Effects of the buy-online-and-assemble-in-store approach: Implications for firms, consumers, and environment

Abstract

The buy-online-and-assemble-in-store (BOAS) approach has been implemented by different contemporary firms (i.e. IKEA and TUHU); however, the implications of BOAS for firms, consumers, and environment remain unclear. To fill this gap, this study considers a monopolistic firm selling products that require consumers’ post-processing assembly for effective use. Two distinct consumer segments exist in the market, including professional and amateur consumers, each with unique product needs and processing capabilities. Furthermore, this study analyses two strategies in which the BOAS channel is introduced or not. We build a game-theoretic model to analyse the impact of the BOAS channel on firms’ optimal decisions, profits and consumer surplus. The findings demonstrate that implementing the BOAS channel in some circumstances will reduce the total demand for the product, although it may increase demand from professional or amateur consumers independently. Moreover, introducing the BOAS channel has various effects on the firm and consumer surplus depending on some critical parameters, including the distribution of consumer types and product handling costs. Particularly, a larger proportion of professional consumers can incentivise firms to adopt the BOAS channel, while higher handling or travelling costs may lead firms to avoid its use. In terms of consumer surplus, although the introduction of BOAS channels appears to enhance amateur consumers’ experience, it may hurt the total consumer surplus in some cases. Finally, we also discussed the impact of BOAS on sustainable operations and found that by centralising the final assembly or customisation of products, the introduction of the BOAS channel can optimise the use of resources, reduce material wastage and improve efficiency. This study significantly contributes to the existing body of knowledge by elucidating the nuanced effects of BOAS on firm strategies and sustainability, providing actionable insights for practitioners navigating the complex omni-channel landscape.