Managing return policies with consumer resale

Lei, Yong; Liu, Qian; Shum, Stephen

doi:10.1002/nav.22004

Cited by 10 publications

(5 citation statements)

References 40 publications

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“…Li et al (2019) evaluated the implications of a secondary market on manufacturers' remanufacturing decisions. Lei et al (2022) identified the effects of consumer resale on return policies. These works lay a foundation for us to model the second‐hand platform.…”

Section: Literature Reviewmentioning

confidence: 99%

Sharing or reselling? How does manufacturer handle used products?

Wang,

Zhang,

Cheng

2024

Naval Research Logistics

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To encourage consumers to reuse their used products, some manufacturers launch second‐hand platforms while others adopt sharing platforms. Which platform benefits them more is an interesting problem for such manufacturers. To address this problem, we propose a two‐period model in which heterogeneous consumers decide whether to buy new products in Period 1 or to rent (buy) used products on the platform in Period 2. Under a proportional transaction fee, we show that the two platforms can benefit the manufacturer if the unit production cost is high, and the valuation difference is low or the number of high‐value consumers in Period 1 is fewer than in Period 2. Moreover, the two platforms are equivalent when the salvage value is 0. When the salvage value is positive, the second‐hand platform benefits the manufacturer more than the sharing platform. The sharing platform induces the manufacturer to set a higher sale price than the second‐hand platform when the unit production cost is high and there are fewer high‐value consumers in Period 1. Otherwise, the sale and reselling prices are higher under the second‐hand platform. We also consider the cases with a general consumer valuation distribution, multiple product life cycles, and a fixed transaction fee. Our findings can help manufacturers make the decision on platform choice to handle used products.

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Section: Literature Reviewmentioning

confidence: 99%

Sharing or reselling? How does manufacturer handle used products?

Wang,

Zhang,

Cheng

2024

Naval Research Logistics

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“…(2) Consumers' return behavior. As the reasons introduced ahead in the introduction section, this paper considers a fraction (0 < τ < 1) of consumers buying online will return their products (Choi, 2013;Zhang and Choi, 2021;Lei et al 2022). This paper first introduces a money-back return policy (i.e.…”

Section: Model Formulationmentioning

confidence: 99%

“…Amazon, JD.com, Gome and Zappos.com) and thus the supplier needs to select a better one for selling the products online. Consumers' return behavior. As the reasons introduced ahead in the introduction section, this paper considers a fraction (0 < τ < 1) of consumers buying online will return their products (Choi, 2013; Zhang and Choi, 2021; Lei et al . 2022).…”

Section: Model Formulationmentioning

confidence: 99%

Online channel mode selection in a platform supply chain in the presence of consumer returns

Yang

2023

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PurposeMotivated by the real-world practice that the boom of the online selling induces a higher product return as well, selecting which online channel mode indicates who takes ownership over the product and thus bears the loss of the product return. This paper aims to seek the optimal online channel modes for the two members in a platform supply chain in the presence of product returns.Design/methodology/approachThis study aims to develop a platform supply chain that consists of one platform company and one supplier. Along with an offline distribution channel, the supplier can choose two alternative online selling modes (i.e. the reselling and agency modes) to sell its product through the online marketplace. This paper applies Stackelberg game to derive the equilibrium with different business scenarios and selects the optimal online channel modes for two parties, respectively. Moreover, this paper extends to a different supply chain with a reverse channel leadership and a different product return policy for testing the robustness.FindingsSeveral interesting and important results are derived in this paper. Firstly, it is found that the relative pricing are largely relied on the costs of two channels. Secondly, the platform supply chain may benefit from a pure channel rather than the dual-channel when this channel enjoys a relatively low cost and/or a sufficiently high consumer preference. Then, the platform and the supplier act contradictorily when selecting their optimal online channel modes. To be specific, the platform motivates to choose the online reselling mode when both the commission rate and the slotting fee are relatively low, whereas the supplier is likely to select the online agency mode under this circumstance. Finally, a win-win situation in regards to the optimal online channel mode for two parties is achievable with numerical experiments.Practical implicationsBased on the analytical studies, the results derived in the authors’ work can provide managerial insights to assist the supplier and the platform company in determining the operational decision and selecting the optimal online channel mode to deal with consumer returns. In addition, appropriate commission rate along with slotting fee will make both parties achieve a win-win situation in determining their optimal online channel mode.Originality/valueTo the authors’ best knowledge, this paper makes the first move to determine the optimal online channel mode in the content of consumer returns and study how it is affected by different product return policies.

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“…Nageswaran et al (2020) identify the conditions under which the omnichannel firms should offer full refunds or partial refunds for online returns. Lei et al (2022) find that the retailer should decide whether to offer returns and adjust the return policy, considering consumers' resale transaction cost. These studies do not consider the quality factor in optimizing the return policy and their findings may not be applied to the agency selling channel.…”

Section: Literaturementioning

confidence: 99%

Commission, product quality and return policy in agency selling

Hsiao

Chen

Xiong

2022

Naval Research Logistics

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Many sellers provide products for consumers directly on online platforms. This selling format is labeled “agency selling.” In this article, we investigate the platform's contract design and the seller's quality and return decisions in the agency selling. We find that the platform chooses a high commission rate to induce the seller to accept returns when the salvage factor is large enough or the consumers' willingness to pay for quality is sufficiently low. Compared to the direct channel, the seller is more likely to accept returns in the agency selling. Moreover, if the consumers' willingness to pay for quality increases, the platform intends to reduce the commission rate to induce the seller to increase the quality. The commission rate makes no influence on the generosity of the refund. However, when the consumers' willingness to pay for quality is sufficiently large, the platform prefers the seller to offer no refund and the commission rate may increase in the consumers' willingness to pay for quality. Finally, we consider two extensions: quality affects satisfaction probability and return window.

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Managing return policies with consumer resale

Cited by 10 publications

References 40 publications

Sharing or reselling? How does manufacturer handle used products?

Sharing or reselling? How does manufacturer handle used products?

Online channel mode selection in a platform supply chain in the presence of consumer returns

Commission, product quality and return policy in agency selling

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