Optimal Freight Subsidy Strategy Under False Failure Return

As an important channel for product selling,e-commerce has brought many benefits for both retailers and consumers.However,due to information asymmetry and the convenience of return,the return rate of e-commerce is much higher than that of traditional industries and the issue of who should bear the reverse logistics cost caused by the consumers has become the key problem.Based on this,a variety of return freight subsidy strategies are arising.The generous freight subsidy strategy has double impact on retailer's profit since it enhances competitiveness while also increasing the return rate.Therefore,retailers keep reasonable balance between the pros and cons,and make a sound freight subsidy strategy is crucial to the healthy development of the enterprise.Embarking from the reality,we firstly summarize the freight subsidy strategies of the major domestic e-commerce retailers and divide them into four types considering the generosity of return freight:the strategy that the retailer doesn't bear the return freight;the strategy that the retailer offers virtual currency;the strategy that the retailer offers return freight insurance and the strategy that consumers buy return freight insurance.Through the analysis of consumer purchase behavior and return behavior under different strategies,we conclude that:except the circumstance that the cost of consumers buy freight insurance is high,the more generous the return strategy is,the greater the consumers' expected utility and the higher product price will be.The higher product price is,the less the consumers' expected utility will be.The more generous the return strategy is,the higher the return rate will be.Therefore the generosity of return freight has an incentive effect on both the purchase and return behavior of consumers.When consumers certainly buy freight insurance and the product is at a fixed price,the strategy that retailers offer freight insurance has the same return rate as the strategy that consumes buy freight insurance.Secondly,we analyze the optimal order quantity and optimal profit under different strategies and find that the optimal order quantity decreases with the retailer's return rate.Therefore,we suggest that retailers with higher return rate set lower order quantities and retailers with lower return rate set higher order quantities.When the retailer sets the same price and order quantity under the four strategies,the strategy that the retailer doesn't bear the return freight is optimal.When the retailer sets the optimal price and order quantity under the four strategies,for high cost performance retailer,the strategy that the retailer offers virtual currency is optimal when the return freight is low while the strategy that the retailer offers return freight insurance is optimal when the return freight is high;for middle cost performance retailer,the strategy that the retailer offers virtual currency is optimal when the return freight is low while the strategy that the consumers buy return freight insurance is optimal when the return freight is high;for low cost performance retailer,the strategy that the retailer offers virtual currency is optimal while the strategy that the consumers buy return freight insurance is optimal when the return freight is very high.