Introduction of a Buy-online-and-pick-up-in-store Channel: An Analysis in a Multi-channel Supply Chain System

Abstract

Digitalization has improved the living status of human beings and a major portion of consumers are now intending to do online shopping. So, it is difficult for the retailer to continue business solely with the offline channel. This paper introduces a new Buy-online-and-pick-up-in-store (BOPS) selling channel at the retail store besides the online and traditional offline channels. Also, it investigates consumers’ optimal channel selection and pricing decisions in a multi-channel supply chain (SC) system. Here, the manufacturer has the direct online channel and the indirect channels through the retailer. The retailer sells the product in the offline channel as well as in the BOPS channel. The BOPS and casual consumers are clustered based on distance from the retail store. First, we have defined the BOPS structure and consumers’ perspectives on channel selection. Then the consumers’ demand is measured from the utility function based on the product’s price, shipping charge, and distance from the retail store. The entire problem is modeled under cooperation, non-cooperation, and coordination scenarios and the optimal decisions are derived using the game theory approach. Also, we have established five particular models. The analyses of the results revealed that consumers are more intending to purchase the products from the BOPS channel regardless of the presence of the offline channel. Also, the whole SC system profit is enhanced for SC members’ cooperation whereas individual profits are gained for the SC members’ coordination under a revenue-sharing contract.

Keywords

Multi-channel supply chain / buy-online-and-pick-up-in-store channel / utility function / coordination contract / Stackelberg game

References

[1] BasakS, BasuP, AvittathurB, SikdarS. Manufacturer driven strategic coordination as a response to “showrooming”. Decision Support Systems, 2020, 133: 113305

[2] BiswasI, AvittathurB. Channel coordination using options contract under simultaneous price and inventory competition. Transportation Research Part E: Logistics and Transportation Review, 2019, 123: 45-60

[3] CaiG G, ZhangZ G, ZhangM. Game theoretical perspectives on dual-channel supply chain competition with price discounts and pricing schemes. International Journal of Production Economics, 2009, 117(1): 80-96

[4] CattaniK, GillandW, HeeseH S, SwaminathanJ. Boiling frogs: Pricing strategies for a manufacturer adding a direct channel that competes with the traditional channel. Production and Operations Management, 2006, 15(1): 40-56

[5] ChenJ, ZhangH, SunY. Implementing coordination contracts in a manufacturer Stackelberg dual-channel supply chain. Omega, 2012, 40(5): 571-583

[6] ChenX, ZhouJ. The complexity analysis and chaos control in omni-channel supply chain with consumer migration and advertising cost sharing. Chaos, Solitons & Fractals, 2021, 146: 110884

[7] ChengY, PanJ, GongY. Who will undertake corporate social responsibility in supply chain encroachment? Manufacturer or retailer. Managerial and Decision Economics, 2024, 45(3): 1511-1527

[8] EsmaeiliM, AryanezhadM B, ZeephongsekulP. A game theory approach in seller-buyer supply chain. European Journal of Operational Research, 2009, 195(2): 442-448

[9] FanX, TianL, WangC, WangS. Optimal service decisions in an omni-channel with buy-online-and-pick-upin-store. Journal of the Operational Research Society, 2022, 73(4): 794-810

[10] FatikaH L, AristioA P, JunaediL, et al.. Intention to use buy online-pickup in store of coffee shop. Procedia Computer Science, 2022, 197: 591-598

[11] GaoF, SuX. Omnichannel retail operations with buy-online-and-pick-up-in-store. Management Science, 2017, 63(8): 2478-2492

[12] GiriR N, MondalS K, MaitiM. Government intervention on a competing supply chain with two green manufacturers and a retailer. Computers & Industrial Engineering, 2019, 128: 104-121

[13] HaA Y, TongS, WangY. Channel structures of online retail platforms. Manufacturing & Service Operations Management, 2022, 24(3): 1547-1561

[14] HeP, HeY, XuH. Channel structure and pricing in a dual-channel closed-loop supply chain with government subsidy. International Journal of Production Economics, 2019, 213: 108-123

[15] HeP, HeY, ZhouL. Channel strategies for dual-channel firms to counter strategic consumers. Journal of Retailing and Consumer Services, 2023, 70: 103180

[16] HouR, ZhaoY, ZhuM, LinX. Price and quality decisions in a vertically-differentiated supply chain with an “Online-to-Store” channel. Journal of Retailing and Consumer Services, 2021, 62: 102593

[17] HsiehC-C, LathifahA. Brick-and-mortar retailer’s competitive strategy with consumer information under showrooming. Decision Support Systems, 2023, 174: 114014

[18] HuaG S, ChengT E. Price and lead time decisions in dual-channel supply chains. European Journal of Operational Research, 2010, 205(1): 113-126

[19] HuangM, JinD. Impact of buy-online-and-returnin-store service on omnichannel retailing: A supply chain competitive perspective. Electronic Commerce Research and Applications, 2020, 41: 100977

[20] JamaliM-B, Rasti-BarzokiM. A game theoretic approach for green and non-green product pricing in chain-to-chain competitive sustainable and regular dual-channel supply chains. Journal of Cleaner Production, 2018, 170: 1029-1043

[21] JauhariW A, KamilaN S, LaksonoP W. Acoordination model for closed-loop supply chain systems with a single manufacturer and retailer. Supply Chain Analytics, 2023, 4: 100051

