Research on the Conditions and Operational Strategies of the Retailer's Participation in Omnichannel Returns Cooperation

ABSTRACT In the context of online retailing, many e‐commerce platforms have begun to explore omnichannel returns cooperation modes that are practical and satisfy consumers' offline channel preferences in response to the rising online return rate and the growth of consumer preference for returning products to physical stores. The purpose of this paper is to investigate what conditions the offline retailer will choose to participate in an omnichannel returns cooperation strategy and how the cooperation brings value to both sides of the alliance. Based on the consideration of consumers' differentiated purchase and return modes and whether the retailer participates in omnichannel returns cooperation, this paper first derives the consumer utility functions for the buy online and return online (BORO) mode, the buy offline and return offline (BS) mode, and the buy online and return in store (BORS) mode before and after the omnichannel returns cooperation. This paper then constructs profit expressions for an online e‐commerce platform and offline retailer before and after omnichannel returns cooperation and further explores the conditions and value of the offline retailer's willingness to participate in omnichannel returns cooperation. According to the study, the following interesting and important conclusions have been drawn. First, the participation of the offline brick‐and‐mortar retailer in an omnichannel returns strategy can introduce a new channel, which can help facilitate the integration of online and offline channels. Second, when the proportion of the online‐type consumer is low, the larger the critical point of composite return cross‐selling benefit required by the offline brick‐and‐mortar retailer, the lower the equilibrium price caused by their participation in omnichannel returns cooperation. Third, when the proportion of online‐type consumer exceeds a certain threshold and the online return cost of consumers is less than the offline return cost can the brick‐and‐mortar retailer enhance the return service experience to attract consumers and thus further increase profits. In the analyses of retail operations, these findings can offer guidance for the implementation of omnichannel returns and the development of appropriate operational plans for the physical business. The conclusions can provide directional suggestions for brick‐and‐mortar retailers to conduct omnichannel return practices and help formulate reasonable strategies for new retail operations.