Buy-Online-Pick-Up-At-Store Benefits Supply Chains Considering Supplier Encroachment

Abstract

Buy-online-pick-up-at-store (BOPS) is a prevalent strategy in omnichannel retailing. It is widely adopted by retailers, such as Target and Walmart, to attract customers via providing real-time information on product inventory and instant in-store pickup. This strategy is distinguished by its integration of online and offline channels, offering an exclusive service when compared to suppliers who operate solely online. Intuitively, BOPS enhances the competitive advantage of retailers, thereby countering suppliers’ encroachment in retailers’ online markets. However, our research provides the opposite results. We study the impact of BOPS on supplier encroachment by investigating a two-echelon supply chain involving a retailer considering BOPS implementation and a supplier contemplating online encroachment. Our research reveals that BOPS does not always prevent supplier encroachment; instead, it may trigger it. This occurs because the introduction of BOPS attracts customers who previously encountered stockout in physical stores, encouraging them to switch to the supplier’s online channel. This migration prompts the retailer to increase their fulfillment rate to better compete, which subsequently elevates the wholesale profit and benefits the supplier. Moreover, we explore five extensive models, including customer return, store-only customers, endogenous wholesale price, endogenous retail prices and cross-selling effect, with the results indicating that BOPS consistently facilitates supplier encroachment across all scenarios. In conclusion, our research suggests that BOPS might not be a prudent choice since it not only attracts supplier encroachment but also hurts retailers.