The impact of cross-selling on managing consumer returns in omnichannel operations

This paper considers three innovative mechanisms associated with effectively managing consumer returns for an omnichannel retailer that has both online channels and physical stores: buy-online-return-to-store (BORS); return insurance to enhance the return experience by reducing return hassle costs; and a virtual try-on experience, enabling online consumers to evaluate product fit without patronising the store. The seller may earn additional cross-selling profits from consumers patronising stores and making additional purchases. We assess the impact of cross-selling on managing consumer returns under these three innovative mechanisms in omnichannel operations. Compared with the base model, involving buy-online-return-online, our results show that (i) when BORS is implemented, cross-selling has a positive net impact on profits; (ii) when return insurance is available, cross-selling does not directly affect the effectiveness of the return insurance; and (iii) when a virtual try-on experience is provided, cross-selling has a negative impact on profits. Furthermore, several extensions are discussed, including incorporating loss of demand, customer acquisition by offering BORS or return insurance, different channel costs, allocation policies for scarce inventory, and different salvage values.