| Title | The effects of implementing BOPS cooperation on advertising competition and pricing strategies under omnichannel environment |
| Author | HU Jiao; LI Li; HE Xiang; YANG Wensheng |
| Abstract | As the value of consumers′ experience on different channels increases, the omnichannel retail model, which integrates online and offline channels and provides consumers with a seamless shopping experience, is showing rapid development. In practice, omnichannel retail models appear in various forms, among which buy online and pick up in-store (BOPS) is one of the most widely used omnichannel retail models. In the process of BOPS service, online retailers can cooperate with offline retailers and provide offline pickup service for consumers with the help of offline retailers′ physical stores. For example, JD Supermarket cooperates with 87,000 large commercial supermarkets nationwide, providing offline pickup services for consumers in more than 400 cities across the country. After the implementation of BOPS, a new environment where channel cooperation and channel competition co-exist is gradually formed. On one hand, online retailers offer offline retailers a certain commission to stimulate them to provide store pickup services, further promoting cooperation and integration between online and offline channels. On the other hand, BOPS provides convenience for consumers’ online shopping, such as reducing their waiting costs. This may attract online or offline consumers to turn to BOPS for purchases, which in turn increases channel competition and conflict. In this new environment, omnichannel leads to an important theoretical and practical question: How can a retailer gain an advantage in channel competition, strengthen channel cooperation with another retailer, expand demand and increase profit? First, channel pricing is a commonly used channel competition method, the existing omnichannel pricing methods mainly include consistent pricing and inconsistent pricing. Second, advertising investment is also an important marketing tool for expanding channel demand and plays an important role in traditional dual channels. But most of the current studies on competitive pricing and advertising strategies have focused on dual channels consisting of online and offline, and the online and offline channels are independent of each other. There is little literature discussing omnichannel operations where channel cooperation and advertising competition coexist, and there are few studies on advertising competition and pricing strategies based on the BOPS channel cooperation model. Accordingly, this paper investigates the impact of implementing BOPS channel cooperation on omnichannel advertising competition and pricing strategies based on two pricing strategies: omnichannel consistent pricing and inconsistent pricing.To solve the above problems, this paper constructs an omnichannel retail system consisting of online and offline retailers, investigates the impact of BOPS channel cooperation on omnichannel advertising competition and pricing strategies, and focuses on the following four BOPS channel cooperation scenarios: 1) The prices are consistent without BOPS cooperation (CI); 2) The prices are consistent with BOPS cooperation (CC); 3) The prices are inconsistent without BOPS cooperation (II); 4) The prices are inconsistent with BOPS cooperation (IC).Based on the four scenarios of BOPS channel cooperation mentioned above, this paper explores respectively the impact of implementing BOPS channel cooperation under consistent pricing and inconsistent pricing strategies (CI and CC, II and IC), and further conducts a comparative analysis of the two pricing strategies (CI and II, CC and IC) before and after the implementation of BOPS channel cooperation, to explore the choice of which pricing strategy and BOPS channel cooperation strategy is optimal for both online and offline retailers. The results show that when BOPS channel preference is relatively low, BOPS sale commission helps to mitigate the advertising competition intensity to some extent. Also, the implementation of BOPS cooperation is not always optimal for online and offline retailers and the channel preference, commission level, and convenience coefficient in the BOPS are the major determinants of retailers’ profitability. Under the consistent pricing strategy, when BOPS channel preference and commission levels are high, the implementation of a BOPS channel cooperation increases the profitability of the offline retailer, while the online retailer gains less from higher retail prices and greater market demand than from investing in advertisements and BOPS commission costs, resulting in lower profitability for the online retailer. Under the inconsistent pricing strategy, when BOPS channel preference and commission level are both high, the profit of the online retailer decreases, and the profits of the offline retailer and total omnichannel increase after the implementation of BOPS cooperation. In addition, when online channel preference is high, the online retailer can earn a higher profit under the inconsistent pricing strategy compared to the consistent pricing strategy, while the offline retailer is more profitable under the consistent pricing strategy. |
| Keywords | BOPS cooperation; Advertising competition; Pricing strategy; Omnichannel retailing |
| Issue | Vol. 39, No. 5, 2025 |
