Effect of the buy‐online‐and‐pickup‐in‐store option on pricing and ordering decisions during online shopping carnivals

Abstract

Abstract This study focuses on the value of the buy‐online‐and‐pickup‐in‐store (BOPS) option during online shopping carnivals. We develop a newsvendor model in which a retailer faces the risk of online order overload and provides consumers with a BOPS option. The optimal pricing and ordering decisions under the benchmark scenario and the omnichannel retailing scenario with the BOPS option are analyzed. The results demonstrate that after implementing the BOPS option, the retailer will maintain or lower the price instead of raising the price. In addition, we find that the fraction of BOPS consumers, the unit goodwill loss, and the retailer's best online service capacity play significant roles in the implementation of the BOPS option. We identify the condition under which the retailer can benefit from the BOPS option.