Impact of an “online-to-store” channel on demand allocation, pricing and profitability

Cao, James; So, Kut C.; Yin, Shuya

doi:10.1016/j.ejor.2015.07.014

Cited by 152 publications

(91 citation statements)

References 13 publications

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“…For example, Gallino and Moreno [13] empirically studied the impact of the BOPS model on retailers' sales via online and offline channels. Kong et al [14] and Cao et al [15] analyzed the impact of this model on the price, demand, and profit of retailers when the online price and the store price are the same or different. Gao and Su [7] analyzed the impact of the BOPS model on physical store inventory decisions.…”

Section: Literature On Omnichannel Bopsmentioning

confidence: 99%

Joint Decision on Pricing and Ordering for Omnichannel BOPS Retailers: Considering Online Returns

Liu

2020

Sustainability

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Uncertainty in demand and high online return rates tend to generate a large inventory backlog after a hot selling season. Some well-known companies such as Burberry and H&M choose to burn these backlogs, which is very unfavorable to the sustainable development of enterprises and society. The omnichannel BOPS (Buy Online and Pickup in Store) provides consumers with a new and convenient choice of purchasing channels. Considering the probability of online return, we build expected profit models for retailers before and after opening a BOPS channel based on consumer surplus and purchase ratio via an online channel, store channel, and BOPS channel. Then, we prove the existence of optimal solutions and obtain the joint optimization decision on pricing and ordering. The results show that, under certain conditions, when the proportion of online channel buyers increases, the retailers' optimal decision before opening a BOPS channel is to reduce the price and increase the order quantity, and the retailers' optimal decision after opening a BOPS channel is to simultaneously reduce the price and the order quantity. Whether or not a BOPS channel is opened, when the purchase proportion of store channel increases, the optimal decision of retailers is to increase the price and order quantity at the same time. Furthermore, when the online return rate, the cost of online shopping, the inconvenient cost of the store channel, and the inconvenience of the BOPS channel relative to store channel increase, the optimal decision of retailers is to simultaneously reduce the price and order quantity. Moreover, when the maximum psychological value of the product increases, the optimal decision is to reduce the order quantity while increasing the price. In addition, the opening of a BOPS channel increases optimal price, optimal order quantity, and maximum expected profit.

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Section: Literature On Omnichannel Bopsmentioning

confidence: 99%

Joint Decision on Pricing and Ordering for Omnichannel BOPS Retailers: Considering Online Returns

Liu

2020

Sustainability

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“…However, experiencing products in the offline physical store involves trouble and inconvenience costs for customers, including time costs. Similar to the study conducted by Cao et al [46], we use h to denote the trouble cost or inconvenience cost of a customer visiting an offline physical store and experiencing a product under the O2O strategy.…”

Section: O2o Omnichannel Strategymentioning

confidence: 99%

Money-Back Guarantee, Dual Money-Back Guarantee, and O2O Strategy in a Manufacturer’s Dual-Channel Supply Chain

Liu

Ren

Yang

et al. 2020

Mathematical Problems in Engineering

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Return services are increasingly valued by manufacturers, retailers, and customers. In many countries, an offer of money-back guarantee (MBG) is legally binding. In this paper, we discuss how a retailer and manufacturer with a direct channel should choose single or dual MBG and pricing strategies. We identify the conditions under which a retailer or manufacturer should choose a return strategy and show that the handling return loss and the customer return cost in each channel are critical factors that should be considered by the retailer and manufacturer when choosing a return strategy. In addition, the retailer should cooperate with the manufacturer to establish an offline-to-online (O2O) omnichannel to fully benefit from the convenience and advantages of the retail channel. We find that the adoption of the O2O strategy by the retailer in its retail channel always generates profits, while the manufacturer may implement the O2O strategy in its direct channel when the profit from the Internet service is higher than a threshold. Additionally, the impact of various strategies on pricing, market share, and profits is discussed.

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“…Liu and Fan [2] optimize the profits through inventory decision and study the impact of BOPS introduction on retailer demand and profits. Cao et al [3] study the impact of an "online-to-store" channel on the demand allocations and profitability of a retailer. Yan et al [4] examine whether retailers should implement a BOPS channel and develop theoretical models to derive the optimal pricing strategy and sales efforts.…”

Section: Introductionmentioning

confidence: 99%

BOPS in Omnichannel Retailing with Return and Cross-selling

Xu¹,

Ma²,

He³

2019

Proceedings of the Fourth International Conference on Economic and Business Management (FEBM 2019)

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Many retailers have started to integrate online and store channels (such as BOPS) in order to enhance the consumer experience. This paper studies a decision problem of when it is preferable for a dual-channel retailer to introduce BOPS strategy. Based on the utility functions, we develop a model to investigate the interplay between the monopolist retailer and consumers. Our results show that the introduction of BOPS has two aspects of influence: intensifying channel competition and eliminating the effects of cross-selling. Besides, we find that BOPS is not always beneficial to the retailer. Especially for the store, when the impact of cross-selling is too large or too small, introducing BOPS actually damages the store's profit.

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Impact of an “online-to-store” channel on demand allocation, pricing and profitability

Cited by 152 publications

References 13 publications

Joint Decision on Pricing and Ordering for Omnichannel BOPS Retailers: Considering Online Returns

Joint Decision on Pricing and Ordering for Omnichannel BOPS Retailers: Considering Online Returns

Money-Back Guarantee, Dual Money-Back Guarantee, and O2O Strategy in a Manufacturer’s Dual-Channel Supply Chain

BOPS in Omnichannel Retailing with Return and Cross-selling

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