Alleviating poverty for common prosperity: The role of Fupinguan in an E-tailing supply chain

Abstract

To alleviate poverty, e-tailers in China have established special web portals or channels, known as Fupinguans (FPGs), to sell products from poor suppliers in rural areas. This paper investigates the underlying mechanism of FPGs in poverty alleviation (PA) and explores their implications for the common prosperity of stakeholders. We consider an e-tailing supply chain where an e-tailer sells substitutes from a poor supplier (characterized by production inefficiency and capital shortage) and a normal supplier to PA-conscious consumers. The benchmark analyses show that the poor supplier faces hurdles in participating due to cost disadvantages in competition. The traditional PA strategy of loan interest subsidies, employed by the e-tailer, can involve the poor supplier in the supply chain by reducing its costs. However, this strategy can mitigate (not eliminate) the poor supplier's cost disadvantage while hurting the normal supplier. Instead, the FPG strategy will provide the poor supplier with a market advantage while indirectly triggering a spillover effect on the normal supplier's product. In this light, the FPG strategy can eliminate or even reverse the poor supplier's competitive disadvantage while benefiting the normal supplier and all stakeholders. Consequently, it can dominate the traditional strategy when the e-tailer has an insufficient financing capability or efficient FPG investment. The e-tailer's FPG investment incentive decreases with the cost disadvantage, whereas competition can strengthen this incentive when the cost disadvantage or competition intensity is sufficiently low. These findings position FPGs as novel business opportunities that align with the ethos of doing well by doing good.