Benefit from a high store visiting cost in an omnichannel with BOPS.

ABSTRACT

Omnichannel sales surge in the coronavirus pandemic. This paper establishes an analytical model to study when a firm can benefit from implementing the omnichannel strategy of buy-online and pick-up in-store (BOPS), where the market characteristics are captured by the two-dimensional heterogeneity of product valuation and online waiting cost. The increase in the store visiting cost will reduce BOPS consumers' willingness to pay, but it will also strengthen the encroachment of BOPS on traditional dual-channel. The results show that the firm can benefit from the BOPS strategy when the store visiting cost is relatively high. This well explains the rapid development of the omnichannel with BOPS because of a high store visiting cost during COVID-19. Furthermore, sharply contrasting to the traditional dual-channel sales in which a higher store visiting cost always hurts the firm, the profit under BOPS can be nonmonotonic in the store visiting cost and the firm can benefit from a higher store visiting cost. Specifically, the combination of cross-selling effect, BOPS encroachment effect and BOPS expansion reduction effect associated with the store visiting cost can result in a U-shaped or inverse U-shaped BOPS profit. In addition, introducing BOPS motivates the firm to either increase or decrease the optimal price, conditional on the store visiting cost. For consumers, online and offline consumers can also indirectly benefit from the BOPS strategy, though they may not enjoy the BOPS service.