BUS602: Marketing Management

The literature review follows the guidelines for systematic review. First, we defined the scope (as in Sect. 2), and then identified the related literature. The identification step included the material collection/selection and category selection. Finally, we completed a qualitative content analysis. This builds the foundation to develop the research questions in 3.3. Prior to the literature review, we contacted a range of experts in practice and academia in the field of OC distribution to learn on what they believe are the relevant questions for both industry and research. These preliminary discussions helped to define the scope of the research and to set the boundaries of the literature search. We developed a review protocol, including a conceptual discussion of the research problem and a statement of its significance. Finally, we developed the research questions in multiple rounds by iterating literature reviews, updating the review protocol and conducting discussions with experts.

Literature collection/selection and category selection

The development of distribution concepts for OC retailing has emerged in practice very recently, and the number of related scientific publications is still limited. Against this backdrop, a structured literature review in the form of a qualitative content analysis is seen as a practicable method for obtaining evidence-based management knowledge. Our systematic literature review covers two lines. First, because the topic is relatively new and discussed in practitioner-oriented forums, we conducted an Internet search in this field. Second, we conducted a search of peer-reviewed, international research journals.

The first search included a review of practitioner-oriented publications (without a peer-review process). The topic of OC retailing currently is a practice-driven effort. Most reports on related topics are published by consultants and associations. To get an updated view of the market, we therefore leverage these sources in our empirical findings.

The second search, completed simultaneously as an iterative review, included all major international journals that publish research on distribution management and/or OC retailing. Furthermore, we utilized initial search results from open databases (Google Scholar, ssrn), library service databases (Ebsco, Scopus, Metapress), and major publishers (Emeraldinsight, Informs, Sciencedirect, Springerlink, Taylor & Francis, Wiley), and checked literature cited in identified papers. Related keywords in the full text searches included all forms of e-tail, e-commerce, online-, cross-, multi-, omni-channel retailing, including plural forms (e.g., "channels"), delimiters (e.g., "omni-channel"), prefixes (e.g., "across"), and suffixes. All forms of the keywords from logistics relating to supply chain management, distribution, logistics, physical product flow and returns were also selected. The related keywords from retailing and logistics were combined for the search.

However, it is important in a literature review to define distinct boundaries. Because we focus on operational systems, we excluded literature that strictly covers general management, marketing and service management issues, and does not discuss logistical aspects at all. This literature mainly addresses customer behavior in multiple channels and the organizational relations between channels. Furthermore, due to the advent of online commerce in the late nineties, we limited the search to issues published after 2000. Although OC retailing has some features that are related to pure online retailing, we excluded literature from single-channel e-commerce, since it is unclear how the requirements for online retailing will apply to OC. Because we focus on non-food retailing, we also excluded papers restricted to food distribution. We used a qualitative content analysis to identify the conceptual content that is related to our field of research. Papers were assessed based on whether they address problems of physical product flows and/or operational logistics interfaces between channels.

To increase the reliability of the research, databases, journals, and individual papers were checked by a second researcher and updated iteratively during the revision cycle of the paper by the entire team of authors.

Literature review

To structure the content analysis, the literature review distinguishes between the overarching structural dimensions of the forward and the backward distribution system.

Literature on forward distribution

Swaminathan and Tayur identify in their review article that channel integration has advantages for supply chain management with respect to profit, inventory reduction, and customer service, but central control is necessary. They describe among other issues supplier relationships, pricing, customization, and real-time decision technologies that have grown in importance with the prevalence of e-business in traditional supply chain management. They present an overview of analytical research models for e-commerce supply chains. Inventory allocation and coordination constitute the major areas of their research, where distribution designs are already determined. Within the e-fulfillment context, Swaminathan and Tayur further review certain papers presenting drop-shipment strategies (i.e., direct deliveries from suppliers) and see those as a way of improving supply chain and inventory efficiency.

Within their literature review, Agatz et al. analyze among other topics the distribution network design. They systematize possible network designs into integrated fulfillment (common DCs for the different sales channels), dedicated fulfillment (dedicated DCs for the different sales channels), and store fulfillment. They point out the trade-off between inventory pooling and delivery efficiency. The models analyzed by Swaminathan and Tayur and Agatz et al. mainly take on a single-channel perspective, focusing on e-fulfillment. Agatz et al. therefore conclude that there is a lack of literature dealing with the logistics interactions between e-commerce and traditional retailing, thus missing a perspective across channels. Lang and Bressolles derive from the literature four different e-fulfillment systems for retailers that operate multiple channels. They structure it according to order preparation (in a central DC or store) and delivery to the customer (home delivery and pick-up in - store). The authors summarize their discussions with eight French retail companies about these e-fulfillment types and economic performance as well as customer expectation indicators. However, they do not analyze the synergies with store fulfillment, and they discuss effects based only on a limited number of case studies.

