Grey Market Supply Chain Operation Decision Considering Consumer Return Behavior

With the continuous growth of cross-border e-commerce in China,the emergence of B2 C e-commerce platforms has further promoted the development of the gray market.At the same time,with the emergence of new consumer markets and consumption methods(the development trend of coexistence of online and offline shopping modes),the issue of consumer returns is becoming increasingly serious.In order to improve the consumer shopping experience,in reality,most sellers improve service quality to reduce consumer return risks.In addition,consumers will consider the return risk before making product purchase decisions,so it is very necessary to consider consumer return behavior in the gray market supply chain.Therefore,this article analyzes the operation decision of the supply chain before and after manufacturers improve service quality in a gray market where distributors participate in speculation,starting from the risk of consumer returns.Firstly,when manufacturers have no improvement in service quality,operation decision in the gray market supply chain before and after considering consumer return behavior are analyzed.The research results show that:(1)After introducing consumer return behavior into the gray market supply chain system,the sales prices,market demand,and profits of distributors and manufacturers of the three types of products all show a downward trend with the increase in product return rates and product return trouble costs.(2)Compared to the reference model that does not consider consumer return behavior,considering consumer return behavior,the product prices and demand,manufacturers’ and distributors’ earnings,consumer surplus,and social welfare in the three markets are lower than when consumer return behavior is not considered,and there will be varying degrees of decline as consumer return risk increases.Secondly,after considering consumer return behavior,the supply chain operation decision for manufacturers to improve service quality and different service quality strategies are studied.The research results show that:(1)Considering consumer return behavior,manufacturers’ after-sales service quality decisions expand the scale of the high-priced market while maintaining wholesale prices and the scale of the low-priced market,reducing the scale of the gray market;The manufacturer’s pre-sales service quality decision not only expands the scale of the high-priced market,but also expands the scale of the gray market due to the "service free ride" effect of distributors.(2)After considering consumer return behavior,the benefits obtained by manufacturers in improving service quality are higher than those obtained without service quality improvement.Moreover,due to the "free rider" effect of pre-sale service,the benefits obtained by manufacturers in improving pre-sale service quality will gradually be lower than the after-sales service quality strategy as the risk of consumer return increases.(3)The equilibrium solution of after-sales service quality level is positively correlated with the troublesome cost of consumer returns,and negatively correlated with the cost of service quality;The level of pre sales service quality is positively correlated with the return rate of products purchased by consumers,while negatively correlated with the cost of service quality and the free rider coefficient.(4)After considering consumer return behavior,manufacturers’ service quality strategies not only contribute to increasing consumer surplus,but also effectively increase social welfare.Taking consumer return risk as a starting point,analyzing operation decision in the supply chain before and after manufacturers improve service quality not only fills the gap in research on consumer return behavior in the gray market supply chain,but also enriches research on related service strategies.