[22] JenaS K, MeenaP. Shopping in the omnichannel supply chain under price competition and product return. Journal of Retailing and Consumer Services, 2022, 65: 102848

[23] JiJ, ZhangZ, YangL. Carbon emission reduction decisions in the retail-/dual-channel supply chain with consumers’ preference. Journal of Cleaner Production, 2017, 141: 852-867

[24] JinM, LiG, ChengT C E. Buy online and pick up in-store: Design of the service area. European Journal of Operational Research, 2018, 268(2): 613-623

[25] KabulM O, ParlaktürkA K. The value of commitments when selling to strategic consumers: A supply chain perspective. Management Science, 2019, 65(10): 4754-4770

[26] KusudaY. Information effect of buy-online-and-pick-up-in-store in omnichannel retailing with store replenishment. Electronic Commerce Research and Applications, 2022, 52: 101127

[27] LiH. Dual-channel supply chain coordination with BOPS and a revenue-sharing contract. International Journal of Information Systems and Supply Chain Management (IJISSCM), 2022, 15(1): 1-24

[28] LiQ, WangQ, SongP. Do customers always adopt buy-online-and-pick-up-in-store service? Consideration of location-based store density in omni-channel retailing. Journal of Retailing and Consumer Services, 2022, 68: 103072

[29] LiM, ZhangX, DanB. Cooperative advertising and pricing in an O2O supply chain with buy-online-and-pick-up-in-store. International Transactions in Operational Research, 2021, 28(4): 2033-2054

[30] LinX, ZhouY-W, HouR. Impact of a “buy-online-and-pickup-in-store” channel on price and quality decisions in a supply chain. European Journal of Operational Research, 2021, 294(3): 922-935

[31] MishraR, SinghR K, KolesB. Consumer decision-making in omnichannel retailing: Literature review and future research agenda. International Journal of Consumer Studies, 2021, 45(2): 147-174

[32] ModakN M, PandaS, SanaS S. Managing a two-echelon supply chain with price, warranty and quality dependent demand. Cogent Business & Management, 2015, 2(1): 1011014

[33] NiuB, CuiQ, ZhangJ. Impact of channel power and fairness concern on supplier’s market entry decision. Journal of the Operational Research Society, 2017, 68(12): 1570-1581

[34] PapagiannakisG, VoudourisI, LioukasS. The road to sustainability: Exploring the process of corporate environmental strategy over time. Business Strategy and the Environment, 2014, 23(4): 254-271

[35] PengY, LiuY, Ablanedo-RosasJ H. Store density in omnichannel implementation while considering the environmental impact of packaging materials. Journal of Cleaner Production, 2022, 371: 133668

[36] SahaM, GiriR N. Consumers purchasing decisions of a dual-channel supply chain system under return and warranty policies. International Journal of Systems Science: Operations & Logistics, 2023, 10(1): 2173990

[37] SahaM, GiriR N. Government intervention in a recycling supply chain system: A strategy to make sustainable and clean environment. Journal of Industrial and Management Optimization, 2024, 20(3): 1028-1063

[38] TsayA A, AgrawalN. Channel conflict and coordination in the e-commerce age. Production and Operations Management, 2004, 13(1): 93-110

[39] WuJ, ChenZ, JiX. Sustainable trade promotion decisions under demand disruption in manufacturer-retailer supply chains. Annals of Operations Research, 2020, 290: 115-143

[40] XuQ, ShaoZ, HeY. Effect of the buy-online-and-pickup-in-store option on pricing and ordering decisions during online shopping carnivals. International Transactions in Operational Research, 2021, 28(5): 2496-2517

[41] YanR, PeiZ. Retail services and firm profit in a dual-channel market. Journal of Retailing and Consumer Services, 2009, 16(4): 306-314

[42] YangW, ZhangJ, YanH. Impacts of online consumer reviews on a dual-channel supply chain. Omega, 2021, 101: 102266

[43] ZhangP, HeY, ZhaoX. “Preorder-online, pickup-in-store” strategy for a dual-channel retailer. Transportation Research Part E: Logistics and Transportation Review, 2019, 122: 27-47

[44] ZhangY, HuX, ZhaoJ, QiuJ. Impacts of platform’s omnichannel coupons on multichannel suppliers. Journal of Systems Science and Systems Engineering, 2023, 32(1): 71-99

[45] Mathematical Problems in Engineering, 2020, 2020(1)

[46] ZhangH, QiuB, ZhangK. A new risk assessment model for agricultural products cold chain logistics. Industrial Management & Data Systems, 2017, 117 9): 1800-1816

[47] ZhangQ, TangW, ZaccourG, ZhangJ. Should a manufacturer give up pricing power in a vertical information-sharing channel?. European Journal of Operational Research, 2019, 276(3): 910-928

[48] ZhaoS, LiW. Game-theoretic analysis of a two-stage dual-channel supply chain coordination in the presence of market segmentation and price discounts. Electronic Commerce Research and Applications, 2022, 57: 101222

[49] ZhuW, HeY. Green product design in supply chains under competition. European Journal of Operational Research, 2017, 258(1): 165-180

RIGHTS & PERMISSIONS

Systems Engineering Society of China and Springer-Verlag GmbH Germany