In addition, a first set of papers looks at the inventory location problem. Alptekinoğlu and Tang analytically study whether online orders should be fulfilled from physical stores or from a DC. They conclude that expanding bricks-and-mortar DCs for OC distribution pools inventory risks. Liu et al. develop a capacitated location model for retailers with multiple channels. In doing so, they decide which of a retailer's existing bricks-and-mortar DCs should be extended to fulfill distance retail demand, thus making them OC operational. Therefore, within the model, they decide whether a retailer should rely on a full integration of bricks-and-mortar and distance retail channels or on a mix of dedicated bricks-and-mortar DCs and integrated structures. Netessine and Rudi analyze the dual strategy in a non-cooperative game between retailers and wholesalers, where retailers use their own inventory as a primary source and rely on wholesaler's drop-shipping as a backup. They derive conditions under which either traditional retailing, drop-shipping or dual channels with a separate manufacturer and retailer customer interface are beneficial in terms of inventory holding costs and risk pooling aspects. According to their findings the drop-shipping markup and the differences in transportation costs are the main drivers of the choice of channels. Also Chiang and Monahan review different forward distribution strategies, where items are stocked at a manufacturer DC or a retail store. A complete separation of channels, however, is not taken into account. Although their main focus is on inventory policies and allocation, they show by examining different distribution designs (store-only, distance-retailing-only, OC) that OC outperforms single-channel strategies.

Neslin et al., Wolk and Skiera and Cao and Li analyze the financial and economic performance of strategic decisions for opening an Internet channel in terms of e.g., channel mix, channel design, level of channel independence, and resource allocation across channels. However, the specific design of the distribution systems remains open. Further literature exists that focuses on OC fulfillment issues, such as inventory management, allocation and control or capacity management, but it does not analyze the effect on distribution. Hübner et al.provide a framework of OC warehouse operations designs and interdependencies without investigating concepts for physical distribution.

Focusing on OC destinations, McKinnon and Tallam classify the main forms of unattended home delivery, whereas Fernie et al. classify home delivery options in general. Agatz et al. identify the advantages of store pickup concepts, namely bridging the "last mile" and any positive effects on cross-channel sales. They highlight service components that are inherent to e-fulfillment. An online channel not only involves a physical product, but also several related services, most notably delivery. Their analysis is based on Boyer et al., who examine e-service strategies, including delivery processes. Rabinovich et al. show why strictly Internet-based retailers leverage external logistics service providers (LSPs) for distribution, whereas Rao et al. show that retailers with web offerings and stores outsource their logistics to a lesser extent than web-only retailers. Rabinovich and Bailey, Xing and Grant and Xing et al. investigate the physical distribution service quality differences between pure players and MC retailers. Pure players are perceived to deliver higher service quality. In this context, Xing et al. develop a framework for order fulfillment to achieve electronic physical distribution service quality. Xing et al. analyze the interface between LSPs and retailers and the impact of LSPs on customer perception. Gallino and Moreno analyze the demand effect of "buy-online, pick-up-in-store" and show a cross-selling and channel-shifting effect for the stores. Bell et al. investigate the migration effect when retailers introduce a showroom store for product testing, but deliver items to the customer's home.

Literature on backward distribution

Product returns for distance sales have been viewed as an unavoidable cost of doing business. Brito and Dekker classify them as reimbursement guarantees that "give customers the opportunity to change their minds about purchasing […] when their needs or expectations are not met". Fleischmann et al. survey the field of reverse logistics and develop a general framework. They identify three planning areas related to returns, namely distribution, inventory, and production. Brito and Dekker develop a general framework for reverse logistics by structuring according to return reasons, product types, recovering processes, and involved parties. However, they do not discuss the specifics of retailing and home delivery. We further refer to Carter and Ellram, Dekker et al., Bernon et al., Rogers et al. and Govindan et al. as overviews, compilations of reverse logistics frameworks and case studies on general return management problems.

While there is extensive literature on return policies to minimize customer returns in online retailing and estimate return volume, very few publications exist that deal with how retailers organize the backward process of customer returns. Only a few studies address the number and location of return centers where returned products are collected and reprocessed.

