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Managing customer returns strategy with the option of selling returned products

Author

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  • Wan, Xing
  • Li, Dan
  • Chen, Jing
  • Lei, Yongqin

Abstract

Managing customer returns is a crucial issue for the retailing industry. In this paper, we develop a model to investigate a monopolistic retailer's customer returns management strategy. The retailer should determine its returns policy: a money-back guarantee (MBG) or no-refund. If an MBG returns policy is offered, the retailer must also decide whether or not to sell the returned products as open-box products. We derive the optimal pricing strategy for each of the returns strategies and identify the retailer's optimal customer returns management strategy. We show when the retailer should implement each of the returns policies, and when it should sell the returned products as open-box products. We also show that even when the retailer cannot handle customer returns efficiently, it could choose to offer an MBG returns policy and sell returned products as open-box products, if the cost of inspecting returned items is low. Finally, we show that the retailer can simplify the choice of returns management strategy based on identifiable quantities and threshold values. The implications of this study are also discussed.

Suggested Citation

  • Wan, Xing & Li, Dan & Chen, Jing & Lei, Yongqin, 2020. "Managing customer returns strategy with the option of selling returned products," International Journal of Production Economics, Elsevier, vol. 230(C).
    • Handle: RePEc:eee:proeco:v:230:y:2020:i:c:s0925527320301717
    DOI: 10.1016/j.ijpe.2020.107794
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    Citations

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    Cited by:

    1. Guo, Xiaolong & Zhou, Qiang & Bian, Junsong, 2022. "Online retailers’ platform-based Worry-Free-Shopping: Retailing strategy considering consumer valuation bias," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 167(C).
    2. Guo, Xiongfei & Chen, Jing, 2023. "Manufacturer’s quality improvement and Retailer’s In-store service in the presence of customer returns," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 177(C).
    3. Juan Tang & An‐Lin Song & Chang‐Yi Liu & Zhi Liu, 2023. "Optimal decisions in a remanufacturing supply chain under money‐back guarantees," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2254-2277, June.
    4. Li, Dan & Chen, Jing & Liao, Yi, 2021. "Outsourcing strategy in the presence of the customer returns," International Journal of Production Economics, Elsevier, vol. 240(C).
    5. Priya, Bhawna & Biswas, Indranil & Agrawal, Anupam, 2023. "The over-ordering problem in trade credit: Role of return policies," European Journal of Operational Research, Elsevier, vol. 309(2), pages 731-744.
    6. Wang, Lisha & Chen, Jing & Song, Huaming, 2021. "Marketplace or reseller? Platform strategy in the presence of customer returns," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 153(C).
    7. Liu, Jiqiong & Yuan, Rui & Feng, Shuai, 2023. "Whether to offer return-freight insurance or open a physical showroom: A strategic analysis of an online retailer’s decisions," Journal of Retailing and Consumer Services, Elsevier, vol. 75(C).
    8. Li, Dan & Chen, Jing & Chen, Bintong & Liao, Yi, 2022. "Manufacturer’s contract choice and retailer’s returns management strategy," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).
    9. Wang, Junbin & Wang, Shanshan, 2022. "Revisiting the showrooming effect on online and offline retailers: The strategic role of in-store service," Journal of Retailing and Consumer Services, Elsevier, vol. 66(C).
    10. Zhang, Qiao & Chen, Jing & Chen, Bintong, 2021. "Information strategy in a supply chain under asymmetric customer returns information," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    11. Guo, Xiongfei & Chen, Jing & Wu, Jie & Zhang, Tinglong & Zhang, Hui, 2024. "Returns policy, in-store service, and contract strategies in the presence of customer returns," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 186(C).

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