Store density in omnichannel implementation while considering the environmental impact of packaging materials

Abstract

A staggering amount of packaging materials consumption in e-commerce has become a significant threat to the environment. The option of ordering online and fulfillment by offline stores significantly decreases the use of packaging materials. The aim of this paper is to introduce an analytical model to support the decision of an omnichannel strategy implementation while simultaneously optimizing the offline stores' density, pricing strategy, and environmental impact of packaging materials. Two omnichannel models are compared, the Buy-Online-and-Pick-Up in-Store (BOPS) mode and a combination of the BOPS mode plus a Ship-From-Store (SFS) mode (BOPS + SFS). The BOPS and BOPS + SFS modes consider an inconvenience cost for consumers who decide to pick up their product at the offline store. The consumers' inconvenience cost is a function of the distance to the offline stores, which suggests that a greater stores' density results in a lower inconvenience cost. The proposed analytical model shows that both the BOPS and the BOPS + SFS modes support a reduction of the environmental impact of packaging materials when compared with the online-only mode. Moreover, there is an optimal offline stores' density that maximizes profits while reducing packaging materials. The density of offline stores is a strategic planning decision to balance operating costs and consumer inconvenience costs. The fulfillment of online orders through physical stores is an encouraging strategy to solve the problem of over-packaging and improves the customer's experience through fast and convenient order pickup; furthermore, it is aligned with the interests of environmentally aware customers. The research findings can guide decision makers when analyzing an omnichannel implementation or searching for improvement opportunities in sustainable e-commerce.