Providing Data Insights to Suppliers for Product Development: Incentive Analysis of an E-Tailer

Many suppliers invest in product development for market expansion via product development efforts. However, not all suppliers have accumulated market information, which is a critical factor for efficient product development that helps suppliers know consumer preferences better. Being aware of this, some e-tailers (e.g., JD.com) provide market information and data insights for their suppliers, which improves the latter’s product development efficiency. Supported by the market information, the market potential of suppliers’ products can be enlarged and their pricing power may be strengthened, which affects e-tailers from both positive and negative aspects. Based on these observations, we investigate an e-tailer’s incentive to share market information to its suppliers by formulating the tradeoffs among market expansion, product development efficiency, and suppliers’ pricing decisions. We find that the e-tailer prefers sharing market information with its suppliers when the latter’s product development efficiency is high, or the product development efficiency is high but the efficiency improvement rate is high.