| With the development of E-commerce, more and more people tend to shop online. In online direct selling, a consumer cannot experience the product while making the purchase decision. That’s why delivery reliability has emerged as a key competitive factor influencing consumers’purchase intentions in especially service industries. Delivery delay is proved to be a key factor influencing the return rates and the profits of online retailers. Our research generalizes existing delivery models by drawing on concepts of providing compensation when delivery delay occurs and by adding new assumptions-to provide a comprehensive model. If the products don’t arrive to customers on time, the sellers provide the optimal compensation policy for customers who intend to return the late products in order to decrease the return rate and maximize the revenue. An analytical model is conducted to find if retailers should compensate and exactly how much should retailers compensate. The effects of delayed time and the retail price on the optimal compensation are also analyzed. The results indicate that the optimal compensation strategy is associated with the probability of delivery delay and the retail price. Also we provide the optimal compensation strategy under full and partial return policies to find the difference between them. Numeric experimentations are conducted to further simulate the effects of delivery delay probability and compensation on retailers’decisions and profits in the case of non-linear time value model. |
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