Return Strategies and Online Product Customization in a Dual-Channel Supply Chain

Rong Zhang, Jiatong Li, Zongsheng Huang and Bin Liu
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Rong Zhang: Research Center of Logistics, Shanghai Maritime University, Shanghai 201306, China
Jiatong Li: School of Economics and Management, Shanghai Maritime University, Shanghai 201306, China
Zongsheng Huang: School of Economics and Management, Shanghai Maritime University, Shanghai 201306, China
Bin Liu: School of Economics and Management, Shanghai Maritime University, Shanghai 201306, China

Sustainability, 2019, vol. 11, issue 12, 1-17

Abstract: This paper investigates in a dual-channel supply chain which return strategy is better for the manufacturer that considers the consumers’ utility. We find that a manufacturer prefers offering a Money-Back Guarantee (MBG) as long as the net salvage value of the returned product is positive in a channel. However, the return strategy of the retailer is more affected by the return policy of another channel than the net salvage value. In order to reduce online returns, we propose the online product customization channel, and then, we examine the choice of return policy and the manufacturer’s channel selection. We show that the demand and profit of the manufacturer will increase to a certain extent when opening an online customization channel. However, compared to the case where both channels provide an MBG, the implementation of online customization may hurt the manufacturer’s profits with the increase in consumer satisfaction in indirect channels.

Keywords: return policy; online customization; pricing; Stackelberg game (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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