Title
The effects of implementing BOPS cooperation on advertising competition and pricing strategies under omnichannel environment
Author
HU Jiao; LI Li; HE Xiang; YANG Wensheng
Abstract
As the value of consumers′ experience on different channels increases, the omnichannel retail model, which integrates online and offline channels and provides consumers with a seamless shopping experience, is showing rapid development. In practice, omnichannel retail models appear in various forms, among which buy online and pick up in-store (BOPS) is one of the most widely used omnichannel retail models. In the process of BOPS service, online retailers can cooperate with offline retailers and provide offline pickup service for consumers with the help of offline retailers′ physical stores. For example, JD Supermarket cooperates with 87,000 large commercial supermarkets nationwide, providing offline pickup services for consumers in more than 400 cities across the country. After the implementation of BOPS, a new environment where channel cooperation and channel competition co-exist is gradually formed. On one hand, online retailers offer offline retailers a certain commission to stimulate them to provide store pickup services, further promoting cooperation and integration between online and offline channels. On the other hand, BOPS provides convenience for consumers’ online shopping, such as reducing their waiting costs. This may attract online or offline consumers to turn to BOPS for purchases, which in turn increases channel competition and conflict. In this new environment, omnichannel leads to an important theoretical and practical question: How can a retailer gain an advantage in channel competition, strengthen channel cooperation with another retailer, expand demand and increase profit? First, channel pricing is a commonly used channel competition method, the existing omnichannel pricing methods mainly include consistent pricing and inconsistent pricing. Second, advertising investment is also an important marketing tool for expanding channel demand and plays an important role in traditional dual channels. But most of the current studies on competitive pricing and advertising strategies have focused on dual channels consisting of online and offline, and the online and offline channels are independent of each other. There is little literature discussing omnichannel operations where channel cooperation and advertising competition coexist, and there are few studies on advertising competition and pricing strategies based on the BOPS channel cooperation model. Accordingly, this paper investigates the impact of implementing BOPS channel cooperation on omnichannel advertising competition and pricing strategies based on two pricing strategies: omnichannel consistent pricing and inconsistent pricing.To solve the above problems, this paper constructs an omnichannel retail system consisting of online and offline retailers, investigates the impact of BOPS channel cooperation on omnichannel advertising competition and pricing strategies, and focuses on the following four BOPS channel cooperation scenarios: 1) The prices are consistent without BOPS cooperation (CI); 2) The prices are consistent with BOPS cooperation (CC); 3) The prices are inconsistent without BOPS cooperation (II); 4) The prices are inconsistent with BOPS cooperation (IC).Based on the four scenarios of BOPS channel cooperation mentioned above, this paper explores respectively the impact of implementing BOPS channel cooperation under consistent pricing and inconsistent pricing strategies (CI and CC, II and IC), and further conducts a comparative analysis of the two pricing strategies (CI and II, CC and IC) before and after the implementation of BOPS channel cooperation, to explore the choice of which pricing strategy and BOPS channel cooperation strategy is optimal for both online and offline retailers. The results show that when BOPS channel preference is relatively low, BOPS sale commission helps to mitigate the advertising competition intensity to some extent. Also, the implementation of BOPS cooperation is not always optimal for online and offline retailers and the channel preference, commission level, and convenience coefficient in the BOPS are the major determinants of retailers’ profitability. Under the consistent pricing strategy, when BOPS channel preference and commission levels are high, the implementation of a BOPS channel cooperation increases the profitability of the offline retailer, while the online retailer gains less from higher retail prices and greater market demand than from investing in advertisements and BOPS commission costs, resulting in lower profitability for the online retailer. Under the inconsistent pricing strategy, when BOPS channel preference and commission level are both high, the profit of the online retailer decreases, and the profits of the offline retailer and total omnichannel increase after the implementation of BOPS cooperation. In addition, when online channel preference is high, the online retailer can earn a higher profit under the inconsistent pricing strategy compared to the consistent pricing strategy, while the offline retailer is more profitable under the consistent pricing strategy.
Keywords
BOPS cooperation; Advertising competition; Pricing strategy; Omnichannel retailing
Issue
Vol. 39, No. 5, 2025
References