Research On Channel Choice And Return Insurance Strategy Based On Consumer Uncertainty

When consumers purchase products in the online channel,they are uncertain about product quality and fitness.After receiving products,if consumers are unsatisfied with the product,they choose to return the products and have to afford the return shipping fees.When a product is returned,the online retailer incurs a high cost to handle the return.To reduce the costs of the online retailers and the consumers in return,many online retailers adopt some operation strategies.On the one hand,to eliminate consumers’ uncertainty and reduce post-purchase product returns,many online retailers choose omnichannel strategies to disclose product information to consumers before purchase.On the other hand,some online retailers purchase return insurance for consumers to alleviate the consumers’ concerns about return shipping fees and increase their willingness to purchase.In this context,this thesis considers consumers’ uncertainty about product information,and explores the impact of online retailers’ operating models and return insurance on consumers’ purchasing and return behaviors.Specifically,the main work of this thesis is shown as follows.Firstly,this thesis investigates the online retailer’s channel choice between the pure online channel and omnichannel in terms of reducing the online retailer’s return loss.In this section,the physical channel is added as the pre-purchase information disclosure strategy when adopting the omnichannel.This thesis builds a model in which a pure online retailer sells products to consumers who are uncertain about the product’s quality and fitness.The retailer can adopt an omnichannel strategy to deliver product information to consumers,which resolves their information uncertainty.The result indicates that when the cost for each physical store is sufficiently low,the online retailer always adopts the omnichannel strategy regardless of the product quality.In contrast,if the cost for each physical store is moderate,the online retailer adopts the omnichannel strategy if and only if the product quality is above a threshold.Moreover,when the travel cost factor is moderate,the online retailer with a high-quality product would abandon the omnichannel strategy if the fitness probability is moderate.Secondly,from the perspective of reducing consumer return losses,this thesis examines the online retailers’ decisions on the return insurance strategy,where accepting returns is considered as a post-purchase information disclosure strategy.This thesis builds a duopoly model in which two competing online retailers with different quality levels sell products to consumers who have uncertainty about their satisfaction.The quality of the product affects the consumer satisfaction rate.The finding shows that as long as the increase in the consumers’ expected utility is higher than the cost of the premium,the online retailer is better off by offering return insurance,which is not related to his competitor’s decision.Moreover,when both online retailers offer return insurance,the online retailer with the highquality product may reduce or increase the retail price and the online retailer with the lowquality product always increases the retail price.Finally,this thesis analyzes quality decisions based on the research of online retailers’ decisions on the adoption of return insurance,and explores the interaction between the decisions on the quality and offering the return insurance.This thesis builds a duopoly model in which both online retailers make decisions on product quality levels and the adoption of return insurance.The finding shows that the two competing retailers are better off by differentiating their quality levels.When the return insurance provides enough value owing to the high shipping compensation or the low premium,both retailers choose to purchase return insurance for consumers.Moreover,when the premium function is convex,both retailers may improve their quality levels.In this case,both retailers obtain less profit,while both the consumer surplus and the social welfare increase,compared to the case without return insurance.