Coopetition in Omnichannel Operations

Omnichannel strategies may be a creative solution to soften the competition between e-tailers and brick-and-mortar (B&M) retailers. This paper studies the coopetition partnership in omnichannel operations between an e-tailer and multiple B&M retailers under the buy-online-ship-from-store (BOFS) strategy. In this cross-channel partnership, the e-tailer's orders can be fulfilled by B&M retailers with their store inventory, which improves consumers' experiences of last-mile delivery, and retailers earn additional profits through a revenue sharing scheme. We attempt to investigate when the e-tailer and B&M retailers have the incentives to form such a coopetition partnership and when all stakeholders in the market benefit from the BOFS strategy. Our results show that under the coopetition partnership, the profits of the e-tailer and retailers both have an inverted-U shaped relationship with the number of retailers in the market. When there are a few (many) retailers, the entrance of a new retailer may benefit (hurt) both the e-tailer and retailers due to the convenience effect (competition effect) of the coopetition partnership. This creates divergences in firms' willingness to jointly implement the BOFS strategy. We then show that the e-tailer and retailers both want to form the partnership when consumers' hassle cost is low, the market size is large, and the number of retailers is not too large. In addition, all stakeholders, including consumers, the e-tailer, and retailers, may benefit from the coopetition omnichannel partnership with the BOFS strategy (i.e., an “all-win” situation).