Channel selection for the manufacturer considering online firestorms in social commerce era

Social commerce platforms integrate social interactions with e-commerce, presenting brand manufacturers with new distribution avenues. These platforms empower manufacturers to carry out digital content marketing but also subject them to increased uncertainty, particularly online firestorms, where the rapid spread of negative information harms brand reputation and performance. This paper employs differential game theory to investigate optimal pricing and marketing strategies across different channel expansion strategies, including no expansion (Strategy N), expansion to a new traditional e-commerce platform(Strategy TT), and expansion to a social commerce platform(Strategy TS), and analyzes the optimal strategy for a manufacturer already operating on a traditional e-commerce platform. Our results show, firstly, that when the occurrence probability and damage rate of online firestorms are high, both the manufacturer and the platform implement restoration strategies to counteract the firestorms, which may contribute to the enhancement of platform goodwill in the long run. In contrast, when the occurrence probability or damage rate is less significant, they employ resilience strategies to minimize negative consequences. Secondly, when the fixed cost of channel expansion is low and the commission rate is low, Strategy TS yields higher profits for the manufacturer. As the commission rate increases, Strategy TT becomes more advantageous and emerges as the preferred option. When either the fixed cost is high or the commission rate is excessively high, the manufacturer tends to favor Strategy N. Finally, expanding via Strategy TT may enhance the profitability of the incumbent platform, achieving a win-win situation for both parties.