Home delivery vs. out-of-home delivery: Syncretic value-based strategies for urban last-mile e-commerce logistics

Abstract

Adopting the Out-Of-Home Delivery (OOHD) model of using parcel lockers and convenience stores to act as pick-up and drop-off points offers many benefits over the conventional Home Delivery (HD) model in e-commerce logistics. Despite these benefits, consumers still prefer HD over OOHD for their last-mile e-commerce deliveries. While the convenience of HD is a core feature of online shopping, a question arises: Can OOHD offer better customer utility and reduce the delivery costs of last-mile logistics? Motivated by observed industrial practices, this study adopts a game-theoretic approach to analyze the strategies concerning a customer’s preference for delivery (HD vs. OOHD) and the switching (from HD to OOHD) behavior in response to an e-commerce firm’s self-pickup discount. A distinctive feature of this work is the conceptualization of an e-commerce firm’s orientation towards the triple bottom line goal of meeting consumer expectations (people), financial gains (profit), and reducing environmental impact (planet), collectively termed as the syncretic value in this paper. Setting the syncretic value as the business objective function, we obtain the equilibrium solutions on the discount (for OOHD) and shipping charge (for HD) that would entice a switch to OOHD. Unlike the current practice of some e-commerce delivery markets offering a flat rebate for self-pickup, our results reveal that the e-commerce firm should peg the self-pickup discount based on the online product’s price and levy a shipping charge for low-price products to encourage self-pickup. Online retailers should focus on low-price products for the OOHD-based incentivization scheme for better profitability. We provide a comparative analysis between the HD-only and hybrid (HD with OOHD) delivery models to guide the e-commerce platform operators in positioning their business models and customer engagements. The results suggest that including the syncretic value in the business objectives not only increases consumer utility (more delivery choices) and profitability of the e-commerce firm (lower delivery costs) but also addresses the environmental impact of urban logistics, thus contributing to the sustainable development goals.