Seeking survivals under COVID-19: The WhatsApp platform's shopping service operations

Abstract

Under COVID-19 outbreak, retail operations are seriously threatened. There are lots of cases in which physical stores basically have to stop operating. This creates problems to the firm, its employees, and consumers. Recently, Timberland in Hong Kong and various other brands such as Joyce Boutiques and The North Face have established the “WhatsApp Shopping Service Operation” (WSO) in which consumers can shop by using the well-established communication tool “WhatsApp.” Salespeople in stores provide services via WhatsApp to assist the consumers without them having to visit the stores. We collect primary data from real-world cases and theoretically explore WSO. We build a standard consumer utility based model to derive the firm's optimal pricing and employment decisions under different cases. We evaluate the impacts of COVID-19 and values of WSO implementation from the “Worker-Consumer-Company” (WCC) welfare perspective. Our results interestingly imply that WSO is superior to the traditional online channel in terms of keeping business under the pandemic; meanwhile, implementing WSO can help stimulate demand in the physical store under COVID-19. However, whether WSO is effective to help increase the firm's profit and WCC welfare depends on both consumer type' distribution and consumers’ fear of infection. When consumers’ fear of infection is very polarized (i.e., extremely low or high), WSO is not recommended. We further propose that the government's subsidy for WSO implementation could be an effective way to help the firm improve its profit and WCC welfare. We also check the robustness of our study by extending the model to consider endogenous consumer type, endogenous service level, and WCC-welfare-oriented firm.