Channel Integration Through a Wireless Applet and an E-Commerce Platform

We study an online–merge–offline (OMO) system that integrates a retailer’s online and offline channels through an e-commerce platform and a wireless applet. The customers in the online channel are generated through paid advertising in an e-commerce platform, while the offline channel is a regional retail chain. The OMO system omnichannelizes sole-channel customers from either channel by converting them into omnichannel ones with the wireless applet and then providing them online and offline options at each touch point along the shopping journey. The prices in the OMO system across both channels are uniform. To validate the effectiveness of this new omnichannel system, we construct a legacy system that maintains separate online and offline channels with independent customer populations. Using the legacy system as a benchmark, we assume the OMO system has arbitrary omnichannelization rates of the customers flowing into the two channels. We analyse the perfect OMO system which has all the customers omnichannelized, and show its advantage over the legacy system. We then numerically find that if the omnichannelization rates in the OMO system are general then it is most efficient when products are either highly digital or highly nondigital.