Optimal cross-channel return policy in dual-channel retailing systems

Abstract

Many dual-channel retailers sell their products through both a physical store and an online store. Allowing unsatisfactory online purchases to be cross-returned to the physical store together with same-channel returns is one of the practical strategies used in the dual-channel retailing industry. Many of those returns are intact and undamaged and, thus, can be resold. But there is a lack of the research on how those resalable returns impact the order quantities of each channel. In this paper we study and compare four different return policies where a dual-channel retailer offers both same- and cross-channel returns. For each return policy, we propose mathematical models to determine optimal order quantities that account for the impact of resalable returns. Several insights on the different cross-channel return policies and some properties of the optimal solutions are presented.