Fly with the wings of live‐stream selling—Channel strategies with/without switching demand

Live‐stream selling is becoming increasingly popular in e‐commerce platforms, where streamers sell products through real‐time interactions, while consumers make purchases during live‐stream time. We identify several important factors to evaluate the live‐stream selling: (1) the streamer's ability to sell, which brings an extra value to consumers through real‐time illustrations and social interactions; (2) whether the extra value is positively or negatively correlated to consumers’ preference value; and (3) consumers’ cost to purchase through the live‐stream channel since consumers have to participate in the live‐stream show during a fixed time. We find that adding a live‐stream channel is profit‐enhancing only when the streamer's ability to sell is sufficiently high. If we consider the switching demand to the traditional channel from consumers who would have purchased from the live‐stream channel during the live‐stream time, we find that (1) a single live‐stream channel can be optimal, and (2) a high streamer's ability to sell may result in a profit loss. We also find that regardless of the switching demand, live‐stream selling is always more profitable when the extra value is negatively correlated with the consumer's preference value than the scenario when the extra value is positively correlated. These findings not only contribute to the literature on live‐stream selling and price discrimination but also offer guidelines for firms to make strategic decisions on live‐stream selling.