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

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.

Multi-dimensional circular supply chain management: A comparative review of the state-of-the-art practices and research

“…Problems may arise when members in closed-loop supply chains have non-aligned objectives (Souza, 2013), leading to competition among supply chain members for recovery operations and sales in the secondary market (Borenich et al, 2020;Kleber, Reimann, et al, 2020). De Giovanni (2018 suggests joint maximization to align the motivation of firms to close the material loops so as to achieve a triple bottom line.…”

Does supply chain agility create customer value and satisfaction for loyal B2B business and B2C end-customers?

“…Whether they are purchasing managers or end consumers, customers constitute the ultimate appraiser of the relevance of a firm's supply chain capabilities and operations (Esper et al , 2010; Mentzer and Gundlach, 2010). Customers' experiences and perceptions are essential to value determination (Payne et al , 2008), rewarding or sanctioning firms based on their judgment of delivered value (Borenich et al , 2020; Woodruff, 1997). Accordingly, extant research ties SCM operations and relationships increasingly closer to customers, incorporating the customer perspective into SCM (Kim, 2017; Maull et al , 2012).…”

Whether a retailer should enter an e‐commerce platform taking into account consumer returns

“…Pasternack () and Emmons and Gilbert (1998) studied manufacturers’ return strategies for retailers’ unsold products. Then some scholars investigated no‐reason‐full‐return policies (Davis et al., ; Ferguson et al., ; Shulman et al., ; Geng et al., ; Borenich et al., ; Guo et al., ). For instance, Cheng et al.…”

“…Pasternack (1985) and Emmons and Gilbert (1998) studied manufacturers' return strategies for retailers' unsold products. Then some scholars investigated no-reason-full-return policies (Davis et al, 1995;Ferguson et al, 2006;Shulman et al, 2011;Geng et al, 2017;Borenich et al, 2019;Guo et al, 2020). For instance, Cheng et al (2017) investigated firms' optimal ordering policies for deteriorating items within a no-reason return period; Choi and Guo (2018) studied the impact of consumer returns on responsive supply in fashion mass customization systems; Zhang et al (2018) explored online-only and omnichannel strategies of firms while considering consumer returns and order cancellation.…”