Logistics service sharing in cross-border e-commerce

Abstract

While the demand for cross-border e-commerce has grown rapidly, challenges have emerged for both retailers and consumers participating in this global market. Retailers have been struggling with high logistics costs to fulfill cross-border demand, while the lack of trust in foreign retailers is a major issue for consumers. In this paper, we study a cross-border collaboration scheme between a domestic and a foreign retailer to mitigate these challenges. This entails a co-opetition framework where the domestic retailer performs the last-mile delivery of the foreign retailer’s orders in exchange for a logistics service fee. We model demand via a Multinomial Logit (MNL) choice model where the consumers are trust- and price-sensitive. We compare the market outcomes of the two retailers in “pre-collaboration” and “post-collaboration” settings. We find that there exist win-win outcomes where both retailers benefit from collaboration under realistic settings. We also show that a cooperative mechanism can lead to higher profits for both retailers compared to the non-cooperative mechanism for setting the logistics service fee, if the contract terms are decided carefully.