JD Operates Through Chinese New Year - Will This Be Tmall's Waterloo?

Problem definition: One prominent operational difference between JD and Tmall (Alibaba's online platform), two giant Chinese online retailers is that the former establishes, self-manages and provides the logistics service while the latter does not and relies on logistics outsourcing. Thus, during Chines New Year (CNY), JD can still continuously provide the logistics services while Tmall's logistics service is much lagging behind. Academic/Practical Relevance: In this study, we investigate how JD's operating through CNY policy (due to its logistics advantage) affects the profits of Tmall and itself on selling the products towards which customers hold a higher willingness-to-pay in CNY than in other normal periods. Methodology: We construct a stylized two-period game-theoretical model with one period being `before CNY' and the other `in CNY'. The market is composed of two types of customers, strategic and myopic. We then derive the optimal pricing strategies for JD and Tmall. Results: We show that JD's operating through CNY policy may actually benefit Tmall, a result highly hinging on the composition of customer types in the market as well as the magnitude of customers' willingness-to-pays in these two periods. We further propose a framework embedded with an XGBoost forecasting model to estimate the involved parameters' values-- the proportion of strategic customers and customer willingness to pay-- by exploiting the open datasets provided by Cainiao and JD matched by a k-Means clustering algorithm. The framework can also help Tmall to sort out products that can benefit (get hurt, resp.) from JD's operating through CNY policy. Through identification based on a difference-in-differences approach over the data in this framework, we can validate those products for which JD's operating through CNY policy can be a bright side for Tmall. Managerial Implications: Our results shed light on the competition between the two platforms, JD and Tmall. Our data analytical methods provide a means to identify those products on Tmall that can gain from JD's operating through CNY policy.