The strategic value of buy online and pick up from store service to the dual channel coordination

Buy online and pick up from store (BOPS) has been widely practiced in the business market. However, prior studies in literature have not addressed what is the strategic value of BOPS to supply chain performance, who should pay the cost of BOPS, and what is the optimal strategy to implement the BOPS to maximize channel coordination. To fill this gap, we first examine the effect of this newer type of service on supply chain performance. Further, we compare various scenarios to examine which channel member should pay the cost of the BOPS, and how BOPS impacts supply chain performance. Finally, we initiate a new coordination mechanism to solve the dilemma where the manufacturer likes to share the BOPS cost, but the physical reseller prefers to pay fully for it. Our paper provides novel findings: (1) using only the cost-sharing strategy of the BOPS or the reseller's full payment for the BOPS is not an optimal way to improve supply chain performance; (2) quantity discount cannot behave effectively to motivate the reseller to implement the cost sharing strategy of the BOPS; however, (3) profit sharing can perform as an valuable contract to stimulate the reseller to implement the cost-sharing strategy of the BOPS and create higher supply chain performance. Moreover, our research shows a counter-intuitive result: if profit sharing contract is not offered, the reseller's full payment for the BOPS is a better choice to achieve higher supply chain performance than the cost sharing strategy of the BOPS; however, if profit sharing contract is offered to complement the cost sharing strategy of the BOPS and the physical reseller's full payment for the BOPS cost respectively, the result is reversed.