Title: Managing sales return in dual sales channel: an analysis of primary versus secondary market resale strategies

Authors: Erwin Widodo; Katsuhiko Takahashi; Katsumi Morikawa; I. Nyoman Pujawan; Budi Santosa

Addresses: System Cybernetics Department, Graduate School of Engineering, Hiroshima University, A1-831, Kagamiyama 1-4-1, Higashi Hiroshima, 739-8527, Japan ' System Cybernetics Department, Graduate School of Engineering, Hiroshima University, A1-831, Kagamiyama 1-4-1, Higashi Hiroshima, 739-8527, Japan ' System Cybernetics Department, Graduate School of Engineering, Hiroshima University, A1-831, Kagamiyama 1-4-1, Higashi Hiroshima, 739-8527, Japan ' Industrial Engineering Department, Sepuluh Nopember Institute of Technology (ITS), Surabaya, 60111, Indonesia ' Industrial Engineering Department, Sepuluh Nopember Institute of Technology (ITS), Surabaya, 60111, Indonesia

Abstract: The dual sales channel (DSC), which consists of a conventional store and an additional online facility to fulfil in-store and online demand, respectively, is a challenging research topic. Many researchers have attempted to contribute to this area; however, our review found that the literature pertaining to DSC sales return management is still scarce. In fact, the mismanagement of sales return may threaten the channels' profitability. This paper examines sales return management and attempts to identify the markets in which returned products are optimally resold. We modelled two scenarios: the secondary market resale scenario, in which products are resold to a separate market at a lower price but with a higher level of customer acceptance; and the primary market resale scenario, in which an alternative resale occurs in the same market in which the original sales occurred. The primary market resale scenario offers higher resale prices but is accompanied by risks relating to the original sales. We analysed our models and evaluated the performance of the entire channel and each DSC player in terms of their profits by using the channel prices as the decision variables. This evaluation is performed under simultaneous Bertrand and step-by-step Stackelberg pricing schemes and under tight and loose policies for determining resale prices. Based on this analysis, some beneficial insights regarding resale in DSC are provided.

Keywords: dual sales channels; DSC; sales returns; sales return management; primary markets; secondary markets; resale strategies; customer acceptance; resale prices; channel prices; simultaneous Bertrand; step-by-step Stackelberg; pricing schemes.

DOI: 10.1504/IJISE.2013.056087

International Journal of Industrial and Systems Engineering, 2013 Vol.15 No.2, pp.119 - 152

Published online: 27 Dec 2013 *

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