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Return freight insurance strategy in a hybrid selling mode of online retail platforms

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  • Chen, Xiaohong
  • Tan, Jitong
  • Wang, Fuqiang
  • Guo, Xiaolong

Abstract

The widespread adoption of return freight insurance (RFI) by e-tailers has become a well-documented practice on online platforms to alleviate consumers’ concerns regarding return freight. This paper establishes a model consisting of an online platform and a manufacturer to investigate their equilibrium RFI strategies in a hybrid selling mode and the impacts of RFI premium on equilibrium demand and profit. In this mode, the manufacturer distributes products through both the reselling channel operated by the platform and the agency channel operated by the manufacturer. To attract consumers to purchase, both the platform and manufacturer decide whether to offer RFI, generating four scenarios to evaluate. Several interesting findings emerge from our analysis. First, the co-opetitive relationship between the platform and the manufacturer significantly impacts their RFI strategies. Specifically, under an exogenous commission rate, the manufacturer always prefers to adopt RFI when the premium is below a certain threshold, whereas the platform may choose to provide RFI when the premium is high. This underscores the strategic role of RFI in hybrid channel co-opetition. Second, the optimal RFI strategies of both the platform and the manufacturer are mutually independent—neither party’s decision depends on the other’s. Consequently, all four strategy scenarios—NN, NF, FN, and FF—can arise as the equilibrium outcomes. Third, offering RFI by the platform at low (high) premiums always enhances (reduces) the manufacturer’s profit. In equilibrium, both the demand in each channel and the platform’s profit may increase as the premium increases.

Suggested Citation

  • Chen, Xiaohong & Tan, Jitong & Wang, Fuqiang & Guo, Xiaolong, 2026. "Return freight insurance strategy in a hybrid selling mode of online retail platforms," European Journal of Operational Research, Elsevier, vol. 329(2), pages 591-606.
    • Handle: RePEc:eee:ejores:v:329:y:2026:i:2:p:591-606
    DOI: 10.1016/j.ejor.2025.07.045
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