Effects of Consumer‐to‐Consumer Product Sharing on Distribution Channel

TLDR

Mobile communication technologies and online sharing platforms have made collaborative consumption a major economic trend, yet many consumers purchase products they do not fully use, and owners may rent out products when their self‑use value is low. The study develops an analytical framework to examine how consumer‑to‑consumer product sharing influences the distribution channel. The framework models the manufacturer’s pre‑built production capacity and the retailer’s sales to forward‑looking consumers, linking sharing market dynamics to channel outcomes. Analysis shows that a high capacity‑cost coefficient raises the manufacturer’s optimal capacity, while a low coefficient reduces it, and the sharing market increases the retailer’s gross‑profit share and benefits firms when capacity is costly, but often favors the retailer at the manufacturer’s expense.

Abstract

In recent years, mobile communication technologies and online sharing platforms have made collaborative consumption among consumers a major trend in the economy. Consumers buy many products but end up not fully utilizing them. A product owner's self‐use values can differ over time, and in a period of low self‐use value, the owner may rent out her product in a product‐sharing market. This study develops an analytical framework to study how consumer‐to‐consumer product sharing affects the distribution channel, where the manufacturer has to build its production capacity beforehand and the retailer sells the product to forward‐looking consumers. Our analysis reveals that there exists a threshold for the capacity cost coefficient, above which product sharing will increase the manufacturer's optimal capacity and below which it will reduce the manufacturer's optimal capacity. We find that the sharing market tends to increase the retailer's share of the gross profit margin in the channel. Furthermore, the existence of the sharing market tends to benefit the firms when capacity is relatively costly to build, but it is more likely to increase the retailer's profit than the manufacturer's profit, that is, product sharing can sometimes benefit the downstream retailer at the expense of the upstream manufacturer.