Promised delivery time: Implications for retailer’s optimal sales channel strategy

•Promised delivery time is considered as a key factor in channel choice strategy.•Dual-channel hurts retailer if logistics capability coefficient is either too large or small.•Retailer’s channel strategy is given under joint quantity and PDT competition.•Retailer with larger market benefits from dual-channel as competition increases. Incorporating the pros (increased market size) and cons (costs, delivery time, and channel competition) associated with the online channel, this paper investigates whether or not a retailer should establish an online channel alongside its offline physical store, and if so, under what conditions. Specifically, we take the impact of promised delivery time (PDT), which is of great significance in the online channel, into the consideration of sales channel choice. We first consider a single retailer and then extend the analysis to two competing retailers with joint quantity and PDT competition to analyse each retailer’s optimal sales channel strategy. The results demonstrate that the optimal sales channel depends on the logistics capability of the third-party logistics provider, the increased market size obtained by introducing an online channel and the degree of demand competition. Interestingly and counter intuitively, we find that introducing an online channel can hurt the retailer’s profit when the logistics capability coefficient is sufficiently small or large. This is because logistics capability has a significant impact on PDT and demand. We also find that with increasing of the degree of demand competition, the retailer with the larger market will be more likely to introduce an online channel.