Service Decisions in a Two-Echelon Retailing System with Customer Returns
Many manufacturers and retailers have already opened online stores to sell their products. Thus, manufacturers are competing as sellers, and retailers are transforming into dual-channel retailers (DCRs). Such an expansion in business scope and the wide spread of lenient return policies trigger treme...
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| Format: | Article |
| Language: | English |
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MDPI AG
2022-09-01
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| Series: | Journal of Theoretical and Applied Electronic Commerce Research |
| Subjects: | |
| Online Access: | https://www.mdpi.com/0718-1876/17/3/62 |
| _version_ | 1797486042331217920 |
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| author | Mohannad Radhi |
| author_facet | Mohannad Radhi |
| author_sort | Mohannad Radhi |
| collection | DOAJ |
| description | Many manufacturers and retailers have already opened online stores to sell their products. Thus, manufacturers are competing as sellers, and retailers are transforming into dual-channel retailers (DCRs). Such an expansion in business scope and the wide spread of lenient return policies trigger tremendous return volume that requires great deal of logistical efforts. The service levels offered within online stores greatly affect channels’ demand. However, they also influence the channel choice of return for online customers, if applicable, when their purchases are unsatisfactory. Therefore, this paper studies the optimal service level for a centralized DCR. In addition, it examines the optimal levels for a decentralized two-echelon system through the implementation of Nash and Stackelberg theoretical frameworks. Important properties of optimal solutions and vital managerial insights have been devised through analytical and sensitivity analysis. It is found that a DCR may have the following tradeoff: decrease service level to increase the reward from the physical store or increase service level to enhance competitiveness of the online store. The optimal decision depends greatly on how sensitive the customers’ return behavior is to service level. In addition, as the exogenous price increases, the change in the retailer’s offered level depends significantly on the different rates of return. |
| first_indexed | 2024-03-09T23:27:32Z |
| format | Article |
| id | doaj.art-a8a6f68ce11143efa53e3e4c7a798d25 |
| institution | Directory Open Access Journal |
| issn | 0718-1876 |
| language | English |
| last_indexed | 2024-03-09T23:27:32Z |
| publishDate | 2022-09-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Journal of Theoretical and Applied Electronic Commerce Research |
| spelling | doaj.art-a8a6f68ce11143efa53e3e4c7a798d252023-11-23T17:15:44ZengMDPI AGJournal of Theoretical and Applied Electronic Commerce Research0718-18762022-09-011731219124210.3390/jtaer17030062Service Decisions in a Two-Echelon Retailing System with Customer ReturnsMohannad Radhi0Department of Industrial Engineering, Faculty of Engineering–Rabigh Branch, King Abdulaziz University, Jeddah 21589, Saudi ArabiaMany manufacturers and retailers have already opened online stores to sell their products. Thus, manufacturers are competing as sellers, and retailers are transforming into dual-channel retailers (DCRs). Such an expansion in business scope and the wide spread of lenient return policies trigger tremendous return volume that requires great deal of logistical efforts. The service levels offered within online stores greatly affect channels’ demand. However, they also influence the channel choice of return for online customers, if applicable, when their purchases are unsatisfactory. Therefore, this paper studies the optimal service level for a centralized DCR. In addition, it examines the optimal levels for a decentralized two-echelon system through the implementation of Nash and Stackelberg theoretical frameworks. Important properties of optimal solutions and vital managerial insights have been devised through analytical and sensitivity analysis. It is found that a DCR may have the following tradeoff: decrease service level to increase the reward from the physical store or increase service level to enhance competitiveness of the online store. The optimal decision depends greatly on how sensitive the customers’ return behavior is to service level. In addition, as the exogenous price increases, the change in the retailer’s offered level depends significantly on the different rates of return.https://www.mdpi.com/0718-1876/17/3/62two-echelondual-channel retailercustomer returnsservice levelStackelberg gameNash game |
| spellingShingle | Mohannad Radhi Service Decisions in a Two-Echelon Retailing System with Customer Returns Journal of Theoretical and Applied Electronic Commerce Research two-echelon dual-channel retailer customer returns service level Stackelberg game Nash game |
| title | Service Decisions in a Two-Echelon Retailing System with Customer Returns |
| title_full | Service Decisions in a Two-Echelon Retailing System with Customer Returns |
| title_fullStr | Service Decisions in a Two-Echelon Retailing System with Customer Returns |
| title_full_unstemmed | Service Decisions in a Two-Echelon Retailing System with Customer Returns |
| title_short | Service Decisions in a Two-Echelon Retailing System with Customer Returns |
| title_sort | service decisions in a two echelon retailing system with customer returns |
| topic | two-echelon dual-channel retailer customer returns service level Stackelberg game Nash game |
| url | https://www.mdpi.com/0718-1876/17/3/62 |
| work_keys_str_mv | AT mohannadradhi servicedecisionsinatwoechelonretailingsystemwithcustomerreturns |