Products pricing and return strategies for the dual channel retailers

This paper analyzed how different return strategies and return rates affect dual-channel retailers' profits and channel pricings. Return can stimulate sales; however, the return has presented significant challenges to retailers. The return has long been studied to maximize profit and pricing; however, the different return strategies for dual-channel retailers affect channel both. This paper aimed to study whether or not dual-channel retailers should allow customers to return items in two channels and whether or not the retailer should contract with the manufacturers and pay extra fees to return products. This study indicated when the retailer should allow customers’ returns to maximize the profit by increasing the demand. It was discovered that when a customer's sensitivity factor for pricing is large (i.e., the demand is small) and the return rate is low, both retailer and manufacturer should object to contracting for handling returned products. However, when both the customer's sensitivity factor for pricing and the return rate are high, the retailer and the manufacturer should sign a contract to achieve maximum profit. Otherwise, the contract desire was only one-sided. The profit-maximizing retailers must balance the trade-off between the product demands, the return losses, and the return rates. This analytical work was verified with numerical simulation, and the results demonstrated implications for dual-channel retailers, return strategies, and pricing.