Summary: We study an increasingly popular retail practice called pickup partnership that allows online retailers to offer an in-store pickup service by partnering with a physical store. In practice, online retailers use two policies for such partnerships:

-Fixed fee policy: Under this policy, online partner signs a partnership with a physical store and pays a fixed fee to the partner so that the customers can visit the offline store to pick up their orders.

-Coupon policy: Under this policy, online partner issues a coupon (discount or promotion coupon) to the customers. When the customers visit the offline store to pick up their orders, they use the coupon to purchase additional items from the offline store. These policies have pros and cons. Our research found that the fixed fee policy is very easy to implement whereas coupon policy generates cross-selling opportunity for the offline partner.