Collection Responsibility Choice for Competing E-Tailing Supply Chains With Consumer Returns

Abstract

For implementing consumer returns policy in e-tailing, to whom consumers should return their purchases is a crucial operations decision. We develop game models of competing e-tailing supply chains to study how price competition, channel structure of competitor, and consumer returns policy affect collection responsibility scenario. There are two collection responsibility scenarios: manufacturer collection and electronic retailer (e-tailer) collection. We find that in the common e-tailer setting, the channel collection efficiency and existence of the fixed cost are important for the manufacturer to decide whether to accept the e-tailer's transfer of collection responsibility; if manufacturer collection is optimal for a manufacturer, then it is awin-winscenario for both the manufacturer and the e-tailer, i.e., they are better off using manufacturer collection. If e-tailer collection has higher channel efficiency than manufacturer collection, then e-tailer collection is chosen; otherwise, in the presence of fixed cost, we show that 1) both manufacturers collect returned products if market scale is large, the e-tailer collects them if market scale is small; otherwise, different collection responsibility scenarios are used; 2) price competition accounts for the coexistence of different scenarios and reduces the range of manufacturer collection; 3) the channel structure of competitor can reverse the effect of price competition degree on collection responsibility; and 4) the manufacturer with higher restocking fee has a smaller incentive to collect returns products.

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