Study On E-tailers’ Exaggeration Strategies Of Product Description Under Return Policy

In modern day e-tailing, most e-tailers will offer full return policy in order to reduce customers’ risk perception and ensure their products with a higher level of quality. For the product which customers do not understand or familiar with, customers will determine whether to purchase only through the product information provided by the e-tailers. On one hand, compared to the brick&mortar retail, as the customers are lack of opportunity to try and fully understand the product, e-tailers can take advantage of the asymmetric information and exaggerate the product description to attract the customers and increase their pre-purchase satisfaction perception of the product. On the other hand, in the case of return policies generally available, the exaggerated description may lead to a higher rate of product return, which will adversely affect the e-tailers. The purpose of our study is whether to exaggerate the product description and what is the possibly best exaggeration degree from the perspective of maximizing e-tailers’ profits.Based on the researches of the world in customer returns, product description, and customer satisfaction, we construct our models and analyze them in both model and numerical ways. We creatively discuss the optimal strategies for the product exaggeration by the e-tailers in monopoly and duopoly cases. The results confirm that e-tailers do have a motive to exaggerate the product description under certain conditions and can get more profits. We can understand an underlying cause of the high return rates may be that e-tailers can earn more profits by the exaggeration than the possible product return losses. On one hand, we provide advices to e-tailers for their managerial decisions. On the other hand, we demonstrate the possible existence for the exaggerated product description in the e-tailing, and provide a reference for the customers and policy makers.