Perils and Merits of Cross-Channel Returns

Abstract

In this article, we study the impact of cross-channel returns on a bricks-and-clicks dual-channel retailer's overall profit, individual channel prices, and individual channel demand under two scenarios: 1) exogenous returns and 2) refund-dependent returns. Our study reveals a number of interesting results. For example, when channel substitutability is high, accepting online purchased returns in the bricks-and-mortar store is likely to drive the in-store price up, despite a drop in the offline demand due to the cannibalization effect. In general, firms should allow cross-channel returns when channel substitutability is high, return handling cost is low, and self-channel returns are not hefty. Unlike the extant literature, we also see that bricks-and-mortar returns impact a multiple-channel retailer's optimal return policy. We are also able to verify that our main findings are fairly consistent under both exogenous and refund-dependent returns scenarios.