Channel structures and ESG initiatives for logistics service providers

Abstract

Supply chain disruptions have caused notable transport capacity volatility, prompting the rise of logistics service providers with hybrid sales in the freight market. This study investigates transport capacity channel structures and evaluates the merit of Environmental, Social, and Governance (ESG) initiatives for logistics service providers. We consider two dual-channel structures for logistics service providers and freight forwarders: a combination of direct selling and reselling, or direct selling and agency selling. The findings indicate that an increase in cross-price sensitivity escalates selling prices within each channel and direct sales volume, but negatively impacts the agency sales volume. Furthermore, our analysis debunks the prevailing belief about pricing discrimination demonstrating that heightened consumer awareness of the direct selling channel does not invariably result in lower agency selling prices. It depends on the commission rate, which is a critical factor influencing logistics service providers’ selection of an optimal channel structure. Surprisingly, the interactive analysis demonstrates that ESG initiatives prompt logistics service providers to prefer a structure that combines direct selling with reselling. On the other hand, as the agency selling channel's commission rate escalates, the willingness of logistics service providers to invest in ESG decreases. In summary, logistics service providers using a dual-channel structure should ensure consistent service features across channels and provide flexible transport capacity. Moreover, it is necessary for logistics service providers to assess the impacts of the commission rate and ESG level on channel structures and ESG initiatives for enhanced financial returns.