‘Buy online and pick up in-store’: Implications for the store inventory

Abstract

�Buy online and pick up in-store� (BOPS), wherein a customer buys the product online and picks it up from the physical store at her convenience, is fast gaining popularity. However, BOPS service complicates the store's inventory policy as BOPS orders, while waiting to be picked up, block inventory and thus delay replenishment requests. The store now has to maintain a base-stock level that is optimal considering both walk-in and BOPS orders. We discuss an inventory control policy that suits this situation. The problem is accentuated when the online channel and the physical store are under different ownerships, since the revenue from BOPS orders will now get shared between the two. In such a scenario, the store may opt for an inventory policy that favours walk-in orders over BOPS requests, as every BOPS order fetches less revenue than every walk-in customer. The extent of restriction on BOPS orders will depend on the revenue-sharing policy and also on the relative frequencies of walk-in and BOPS demands. We discuss two inventory policies that can help the store prioritize walk-in demands over BOPS demands. We compare the performances of the policies proposed, and show that each policy has its claim to supremacy over others in different operating environments, characterized by the input parameters.