Delivery mode selection of home furnishing e-retailer based on a combination of logistics delivery and installation service

Abstract

With the increasing demand for online home-furnishing products, product delivery services, especially installation services, have become increasingly regarded as bottlenecks and key factors for success. Meanwhile, customers have different preferences for a combination of delivery modes because of separated or synchronized logistics delivery from installation services. It is essential for online home-furnishing e-retailers to self-build or outsource installation services. This study investigates the optimal delivery mode selection of home-furnishing e-retailers in a home-furnishing supply chain consisting of a home-furnishing e-retailer, a third-party installation service provider (ISP), and a third-party logistics service provider (LSP). Specifically, we explore three alternative modes: (ⅰ) The home-furnishing e-retailer undertakes the installation service (Mode E); (ⅱ) the ISP undertakes the installation service (Mode I); (ⅲ) the LSP undertakes the installation service (Mode L). The results reveal that the self-build mode does not always generate the highest installation service level, and the integrated delivery mode may generate the highest installation service level when the cost performance of the installation service is relatively low. Moreover, optimal delivery mode selection depends on the installation service’s cost performance. When the installation service’s cost performance is relatively low, the e-retailer and the LSP reach a “win-win” situation from the integrated delivery mode. When the installation service’s cost performance is relatively high and the self-build fixed cost is low, the e-retailer and the LSP reach a win-win situation from the self-build mode. Interestingly, compared with the outsourced integrated service mode, the self-build integrated service mode is not a better choice for the e-retailer if the self-build fixed cost is too high. Our study contributes to the growing literature on home furnishing and guides the implementation of delivery strategies for large-product online retailers.