Online retail platforms have become a popular channel choice for many sellers. In this study, we examine a channel structure where a company sells the same products through both an online retail platform and its own online store. We focus on the long-term benefit of the partnership to the company in terms of helping migrate customers from the online retail platform to the online store. For this purpose, we use customer purchase data to estimate a simultaneous model of customers’ channel choice and expenditure decisions, in which customers’ consideration sets are determined by their awareness of the company’s own store. We find that the company has been greatly benefited from the partnership with the retail platform, not only because it can acquire new customers on the retail platform, but also because the online store can convert customers who buy their products from the retail platform to sales in later periods. We use counterfactuals to show how the company can manipulate product assortments to improve its long-term profit and create a “win-win” situation for both the retail platform and itself. We also demonstrate how the value of the partnership with retail platforms depends on the customer awareness and the intrinsic attractiveness of the company’s store.

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Available from: Qin Zhang, Jun 19, 2014