Impact of BOPS on Demand Allocation and Profitability in Omnichannel E-commerce Retailing with Consideration of Experience Service

Abstract

With the rapid development of mobile Internet and O2O e-commerce, more and more retailers are beginning to offer customers omnichannel shopping that includes buy-online-and-pickup-in-store (BOPS). Online channel often results in high return rates due to lack of product experience, while retailers can increase consumer perceive value by providing experience services (ES) to increase their purchases, but the ES will also incur a certain cost. This paper establishes two profit models before and after opening a BOPS channel when considering ES. Then, the study analyzes and compares the impacts of BOPS on retailers' demand allocation and profitability. The results show that when the BOPS channel is convenient or the online return rate is low, the opening of the BOPS channel will reduce the store channel demand and increase the total demand and the profit. In addition, whether a retailer opens a BOPS channel depends on the number of stores and the characteristics of the products.