Abstract
Retailers offer BOPS (Buy Online, Pick Up in Store) service to improve consumers shopping experience. However, this greatly increases the decision complexity for retailers and consumers. For consumers, whether to purchase online or from a store with the BOPS service is a complex decision. This is especially true when the product has fit uncertainty. That is, consumers are uncertain about product fitness before using it. Also, their store visit cost can be heterogeneous and follows some distribution function. For a retailer, it needs to jointly optimize multiple decisions including the convenience degree of BOPS. To help the retailer develop the jointly optimal decisions, we first build a mathematical model where the retailer sells the product through online and store channel and analyzes the possible effects of BOPS. We find that the retailer should offer BOPS when the channel cost ratio (ratio of shipment fee divided by average store visit cost) is large enough. Through numerical studies, we show that the ratio of profit offering BOPS divided by the benchmark increases with the probability of product fit, shipment fee, and the convenience degree of BOPS. We then consider the case where the convenience degree of BOPS is also a decision itself. We find the optimal convenience degree of BOPS increases along with the average store visit cost and the probability of product fit. When the cost factor of offering the convenience for BOPS is larger than a threshold, the retailer should never offer BOPS.
Highlights
Nowadays, consumers can shop over multiple retailing channels, such as brick-and-mortar stores, online stores, mobile stores, and even social network platforms
We identify that the retailer should offer BOPS when the channel cost ratio is high enough. e total demand will increase due to channel shift effect that consumers switch to BOPS from store channel and generate some new demand
Our study focuses on the effect of product fit uncertainty on BOPS service
Summary
Consumers can shop over multiple retailing channels, such as brick-and-mortar stores, online stores, mobile stores, and even social network platforms. Consumers should pay the shipment fee if they choose to buy online and use home delivery service, or pay no fee if picking up in local stores. Some retailers such as Tesco offer some convenience for the BOPS customers, such as drive-through service where shoppers drive to the store and take the goods without getting out their cars. To lower the fit uncertainty, consumers prefer making physical purchases to buying online, especially when considering the product returns are costly to both consumers and retailers [13]. Motivated by the above observations, we set out to study the effect of BOPS for the different product types with fit uncertainty.
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