This paper studies the impact of revenue-sharing contracts on firms’preferences regarding supplier encroachment in a stylized supply chain including a supplier and a retailer. The results show that, for the retailer, a higher proportion of revenue sharing leads to higher service effort, higher market demand, and higher consumer surplus. The retailer benefits from supplier encroachment when the proportion of the revenue sharing is high. 〖JP3〗For the supplier, the supplier encroachment can benefit itself only when the coefficient of the retailer’s 〖JP〗service effort cost is high. Meanwhile, there exists an optimal proportion of revenue sharing that maximizes the supplier or retailer’s profit under the supplier encroachment strategy, and that the optimal proportion of revenue sharing decreases with the coefficient of the retailer’s service effort cost. Furthermore, the paper extends the analysis 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 shows our main results are robust. These results enrich the existing literature and provide managerial insights of dual-channel management for supply chain firms.