Research On The Impact Mechanism Of The No-reason Return Policy And Quality Requirement On The Sellers’ Decisions

In recent years, the e-commerce is developing rapidly in the world, especially in China. In 2015, the total amount of the online retailing reaches 387.73 billion RMB, and China has been the world greatest e-commerce market. With the development of the e-commerce scale, some Chinese e-business companies have changed into platform enterprises. Among them, Alibaba and JD have listed in the US in 2014 and were warmly welcomed by global investors. Platform strategy is conductive to the rapid increase in the scale of the e-business companies and trading volume, so that the companies can take advantage of further economies of scale. In addition, platform strategy helps the e-business companies focus on the development of the e-commerce system. However, everything has its other side. The e-business platforms usually meet the consumers’need with thousands of sellers or retailers, while they cannot control the sellers’service and product quality directly. As a result, some sellers, for short-term profit, treat the consumers return rudely or even provide fake or low quality product, which destroys the consumers’online shopping experience, incurs their complaints and even threatens the sustainable development of the platform. Under the pressure of the public opinion, the government has also begun to strengthen the supervision of the e-commerce by means of legislation.No matter it is forced by public opinion, legal pressure or for the company’s long-term development needs, the e-business platform companies have to face the fact that the return service and product quality problems among the sellers need to be solved. In the practice of the e-business platforms’measures to manage the sellers’return service and product quality, the most notable ones are the no-reason return policy and platform quality requirement. The no-reason return policy is about the management of the platform on the sellers’return policy. Under the no-reason return policy, except some special products, the sellers must accept the return from the consumers unconditionally in a limited period, if the consumers keep the product in good condition. The platform quality requirement is about the supervision of the platform on the sellers’product quality. The quality requirement that aims at improving the product quality on the platform and enhancing the consumers’confidence of making a purchase, usually claims that only qualified sellers can enter the platform and sell their product, and the sellers who sell fake or relatively low quality product (lower than the minimum quality standard), compared with the requirement, will be excluded from the platform.In this paper, we study the impact mechanism of the e-business platform’s no-reason return policy and minimum quality requirement on the sellers’ shipping strategy, return service charge and product quality. Our researches focus on the following three questions. (1) Under the no-reason return policy, the sellers face the challenge of increased return cost, how should they maximize their profit by optimizing their shipping strategy and return service charge; (2) When the platform sets quality requirement, how should the seller optimize its product quality and return service charge; (3) When the platform sets quality requirement, what’s the range of the quality of the sellers’ product on the platform in a given industry.We develop some theoretical models to conduct the sellers’ optimal shipping strategy and return service charge under no-reason return policy, the sellers’optimal product quality and return service charge under the platform quality requirement, and the quality range of the product that the sellers sell on the platform in a given industry. Based on analytical results and data experiments, we obtain some meaningful insights.First, under the no-reason return policy, the sellers could maximize their profit with joint decision of shipping strategy and return service charge, and the joint decision keeps the profit much more stable, compared with separate decision of shipping strategy or return service. In general, the sellers should set a higher return service charge if they provide free shipping service, and set lower return service if they provide shipping fee service. In addition, we find that the market parameters, i.e., the base return quantity, the price, the shipping fee-demand sensitivity, the refund-demand sensitivity and the refund-return quantity sensitivity all matter for the sellers’ joint decision of shipping strategy and return service charge. The sellers can take some actions to influence the market, so that they can obtain a more favorable joint decision. Furthermore, our analytical results can provide an explanation for some widely used shipping strategy and return service charge. Especially, it can explain why some sellers provide some of their customers shipping free service and free return service.Second, the sellers whose optimal product quality is lower than the platform required level will be affected by the platform quality requirement. When the platform sets quality requirement, these risk-neutral sellers will improve their product quality to the required level, while their return service charge depends on the platform quality requirement. If the return quantity reduction caused by improving product quality is greatr than the demand growth caused by refund increase with the same cost, these sellers will charge less for return; otherwise, these sellers will charge more for return. We also study the risk-aversion sellers’optimal product quality and return service charge under the platform quality requirement by incorporating uncertain factors into the sellers’demand and return quantity, and we obtain similar results. In addition, based on the analytical results, we find that the correlation between the demand volatile and return quantity volatile affects the risk-aversion sellers’decision of return service charge in many ways. In particular, the greater the correlation coefficient is, the lower the requirement affected risk-aversion sellers’optimal return service charge.Third, when the platform doesn’t set minimum quality standard and the sellers enter the platform according to their own willingness, there will be a lower bound and an upper bound for the quality of their product on the platform. When the platform sets quality requirement, which can be called as minimum quality standard, there will be some sellers who sell relatively higher quality products. What’more, the upper bound of the quality of the sellers’product on the platform increases in the platform’s minimum quality standard, and decreases in the consumers’aversion of the product quality lower than their expectation, the platform’s fixed annual service fee and shared revenue from the sellers’sales. Further study on the platform’s profit shows that there exits an optimal minimum quality standard to maximize the platform’s profit.Our research focus on the practice of the e-business platform, and conducts several theoretical models to study the impact mechanism of the platform’s no-reason return policy and quality requirement on the sellers’decisions of shipping strategy, return service charge and product quality. The results we obtain are meaningful for the e-business operation.