This paper studies the impact of revenue sharing contracts on firms' preferences on the supplier encroachment in a stylized supply chain including a supplier and a retailer. We show that, for the retailer, a higher proportion of revenue sharing leads to a higher service effort, a higher market demand, and a higher consumer surplus. The retailer benefits from supplier encroachment when the proportion of the revenue sharing is high. For the supplier, the supplier encroachment can benefit itself only when the coefficient of the retailer's service effort cost is high. We also show that there exists an optimal proportion of revenue sharing to maximize the supplier or retailer’s profit under supplier encroachment strategy, and the optimal proportion of revenue sharing decreases with the coefficient of the retailer's service effort cost. Furthermore, we extend to investigate the impacts of the channel competition, the cost of the direct selling and the sequence of quantity decisions, on supplier encroachment strategies, and show our main results are robust. These results enrich the existing literature and provide managerial insights of dual-channel management for supply chain firms.