Price, online coupon, and store service effort decisions under different omnichannel retailing models

This paper explores three omnichannel retailing models—that is, a Buy-Online, Pick-Up In-Store (BOPS) model, a Showroom model, and an Interactive model (a model that combines the characteristics of BOPS and Showroom)—under which the retailer offers coupons online and invests in service efforts offline. For each omnichannel retailing model, three coupon distribution scenarios (i.e. no coupon, coupon with a common value, and coupon with a different value) are discussed to investigate coupon promotion policies and omnichannel operation strategies. Profits in the omnichannel system and under each model are compared by deriving three decision values: price, coupon value, and service effort. The key findings show that the retailer achieves profit improvement when the incremental purchasing reaches a large value. In addition, a great service effort coefficient leads to a high price, service effort, and retailer profit. The service effort and coupon value in the Showroom model are the largest among the three omnichannel models, while its profit is the lowest. Conversely, although the retailer invests less in service effort, and the price and coupon value are not too large in the BOPS model, the retailer still gains the highest profit. Additionally, in the BOPS model, it is profitable for the retailer to distinguish the coupon value for the online-only and BOPS channels when consumers are less sensitive to the online-only channel’s coupon. However, in the Interactive model, the retailer derives increasing profit by providing coupons with a common value for the online-only and BOPS channels.