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Top1. Introduction
Online retailing has developed rapidly in recent years. As customers become accustomed to online shopping, many manufacturers and brick-and-mortar retailers have supplemented their traditional channels with online channels. The online channel has initially been perceived as competition to stores, and early studies have focused on solving channel conflicts. Currently, firms realize the need to integrate multi-channels into their operations to satisfy customers’ needs, as customers usually obtain information online before shopping. For example, the brick-and-mortar channel can attract customers by its good service, and the online channel can give customers more conveniences by information availability or home delivery. Is there any way to integrate the advantages of different channels? As a result, “Omni-channel retailing” is proposed. For it can provide customers with a seamless shopping experience through all available shopping channels, it is considered as a new way of firms’ development (Bell et al., 2014). The omnichannel environment provides customers more information on their purchasing strategies. In particular, a customer may either buy the product in a brick-and-mortar store and choose a home delivery service; purchase the product online and choose a BOPS strategy if he wants to get the product sooner; or search online for more information about the product and find a nearby store from which to buy the product if he is hesitant to shop online. Moreover, if a customer uses BOPS and finds that the product does not match his expectations, he can return the product to stores without the need to post it back to online retailers. In a nutshell, a customer has more choices in an omni-channel environment relative to traditional retailing. From the retailers’ perspective, a BOPS strategy can attract more customers to offline stores. When a customer picks up the package from the store, he may know soon whether the product matches his expectations, which lowers the return losses for both the retailer and the customer, or the customer may purchase a different product from the store, which is likely to increase the store’s profits. These cross-channel effects can increase the profits of offline stores.
Although an omni-channel environment provides numerous benefits, it also introduces many new challenges. This paper focuses on supply chain coordination. For example, while the buy-online-pickup-in-store option may be offered to customers, the online channel should cooperate with offline stores to coordinate their sale strategies. This cooperation requires not only the integration of a member management system but also that of the entire supply chain, including sales, pricing, and inventories. When a retailer has both online channels and offline channels with centralized decision making, it is straightforward to coordinate the different channels. In contrast, when the channels are controlled by several independent firms with decentralized decision making, each firm strives to maximize its own profits, resulting in a vertical and horizontal competition that hinders omni-channel integration. At the same time, the supply chain must decide what portions of the store’s inventory should be allocated to the online and offline channels and how to allocate profits between the two channels.
In this paper, the author considers omni-channel coordination with a BOPS strategy. Some online customers use BOPS to save waiting time, reduce delivery fees or for other reasons. However, the firms that operate the online and offline channels may be independent for many goods are sold by agents. For the BOPS strategy to be used successfully, dual-channel coordination mechanisms are indispensable. In this paper, the author focuses on the following three questions:
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How do online customers’ returns affect the profits of the supply chain and its members?
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Should the supply chain controller adopt a BOPS strategy to coordinate the online and offline channels?
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What mechanisms including a BOPS strategy can the author design to allocate profits in the omni-channel supply chain?