Retailers’ optimal ordering decisions under a doorstep exchange service: An economic order quantity model

To enhance the post-purchase experience, e-commerce platforms have recently introduced a novel Doorstep Exchange Service (DES), which reduces exchange waiting time by dispatching replacement items in advance, thereby improving consumer convenience. However, DES presents a dilemma for retailers in making ordering decisions. Increased purchasing demand coupled with higher exchange volumes necessitates larger initial inventories, which typically lead to extended order cycles. At the same time, the advance dispatch of replacements and accelerated exchange rates hasten inventory depletion, prompting retailers to adopt shorter cycles and more frequent replenishment. These conflicting pressures render the determination of optimal order cycles highly uncertain. To support optimal ordering decisions under DES, this study develops an economic order quantity model to analyse retailers’ ordering behavior under DES and compares it with traditional exchange mechanism. Our results indicate that DES leads to larger order quantities and shorter order cycles, driven by increased exchange volume and accelerated inventory turnover. DES enhances retailer profitability under specific conditions, including low inventory holding costs, high product quality, minimal mismatch costs, a narrow wholesale-salvage price gap, and short waiting time. When prices are endogenously determined, retailers consistently set higher prices under DES. This research contributes to the literature of after-sales policies in e-commerce. Our results offer valuable insights for manufacturers, retailers, and logistics providers to support their decision-making under DES and facilitate optimal choices regarding the adoption of DES.