Abstract
With the rapid development of e-commerce and the economy, an increasing number of retailers are adopting a dual-channel retail strategy (DCRS), which allows customers to return unsatisfactory products, provided that their complaints are reasonable, and receive a full refund. This paper studies the pricing strategies of an integrated dual-channel retailer (DCR) when it provides return policies to customers, including original channel return, fixed cross-channel return, and relaxed cross-channel return. The relationship between the DCR’s system performance and channel pricing is impacted by customer channel preferences, and the return rates of different channels are discussed. The results show that the greater the difference in customer preferences between channels is, the greater the profitability of the DCR will be. A fixed cross-channel return model should be selected when the return rate in the online channel is higher or the cross-channel return rate is lower; otherwise, the original channel return model should be selected. When the return rate of a certain channel is high, the retailer should increase the price in that channel and reduce the pricing of its competing channel to compensate for the loss caused by the returns and transfer sales between channels. A selective return policy can not only improve the flexibility of business operations and enhance competitive advantage but also provide convenient customer returns and enhance consumers’ sense of security.
Highlights
With the rapid development of the Internet and third-party logistics providers, online sales channels have experienced growth in their customer bases
To answer the above questions, we propose and investigate three return modes according to the different return channels available to customers: the original channel return mode, the fixed cross-channel return mode, and the random cross-channel return mode. When comparing these different return modes, the system performance of the dual-channel retailer (DCR) is proxied by the total profit of the system, and the optimal channel prices of products are determined by the objective of an integration problem to maximize the total profit
Based on the decision results for the optimal pricing and total profit under each return mode, we identify the rules that govern the change in the total profit and optimal pricing of DCR system while considering customer channel preferences and return rate through numerical analysis
Summary
With the rapid development of the Internet and third-party logistics providers, online sales channels have experienced growth in their customer bases. Us, this paper studies the problems of optimal pricing strategies under different return modes and the choice of return mode when an integrated dual-channel retailer using a DCRS is the sole decision maker. To answer the above questions, we propose and investigate three return modes according to the different return channels available to customers: the original channel return mode, the fixed cross-channel return mode, and the random cross-channel return mode When comparing these different return modes, the system performance of the DCR is proxied by the total profit of the system, and the optimal channel prices of products are determined by the objective of an integration problem to maximize the total profit. E analysis reveals that both the customer channel preferences and the return rate of each channel are important factors affecting the optimal pricing decisions and total profit under different return modes, which means that the choice of the optimal return mode for DCR depends on the value of each parameter.
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