Enhancing supply chain coordination through transparency initiatives to mitigate product returns

The increasing popularity of online shopping has presented a considerable challenge in supply chain management—a significant number of returns due to information opacity of products. To tackle this issue, e-retailers exert various marketing efforts, such as virtual fitting rooms, augmented reality technology, and live streaming, so as to reduce product returns. In the era of e-commerce, remanufactured products have also entered the online shopping arena to achieve sustainable development. This study explores the pricing and marketing strategies considering transparency effort to reduce product returns in a supply chain, where the manufacturer produces new products for wholesale and provides remanufactured products for direct sales, and the retailer sells new products and handles returns for resale. We construct Stackelberg game models to investigate equilibrium decisions and results under scenarios with and without the adoption of transparency effort. Comparative analysis shows that both the manufacturer and retailer can improve their profits with the retailer's transparency effort. Additionally, transparency effort also contributes to increased consumer surplus. Moreover, we explore the supply chain coordination through a contract mechanism and propose a revenue-cost-sharing contract that achieves a win-win outcome within a specific range of cost-sharing ratios. Numerical experiments show that transparency effort is more advantageous when facing high product return rates or low consumer acceptance of remanufactured products. Our finding also suggests that the proactive cost-sharing benefits the manufacturer himself under the coordination mechanism, as it incentivizes the retailer to invest more effort in improving product information transparency.