A study of return strategy under Omni-Channel retail based on Stackelberg game

Institute of Logistics Science and Engineering, Shanghai Maritime University, Shanghai 201306, China

Abstract

In practice more and more retailers began to allow consumers to order online and pick up in store (BOPS), this paper focuses on the BOPS omni-channel model under the return strategy selection problem of the research, considering the product matching rate, online return processing costs, cross-channel return probability and other factors. Constructing Stackelberg game models by using the consumer utility function which is used for analyzing the consumers' choices for different channels and constructing the demand function of each channel and the profit function of retailers and manufacturers. Backward induction is used for calculating the price and profit equilibrium and manufacturers' optimal pricing and channel demand are examined both before and after cross-channel return services are implemented. In addition, the manufacturer's perspective on return strategy selection gets examined. The results show that: compared to the dual-channel model, the overall demand of the supply chain increases substantially after the implementation of the BOPS strategy regardless of whether cross-channel returns are allowed or not; aggregate demand in the supply chain increases as product matching increases and is at its highest when cross-channel returns are permitted; the implementation of a cross-channel returns strategy by manufacturers is optimal when the cross-channel returns processing cost are minimal and the benefits derived from implementing a BOPS strategy are considerable.