Channel Integration Strategies for Competing Dual-Channel Retailers: Effect of Cross-Selling

49 Pages Posted: 6 Jun 2019

See all articles by Ronghui Wang

Ronghui Wang

Tianjin University - College of Management and Economics

Lin Chen

Tianjin University

Guofang Nan

Tianjin University; Tianjin University - College of Management and Economics

Minqiang Li

Tianjin University - College of Management and Economics

Date Written: May 18, 2019

Abstract

The “buy online and pick up in store” (BOPS) mode is gaining tremendous popularity among dual-channel retailers since it is convenient for consumers and brings additional store sales to retailers. It is one of the new sales models in the era of omnichannel retail. However, given the large investment required to operate this new sales channel, offering the BOPS channel to fulfill online orders in physical stores is a challenge for retailers. This study considers the pricing strategies of two competing dual-channel retailers, focuses on whether and when the retailers in a Stackelberg game should adopt the BOPS strategy, and explores the impacts of market factors on the equilibrium outcomes. First, we show that the follower’s price is not always lower than the leader’s price. Specifically, when only the follower adopts the BOPS strategy, and the demand for its BOPS channel is large enough, the follower will set a higher price than the leader. Second, we find that retailers prefer to adopt the BOPS strategy when the unit operating cost of the offline channel is large, and the operating cost of the BOPS channel is small. Third, we present an interesting insight: an increase in additional profit from cross-selling is not always beneficial to a retailer. If a retailer benefits from the increase in additional profit from cross-selling, it will be the only retailer who offers a BOPS channel, and the demand for its BOPS channel is sufficiently large.

Keywords: electronic commerce, omnichannel retailing, buy online and pick up in store, competition, pricing, Stackelberg game

JEL Classification: M00

Suggested Citation

Wang, Ronghui and Chen, Lin and Nan, Guofang and Nan, Guofang and Li, Minqiang, Channel Integration Strategies for Competing Dual-Channel Retailers: Effect of Cross-Selling (May 18, 2019). Available at SSRN: https://ssrn.com/abstract=3390426 or http://dx.doi.org/10.2139/ssrn.3390426

Ronghui Wang

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

Lin Chen

Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

Guofang Nan (Contact Author)

Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

Minqiang Li

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

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