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Pricing and return strategy of online retailers based on return insurance

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  • Ren, Minglun
  • Liu, Jiqiong
  • Feng, Shuai
  • Yang, Aifeng

Abstract

With the development of e-commerce, online shopping has become increasingly common, and as a result, consumers inevitably encounter the problem of returns. Therefore, pricing, return policy and return insurance strategy have attracted considerable research attention. In this paper, we construct four models to study pricing, return policy and return insurance strategy. We show that when a product's net residual value is greater than or equal to zero, online retailers should offer a money-back guarantee (MBG) return policy; however, they do not have to offer free return insurance because the latter does not increase their market share and profit, nor does it increase consumer surplus. The optimal strategy of insurance providers is unaffected by whether the policyholder is an online retailer or a consumer and should be neutral, which helps insurance providers gain the trust of policyholders. Consumers should buy products only when online retailers offer an MBG return policy; however, consumers should not do so if the online retailer provides free return insurance.

Suggested Citation

  • Ren, Minglun & Liu, Jiqiong & Feng, Shuai & Yang, Aifeng, 2021. "Pricing and return strategy of online retailers based on return insurance," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
  • Handle: RePEc:eee:joreco:v:59:y:2021:i:c:s0969698920313588
    DOI: 10.1016/j.jretconser.2020.102350
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    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.
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    8. Chang, Hsiu-Hua & Yang, Ting-Shan, 2022. "Consumer rights or unethical behaviors: Exploring the impacts of retailer return policies," Journal of Retailing and Consumer Services, Elsevier, vol. 64(C).
    9. Serravalle, Francesca & Vannucci, Virginia & Pantano, Eleonora, 2022. "“Take it or leave it?†: Evidence on cultural differences affecting return behaviour for Gen Z," Journal of Retailing and Consumer Services, Elsevier, vol. 66(C).
    10. Adriana Dima & Elena Radu & Ecaterina Milica Dobrota & Adrian Otoiu & Alina Florentina Saracu, 2023. "Sustainable Development of E-commerce in the Post-COVID Times: A Mixed-Methods Analysis of Pestle Factors," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 25(S17), pages 1095-1095, November.
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    12. Shujun Yang & Ivan Kai Wai Lai & Huajun Tang, 2022. "Pricing and Contract Coordination of BOPS Supply Chain Considering Product Return Risk," Sustainability, MDPI, vol. 14(9), pages 1-21, April.

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