Omnichannel Operations in On-Demand Delivery Platform with Buy-Online-and-Pick-up-in-Store

Problem definition: This paper studies an emerging omnichannel on-demand economy, where consumers decide how their orders are delivered through a platform: fulfilled by independent couriers or picked up in-store by themselves. We analyze the platform’s optimal pricing strategies across service channels and its wage-setting decisions for couriers, and assess the resulting welfare implications.

Methodology/results: We develop a stylized model to study how buy-online-and-pick-up-in-store (BOPS) influences pricing on both the courier and consumer sides. We then estimate model primitives using data from a leading meal-delivery platform in China, and use these estimates to quantify the effects of BOPS and wage regulations. Our main results are as follows. First, while it is widely recognized that price is positively related to demand for gig services, this conventional wisdom no longer holds in an omnichannel environment with BOPS, particularly when consumers are less sensitive to delivery congestion. Second, although BOPS shifts the burden of delivery cost from the platform to consumers, the BOPS-channel price need not be lower than the delivery-channel price in a gig-economy setting. Third, although BOPS always improves platform and merchant profits, it enhances consumer surplus only when market demand is sufficiently great, while consistently reducing courier welfare.

Managerial implications: In an omnichannel environment, pricing strategies proven effective in traditional gig economy may become suboptimal. Moreover, because the gains from BOPS are unevenly distributed, platform managers and policymakers should look beyond aggregate gains and consider the welfare losses that BOPS adoption imposes on couriers.