Bricks and Clicks: Decisions in an O2O Supply Chain Considering Product Returns

Wei Feng,Hong Chen

doi:10.1109/access.2019.2958698

Wei Feng, Hong Chen

Open Access

https://doi.org/10.1109/access.2019.2958698

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Abstract

Decision making by participants in supply chains is fundamentally constrained in online and offline (O2O) supply chain management. Enterprises ultimately seek selling strategies that can increase their sustainability in highly competitive marketplaces. In making purchase decisions, customers like to “touch and feel” products, and providing this experience to customers must be considered when calculating the costs for retailers of customers returning products. Therefore, in this study, we discuss the influence of selling strategies and the retailer cost of handling returns according to different distribution channels. The O2O supply chain decision models under a duopoly and monopoly are constructed to obtain the wholesale price and selling price, as well as the maximum profits of game players. One important result is that when the retailer's cost of handling returns is within a certain range, the profits of the supplier and O2O supply chain in the duopoly context (Model D) are higher than those in the monopoly context (Model O). However, regardless of the retailer cost of handling returns, an e-retailer's profits are always higher than the sum of the two retailers' profits. For consumer surplus, when the retailer's cost of handling returns meets certain conditions, the consumer surplus is lower in the monopoly context (Model O) than in the duopoly context (Model D) and creates more utility for consumers in a duopolistic market. The research is beneficial for companies seeking to establish sound pricing and sales strategies in the emerging field of O2O commerce, enhancing companies' long-term economic performance.

Highlights

With the growing popularity of e-commerce, consumers are familiar with buying goods and services through the Internet
Our work primarily aims to compensate for the gap in the literature by concentrating on an analytical framework in an O2O model considering the supply chain, which includes a supplier, an e-retailer and consumers. It focuses on examining the influence of different channels on optimal pricing decisions and performances from the perspective of supply chain management
We focus on pricing decisions and marketing strategies for an O2O supply chain in Sections IV and V

Summary

INTRODUCTION

With the growing popularity of e-commerce, consumers are familiar with buying goods and services through the Internet. This paper uses the theory and methods of cross-discipline optimization, such as the theory of demand cross elasticity, to analyze equilibrium price, selling strategy, channel selection, and supply chain profits It establishes a decision-making game model of the O2O supply chain. Our work primarily aims to compensate for the gap in the literature by concentrating on an analytical framework in an O2O model considering the supply chain, which includes a supplier, an e-retailer and consumers It focuses on examining the influence of different channels on optimal pricing decisions and performances from the perspective of supply chain management. The results from analytical modeling provide several managerial insights that are beneficial for game players in developing reasonable pricing strategies and provide a theoretical basis for the decision making of O2O supply chain participants This facilitates coordination and cooperation to improve the financial performance of both parties.

RELATED WORK

COMPARATIVE ANALYSIS OF MONOPOLY AND DUOPOLY

Findings

VIII. CONCLUSION