Analyzing strategies in a green e-commerce supply chain with return policy and exchange offer

Due to groundbreaking rise of e-commerce and growing trends of customers’ environmental mindfulness, recently, more and more manufacturers are willing to produce eco-friendly products and deliver them through e-commerce platform (EP). Taking into account the product’s selling price, greening level, and the EP’s service level, this article investigates two types of return policies, viz. refund and replacement policies for defective products and EP’s exchange offer in a green e-commerce supply chain. It constructs four decentralized models and determines optimal decisions by using the manufacturer-led Stackelberg gaming approach. Subsequently, a compensation-based profit-sharing contract is designed to investigate channel coordination. Analytical and numerical studies are used to compare and verify optimal decisions. The results show that (a) the replacement policy provides better outcomes compared to the refund policy, (b) the commission is negatively related to the manufacturer’s decisions and profit; even a higher commission is not favorable for the EP, (c) besides providing win-win outcomes to both the channel individuals, the proposed contract is capable of enhancing overall performance. This study contributes in finding the best return policy and improving channel performance through the execution of an appropriate contract. • Two types of return policy for defective products is considered. • Exchange offer for end-of-use products is introduced. • The impacts of commission paid by the manufacturer is investigated. • A compensation-based profit-sharing contract is proposed. • Asymmetric Nash bargaining strategy is used for profit sharing.