O2O results in traffic congestion reduction and sustainability improvement: Analysis of “Online-to-Store” channel and uniform pricing strategy

• Published in: Transportation research. Part E, Logistics and transportation review Vol. 122; pp. 481 - 505
• Main Authors: Niu, Baozhuang, Mu, Zihao, Li, Baixun
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.02.2019
• Subjects: Channel structure; Online-to-store channel; Sustainability analysis; Traffic congestion; Uniform pricing; Sustainability analysis; Uniform pricing; Online-to-store channel; Channel structure; Traffic congestion
• ISSN: 1366-5545; 1878-5794
• DOI: 10.1016/j.tre.2018.12.012

•Tradeoffs of “Online-to-store” channel and uniform pricing are formulated.•Traffic congestion reduction and sustainability improvement can be achieved via O2O.•Win-win-win is possible for channel coordination, traffic control and sustainability.•O2O might result in high retail prices and low total demand size. This paper examines the effects of two O2O business models, (1) the uniform pricing and (2) the online-to-store channel, on traffic congestion control. We show that uniform pricing always reduces the online demand size and increases the retail price if the online logistics cost is low. Therefore, it can be a win-win-win solution for channel coordination, traffic congestion reduction and supply chain sustainability improvement. We also show that, an online-to-store channel might result in a high retail price and low online demand size, which benefits the retailer when the logistics cost is high.