Online-Exclusive or Hybrid? Channel Merchandising Strategies for Ship-to-Store Implementation

Mehmet Gümüş, Desautels Faculty of Management, McGill University

Abstract

We study how a customized channel merchandising strategy can improve the performance of ship-to-store (STS) services, which refers to an omnichannel retail fulfillment initiative that enables customers to ship their online purchases directly to a nearby store. We first develop theoretical predictions regarding the impact of STS on the sales of two types of products: online-exclusive products (i.e., products available only online) and hybrid products (i.e., products available both online and offline) and demonstrate that STS might have varying effects on the overall sales of those products. Then, to improve the performance of STS, we propose a STS implementation strategy for merchandising products as online-exclusive vs. hybrid. Next, we empirically test our predictions using data from an omnichannel retailer that launched the STS functionality. We also conduct an empirical counterfactual analysis to quantify the benefits of our proposed strategy. Overall, our theoretical model coupled with the empirical analysis suggests that to improve the performance of STS implementation, an omnichannel retailer should offer low-priced (resp., high-priced) products, products with high (resp., low) in-store availability, or products that are subject to high (resp., low) competition as online-exclusive (resp., hybrid). Our theoretical model sheds light on the underlying mechanism. The counterfactual analysis reveals that the proposed channel merchandising strategy can improve STS performance by increasing overall retail sales by another 2.1% for the focal retailer.
Joint work with Necati Ertekin and Mohammad Nikoofal.

Short Bio

Milad Mehmet Gumus is Professor of Operations Management at the Desautels Faculty of Management at McGill University. He joined McGill in 2007 from the University of California at Berkeley where he completed his Ph.D. in Industrial Engineering and Operations Research and M.A. in Economics. In his research, he focuses on supply chain management, dynamic pricing, and risk management. His papers are accepted for publication in Management Science, Operations Research, Manufacturing and Service Operations Management, Marketing Science and Production and Operations Management. He serves as AE for Manufacturing and Service Operations Management, and IIE Transactions. In 2017, he developed a new specialized Masters Program in Management Analytics (MMA) and since its inauguration, he is managing the MMA program as the Academic Director. In 2015, he co-founded Plannica Inc. to develop an integrated Decision Support System for the supply chain planning solution and implemented Plannica® to various industries.

Venue

Friday, November 13, 2020, 4.00 pm - Zoom Meeting