Research On The Optimal Strategy For A Dual Channel Supply Chain Based On Consumer Returns

With the development of electronic commerce,more and more companies,such as Lenovo and Haier,adopt dual channel to sell their products,i.e.,set up an alternative direct channel in addition to the traditional retail distribution channel.However,many enterprises do not benefit more from dual channel because of high consumer return rate and huge return cost in the direct channel.Motivated by this background,this paper studies the optimal operations strategy for a dual channel supply chain with direct channel mixture of distribution channel in the presence of consumer returns,and analyzes the effects of consumer return rate and customer acceptance of direct channel on the equilibrium decisions and channel strategy of the supply chain members.In this paper,we develop dynamic programming and dynamic game models of a supply chain consisting of one manufacturer and one retailer.Based on consumer returns,we firstly build a model,where consumers prefer retail channel to direct channel.Through comparing the equilibrium decisions of quality level,pricing and profit under different channel modes,we conclude the optimal pricing and channel strategy for the manufacturer and the retailer.Based on this model,we consider an alternative case where consumers prefer direct channel to retail channel.Finally,we extend to consider the case where two channels sell products with different quality levels to study the optimal pricing and channel strategy of the manufacturer and the retailer.Among these three models,we focus on the.effects of consumer return rate,customer acceptance of direct channel and consumer visiting cost on the equilibrium pricing decisions and channel strategy of the supply chain members.Findings are mainly summarized as follows:(1)When consumers prefer retail channel to direct channel,there does not always exist"pareto range" about customer acceptance of direct channel,because of consumer returns,if consumer visiting cost is zero.Otherwise,under certain conditions,there exists dual channel mode with positive direct channel and the wholesale price under dual channel mode is larger than that under single retail channel mode.(2)When consumers prefer direct channel to retail channel,single direct channel instead of single retail channel arises,which is different from the case where consumers prefer retail channel to direct channel.It shows that with consumer returns,the manufacturer's channel preference is related to consumer return rate,customer acceptance of direct channel and the direct channel selling cost.The manufacturer would rather choose single direct channel mode,if the consumer return rate or customer acceptance of direct channel is sufficiently high,or the direct channel selling cost is sufficiently small;otherwise,the manufacturer would rather choose dual channel mode.But the retailer always prefers the dual channel mode,even though its profit accounts for a very small part of the profit in the whole supply chain.(3)The manufacturer can use product.differentiation strategy to migrate the effect of consumer return rate and customer acceptance of direct channel on the manufacturer and the retailer.It shows that under certain conditions,both the manufacturer and the retailer can benefit from product differentiation strategy,even there exists consumer returns.As a result,product differentiation can improve the operations efficiency of the supply chain.The above research provides decision-making reference for the operations and marketing management of the supply chain,e.g.,choice for the quality level of the product,pricing decisions among channels and choice for channel mode.In addition,we suggest enterprises take measures to reduce consumer return rate,strengthen consumers' preference for channels and use product differentiation strategy.