Should a manufacturer sell refurbished returns on the secondary market to incentivize retailers to reduce consumer returns?

Andrea Borenich, Yanick Dickbauer, Marc Reimann and Gilvan C. Souza

European Journal of Operational Research, 2020, vol. 282, issue 2, 569-579

Abstract: Consumer electronics returns are typically returned by the retailer to the manufacturer for a full refund of the wholesale price. This practice does not sufficiently motivate the retailer to reduce the volume of returns. Different mechanisms have been proposed to incentivize the retailer to reduce returns, such as a reduced wholesale price for returns below a target, but they do not consider the subsequent disposition of returns. The high value of returns usually justifies refurbishment and resale. We study how competition between refurbished returns sold by the manufacturer and new products sold at the retailer affects retailer behavior. We find that the retailer never exerts more effort to reduce returns when faced with competition through the online store. The manufacturer’s profitability, however, is always higher with an online store. The online store is also preferable to a strategy where the manufacturer only partially refunds the retailer for returns.

Keywords: Supply chain management; Manufacturer–retailer supply chain; Consumer returns; Secondary market (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:282:y:2020:i:2:p:569-579

DOI: 10.1016/j.ejor.2019.09.049

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