Peer-to-Peer Crowdshipping as an Omnichannel Retail Strategy
41 Pages Posted: 12 Feb 2018
Date Written: February 7, 2018
We study the novel strategy of peer-to-peer crowdshipping for omnichannel retailers, i.e., utilizing in-store customers as a resource to deliver orders to online customers, and its potential impact on the retailers' operational and marketing strategies.
Closely connected with the sharing economy, crowdshipping is an emerging operations model proposed to tackle the last-mile delivery problem in urban markets. Major retailers such as Amazon and Walmart, as well as start-ups such as Instacart and Deliv, have adopted or experimented with models of crowdshipping. Peer-to-peer crowdshipping carries important implications on the marketing-operations interface: on the one hand, it offers the opportunity to improve last-mile delivery efficiency (the efficiency effect); on the other hand, it provides an additional tool for the retailer to price discriminate between the online and in-store channels (the pricing effect). We model an omnichannel retail network's pricing decision for its online and in-store channels, and consumers' decisions on purchase, channel choice and participation in crowdshipping. As the exact analysis of the game is confounded by heterogeneity of spatial characteristics within a store's catchment area, we adopt a continuous approximation approach to obtain a tractable model. Contrasting two reimbursement modes for crowdshipping, i.e., reimbursing shopper-deliverers their incurred delivery costs or providing an additional premium as a (cross-channel) subsidy, against a store-operated delivery model, our analysis reveals that the effect of crowdshipping depends upon the interactions between the aforementioned efficiency and pricing effects. While the efficiency effect benefits both the retailer and consumers, the pricing effect could benefit the firm at the expense of consumer surplus. Combining these two effects, we find that crowdshipping is generally beneficial from the firm's profit and welfare perspectives, but does not always benefit consumers. A win-win outcome arises if the retailer employs the cost-based reimbursement model when there is little correlation between consumers' travel costs and product valuation, or the cross subsidy model when such correlation is strong.
Keywords: Crowdshipping, omnichannel retail, sharing economy, last-mile logistics
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