Choice of O2O Food Delivery Mode: Self-built Platform or Third-Party Platform? Self-Delivery or Third-Party Delivery?

Abstract

This article examines the optimal choice strategy of online-to-offline (O2O) food delivery mode for a merchant. In practice, there are four modes that are widely adopted by merchants: 1) The self-built platform and self-delivery (Mode SS); 2) the self-built platform and third-party delivery (Mode ST); 3) the third-party platform and self-delivery (Mode TS); and 4) the third-party platform and third-party delivery (Mode TT). First, we establish the merchant's profit model under each mode. Then, by comparing the merchant's profits under different modes, we analyze the optimal choice strategy of food delivery mode for the merchant. The results show that when third party service providers provide delivery services (TPSPs), if the advertising effect generated by the self-delivery is large and the consumer benefit brought by the third-party platform's promotion is small, the merchant should choose SS; if the advertising effect and the consumer benefit are both small (large), the merchant should choose ST (TS); if the advertising effect is small and the consumer benefit is large, the merchant should choose TT. Furthermore, from the perspective of the O2O food delivery system, TS (TT) is the best mode if the advertising effect is large (small).