Should a manufacturer sell refurbished returns on the secondary market to incentivize retailers to reduce consumer returns?

Borenich, Andrea, Dickbauer, Yanick, Reimann, Marc and Souza, Gilvan C. (2019) Should a manufacturer sell refurbished returns on the secondary market to incentivize retailers to reduce consumer returns? European Journal of Operational Research. ISSN 0377-2217 (In Press)

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Official URL: https://doi.org/10.1016/j.ejor.2019.09.049

Abstract

Consumer electronics returns are typically returned by the retailer to the manufacturer for a full refund of the wholesale price. This practice does not sufficiently motivate the retailer to reduce the volume of returns. Different mechanisms have been proposed to incentivize the retailer to reduce returns, such as a reduced wholesale price for returns below a target, but they do not consider the subsequent disposition of returns. The high value of returns usually justifies refurbishment and resale. We study how competition between refurbished returns sold by the manufacturer and new products sold at the retailer affects retailer behavior. We find that the retailer never exerts more effort to reduce returns when faced with competition through the online store. The manufacturer’s profitability, however, is always higher with an online store. The online store is also preferable to a strategy where the manufacturer only partially refunds the retailer for returns.

Item Type: Article
Uncontrolled Keywords: Consumer returns, Manufacturer–retailer supply chain, Secondary market, Supply chain management
Subjects: G100 Mathematics
G400 Computer Science
G500 Information Systems
N200 Management studies
Department: Faculties > Business and Law > Newcastle Business School
Depositing User: Elena Carlaw
Date Deposited: 21 Nov 2019 10:37
Last Modified: 26 Nov 2019 13:45
URI: http://nrl.northumbria.ac.uk/id/eprint/41559

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