The effects of BOPS implementation under different pricing strategies in omnichannel retailing

Abstract Many retailers have recently implemented buy online and pick up in store (BOPS) by integrating their online and offline channels. In this paper, considering a retailer who sells products through both online and offline channels, we develop a theoretical model to study the effects of BOPS adoption. Using our model, we first analyze how adoption of BOPS affects a retailer’s optimal prices, total demand and profit under consistent and inconsistent pricing strategies where a retailer employs the same pricing strategy both before and after BOPS implementation. We then conduct a comparative analysis of the two pricing strategies, discussing which one is most profitable to the retailer. Subsequently, we analyze the scenario where a retailer uses consistent pricing before BOPS adoption and inconsistent pricing afterwards and the scenario where a retailer uses inconsistent pricing before BOPS adoption and consistent pricing afterwards. We conduct numerical studies to obtain insights on when BOPS is most advantageous and which pricing strategy is better to use. Our study results show that BOPS is not always beneficial to the retailer, depending on the unit operating cost and customer hassle cost in the BOPS channel and the cross-selling profit. We also identify under what conditions a retailer is better off under different scenarios. Moreover, we find that BOPS is more beneficial to the retailer under inconsistent pricing especially when the unit operating cost in the BOPS channel is lower.