Buy online and pick up in-store: Design of the service area.

•A physical store fulfills orders for both online and offline customers.•We propose the strategy for deciding the buy-online-pick-up-in-store service area.•We provide retailer a guideline for judging the product type for in-store pickup.•We ascertain the impacts of order cancellation policies on the optimal decisions.•We prove the superiority of reserve-online-pay-in-store mode over in-store pickup.