Buy Online, Pick Up, or Deliver from Store: Why Would an Online Retail Platform with Third-Party Sellers Offer It?

Digital technologies are enabling online retail platforms to connect consumers not only to sellers’ online offerings but also to sellers’ physical stores through options such as local pickup and store-based delivery, which we refer to as local selling. This study examines why a platform would adopt such a strategy even when it gives up fulfillment-related revenue. We show that local selling can still increase platform profits by raising sales commission revenue. By allowing some consumers to pick up orders locally, the platform reveals geographic differences among consumers that traditional online fulfillment masks. This can soften price competition between sellers, increase prices, and benefit both the platform and sellers. Consumers, however, do not necessarily benefit, even when they are offered more fulfillment options. The findings suggest that local selling is not merely a service innovation that improves convenience. It can also be a strategic tool that helps platforms manage seller competition and extract surplus. For practice, the results indicate that platforms should tailor local-selling strategies to product and market conditions rather than apply them uniformly. For policy, the study highlights that expanding consumer choice does not necessarily improve consumer welfare, and that platform innovations should also be evaluated based on their effects on competition, pricing, and surplus allocation.