Retailer’s return policy in the presence of P2P secondary market

• Published in: Electronic commerce research and applications 2020-01, Vol.39, p.100899, Article 100899
• Main Authors: Ma, Weimin, Zhao, Chenrui, Ke, Hua, Chen, Zhiyi
• Format: Article
• Language: English
• Subjects: Consumer uncertainty; P2P platform; Return policies; Secondary market; Supply chain
• ISSN: 1567-4223; 1873-7846
• DOI: 10.1016/j.elerap.2019.100899

•Refuse cheap goods returns, unconditionally accept valuables returns.•Allowing returns does not necessarily increase sales.•Second-hand platform’s profits are always less than half of monopoly retailers. Consumer uncertainty is a non-negligible factor in the e-commerce era. Besides traditional return channels, the peer-to-peer (P2P) secondary platform gradually becomes another way to dispose of inappropriate products. In this paper, to study retailer’s return policy and its influence, we set a two-period model where a retailer sells new products in the first period and a P2P platform operates a web-based used-goods market in the second period. Our analysis shows that return permission causes increase in retail price and platform commission but not necessarily stimulate sales. The unit procuring cost affects sales and profits and we divide it into three cases: When the unit cost is sufficiently high, allowing returns always makes retailers and P2P platforms better off. When it is sufficiently low, returns make both incur loss. When it is medium, maintaining the return rate at a relatively low level generates a greater benefit to all stakeholders.