Reverse logistics in e-business. Optimal price and return policy

Reverse logistics in e-business. Optimal price and return policy

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Article ID: iaor20043615
Country: United Kingdom
Volume: 34
Issue: 1
Start Page Number: 70
End Page Number: 88
Publication Date: Jan 2004
Journal: International Journal of Physical Distribution & Logistics Management
Authors: ,
Keywords: e-commerce
Abstract:

In an Internet direct sales supply chain, the customers buy direct from the manufacturer sacrificing the benefit of physical inspection of the product. This increases the likelihood that customers will have some dissatisfaction with the product and would like to return it. A clearly explained and generous return policy, then, will be welcome by the customers and therefore will enhance demand. From the manufacturer's point of view, this will increase revenue, but will also increase cost due to increased likelihood of return. This paper develops a profit-maximization model to obtain optimal policies for price and the return policy in terms of certain market reaction parameters. It obtains jointly a number of managerial guidelines for using marketing and operational strategy variables to influence the reaction parameters so as to obtain the maximum benefit from the market. The paper mentions several future research possibilities.

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