Optimal ordering decisions for an omnichannel retailer with ship‐to‐store and ship‐from‐store

Abstract

AbstractMany retailers have recently integrated online and offline channels to give consumers a seamless shopping experience. Our study considers an omnichannel retailer fulfilling order delivery by adopting two common strategies, ship‐to‐store (STS) and ship‐from‐store (SFS), when one of the channels is in short supply. We develop a newsvendor model to investigate the effects of these two omnichannel fulfillment strategies on the retailer's order decisions and expected profits. The analysis reveals the key roles of the external market and inventory cost of different channels in adopting an omnichannel strategy. An interesting finding is that the retailer may adopt the STS (SFS) strategy and take the offline (online) channel as a showroom (virtual webroom) to obtain higher profits than without adopting an omnichannel strategy.