Research on the Impact of Retailer Sales Effort under Drop-Shipping Model

Drop-shipping is a rising channel operation model born in the environment of rapid development of e-commerce and information technologies. According to drop-shipping model, retailers take charge of nothing but marketing and sales, while suppliers handle production and delivery. Retailer sales effort influences market demand and supplier´s output, which finally determine the profit. In this paper, based on classic newsvendor model, we provide quantitative relationship between retailer sales effort and supplier´s output, model the interaction of effort level, output and profit, and analyze the influence of retailer sales effort on supplier´s output and final profit by means of computer simulation. The analysis indicates that, profit varies with retailer sales effort heavily, but only high level of retailer sales effort can hardly help increasing profit, and there are always specified combinations of effort level and output leading to optimal profit of retailer, supplier, and the whole supply chain.