Paper Info
Title
Design of win-win return policies for online retailers
Abstract
Product returns cost retailers billions of dollars annually. We analyze return policies (RPs) with cash refunds in the presence of wardrobers. We then analyze RPs with store credit or gift cards (SC/GC) refunds. We also analyze two-option RPs in which consumers choose between cash and SC/GC refunds. We find that for cash-only RPs, the retailer uses price to attract consumers while using the refund fraction to discourage wardrobers. SC/GC can be a good alternative to cash when consumers have high valuation for SC/GC and some SC/GC are not redeemed. With high redemption rate, SC/GC can be a good alternative when consumers make hedonic purchases and the retailer has a reasonable profit margin. We also find that single-option RPs dominate two-option RPs when genuine consumers and wardrobers have the same valuation for SC/GC, and two-option RPs can dominate when the two consumer segments have heterogeneous valuation for SC/GC. When two-option RPs dominate, the retailer gives lenient SC/GC option to genuine consumers who have a high valuation for SC/GC, and uses the cash option to decrease the cost or increase the profit from wardrobers who have a low valuation for SC/GC for some ranges of problem parameters. Moreover, when consumers have continuous valuation for SC/GC, two-option RPs dominate single-option RPs in genuine-only consumer markets. With two-option RPs, the retailer uses cash to increase profit from consumers with a low valuation for SC/GC and uses SC/GC to increase profit from consumers with a high valuation for SC/GC. (c) 2021 Elsevier B.V. All rights reserved.
Year
DOI
Venue
2022
10.1016/j.ejor.2021.11.030
EUROPEAN JOURNAL OF OPERATIONAL RESEARCH
Keywords
DocType
Volume
Pricing, Return policy, Non-cash refunds
Journal
301
Issue
ISSN
Citations 
2
0377-2217
0
PageRank 
References 
Authors
0.34
0
3
Name
Order
Citations
PageRank
Huirong Fan100.34
Moutaz Khouja220419.29
Jing Zhou332754.75