Koster et al. and Hübner et al. discuss operational return-handling processes in warehouses, but do not focus on physical product flows to and from stores and customers. Agatz et al. consider return handling as part of distribution service design. They remark on the scarcity of optimization models for return policies in e-fulfillment, especially in contrast to end-of-life returns. Yalabik et al. model with game theory return systems for buy-back contracts for supply chain coordination with regard to logistical efficiency and marketing effectiveness, showing the trade-off between both. Min et al. develop an algorithm for a multi-echelon reverse logistics network design for an online retailing case. The model makes location/allocation decisions for the initial collection points and centralized return centers, based on the trade-offs between freight rate discounts and inventory cost savings resulting from consolidation and transshipment. Ruiz-Benitez and Muriel assess the impact of returns on wholesale price, order quantity, and the coordination of a decentralized supply chain with a single manufacturer and a single retailer. They analyze how consumer returns impact the decision-making processes of the retailer and the manufacturer, and the resulting order quantities, transfer prices, and related coordination mechanisms. In a similar setting, Bernon et al. explore practices that enable supply chain integration between manufacturers and retailers in retail product return processes.

Summary of related literature

Swaminathan and Tayur and Agatz et al. are the first to derive from the literature basic design options for distribution issues in e-business. They identify a closer interaction between fulfillment for e-commerce and stores as a future area of research. Further literature focuses either on single planning problems, or is based on predetermined distribution structures. These papers are mostly relevant for pure online retailing. The insights on e-business are only partially relevant for OC distribution, because the OC concepts require integration of the bricks-and-mortar channel with the distance channel. Specific analyses of the operational implications for distribution systems of retailing across channels remain scarce. Boyer et al. identify the assessment of the different distribution design options as a future area of research. Rao et al. see a "very interesting question for future research" in how OC retailers can piggyback on their existing infrastructure to integrate the logistics for online and store fulfillment. Gallino and Moreno also see the need to explore the integration of online and offline channels. Because this is a recent phenomenon, they conclude that it is not surprising that there is limited literature on the subject. Grant et al. call for further research in the area of integrated on- and offline retailing to get a broader scope of opinions and obtain a more representative result. Kozlenkova et al. underline the lack of knowledge on the operational implications of innovative distribution channels. "Both theory and practice will be improved if research develops a better understanding of the effects of adding/removing channels to existing distribution systems". This requires the systematization and analysis of multiple channel distribution.

Hence, because of the underdevelopment of the systematization of distribution in OC retailing, and the dearth of extant literature on the operational aspects of OC retailing, there is a strong need to study and structure physical product flows for forward and backward distribution, their application requirements, contextual factors, and pros and cons. Furthermore, the vast majority of research papers in the area address distribution using analytical models and do not derive or test the findings empirically.

To extend the literature within this new area of OC distribution, we conducted an exploratory study. Exploratory studies are appropriate to investigate the hows and whys of a little-known area, also for logistics topics. Trautrims et al., and Randall and Mello identify qualitative methods as a path to provide new insights into retail supply chains. They see qualitative research as appropriate particularly to uncover so far unknown problems using a holistic approach.

Research questions

In view of the gap in the literature, we formulated three main objectives for our research to close this gap: The first objective is (1) to learn more about the relevant issues influencing logistics services and costs in OC retailing. On this basis, we then want (2) to understand what the present structures and processes are in OC distribution, how they can be systematized, and what the fundamental requirements are for their applicability. The second objective leads to the third (3), i.e., to determine the advantages which these concepts offer for logistics services and costs, the challenges that emerge when implementing and using these concepts, and the development phase of an OC distribution system in which these concepts are appropriate to use. In an exploratory study, where a vast amount of qualitative data are collected, the research questions should address general topics and in our case are formulated as follows:

The research questions are worthwhile addressing for at least three reasons. First, OC retailing is a very recent phenomenon. So far the key issues from a practical point of view for achieving excellence in OC distribution in terms of service and cost remain open. Therefore, one contribution is to identify the top issues that retailers face when establishing and developing OC distribution systems. This builds the basis for an understanding of OC distribution designs and the strategic rationale behind certain configurations and developments.

Second, OC retailing is increasing the need for seamless product flows across channels and, therefore, requires an up-to-date overview of potential logistics concepts. As a result, the literature lacks an empirically proven and systematic perspective on OC distribution structures. Another contribution, therefore, is to identify and systematize OC distribution designs and typologies across non-food retail sectors.

Third, as noted in the previous literature, it is still unclear which degree of integration, delivery modes, lead times or shipping models are the keys to success in OC retailing. It is, therefore, of interest to understand which distribution concepts retailers rely on today, how they are configured, and why retailers apply them. Virtually all retailers currently are assessing their options for creating service- and cost-optimized distribution concepts across the channels. Therefore, it is of further interest to know how logistics concepts for multiple channels can lead to OC retailing and, if well-executed, how they increase company performance while maintaining customer satisfaction. Another contribution, therefore, lies in deriving the qualitative benefits of the concepts. This also requires a discussion of cross-industry and industry-specific challenges, areas of application, and contextual factors.