Return Strategies of Competing E-Sellers: Return Freight Insurance vs. Return Pickup Services

Over the past decade, return freight insurance (RFI) and return pickup services (RPSs) have emerged as dominant return service strategies in e-commerce, particularly in China’s competitive online retail market. Despite their prominence, the strategic dynamics guiding e-sellers’ choice between these...

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Main Authors: Qiyuan Li, Yanli Fang, Yan Chen
Format: Article
Language:English
Published: MDPI AG 2025-01-01
Series:Mathematics
Subjects:
Online Access:https://www.mdpi.com/2227-7390/13/2/296
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author Qiyuan Li
Yanli Fang
Yan Chen
author_facet Qiyuan Li
Yanli Fang
Yan Chen
author_sort Qiyuan Li
collection DOAJ
description Over the past decade, return freight insurance (RFI) and return pickup services (RPSs) have emerged as dominant return service strategies in e-commerce, particularly in China’s competitive online retail market. Despite their prominence, the strategic dynamics guiding e-sellers’ choice between these services remain underexplored. This study develops a game-theoretic model to analyze the equilibrium return strategies of two horizontally competing e-sellers with varying misfit probabilities. By examining four subgames, we identify the conditions under which e-sellers converge on either RFI or RPSs. Our findings revealed that highly similar or highly differentiated products typically favor RFI due to intense price competition or reduced need for service-based competition, while moderately differentiated products lead to RPS adoption as service quality becomes a key competitive lever. Additionally, competitive pressure often drives e-sellers to adopt homogenized return strategies, particularly RPSs, to maintain market position. The equilibrium outcomes are shaped by misfit probability differences, consumer hassle costs, and cost structures, offering actionable insights into optimizing return strategies in competitive e-commerce environments. These findings provide actionable insights into optimizing return service strategies in competitive e-commerce environments and contribute to the growing literature on return policies as a competitive lever in online retail markets.
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spelling doaj-art-8a09d5f23c4b4fa5b7b48eee115c73cc2025-01-24T13:40:04ZengMDPI AGMathematics2227-73902025-01-0113229610.3390/math13020296Return Strategies of Competing E-Sellers: Return Freight Insurance vs. Return Pickup ServicesQiyuan Li0Yanli Fang1Yan Chen2Department of Decision Sciences, Macau University of Science and Technology, Macau 999078, ChinaSchool of Mathematics and Statistics, Huizhou University, Huizhou 519007, ChinaDepartment of Decision Sciences, Macau University of Science and Technology, Macau 999078, ChinaOver the past decade, return freight insurance (RFI) and return pickup services (RPSs) have emerged as dominant return service strategies in e-commerce, particularly in China’s competitive online retail market. Despite their prominence, the strategic dynamics guiding e-sellers’ choice between these services remain underexplored. This study develops a game-theoretic model to analyze the equilibrium return strategies of two horizontally competing e-sellers with varying misfit probabilities. By examining four subgames, we identify the conditions under which e-sellers converge on either RFI or RPSs. Our findings revealed that highly similar or highly differentiated products typically favor RFI due to intense price competition or reduced need for service-based competition, while moderately differentiated products lead to RPS adoption as service quality becomes a key competitive lever. Additionally, competitive pressure often drives e-sellers to adopt homogenized return strategies, particularly RPSs, to maintain market position. The equilibrium outcomes are shaped by misfit probability differences, consumer hassle costs, and cost structures, offering actionable insights into optimizing return strategies in competitive e-commerce environments. These findings provide actionable insights into optimizing return service strategies in competitive e-commerce environments and contribute to the growing literature on return policies as a competitive lever in online retail markets.https://www.mdpi.com/2227-7390/13/2/296online retailingcustomer returnsreturn freight insurancereturn pickup servicecompetitive retailers
spellingShingle Qiyuan Li
Yanli Fang
Yan Chen
Return Strategies of Competing E-Sellers: Return Freight Insurance vs. Return Pickup Services
Mathematics
online retailing
customer returns
return freight insurance
return pickup service
competitive retailers
title Return Strategies of Competing E-Sellers: Return Freight Insurance vs. Return Pickup Services
title_full Return Strategies of Competing E-Sellers: Return Freight Insurance vs. Return Pickup Services
title_fullStr Return Strategies of Competing E-Sellers: Return Freight Insurance vs. Return Pickup Services
title_full_unstemmed Return Strategies of Competing E-Sellers: Return Freight Insurance vs. Return Pickup Services
title_short Return Strategies of Competing E-Sellers: Return Freight Insurance vs. Return Pickup Services
title_sort return strategies of competing e sellers return freight insurance vs return pickup services
topic online retailing
customer returns
return freight insurance
return pickup service
competitive retailers
url https://www.mdpi.com/2227-7390/13/2/296
work_keys_str_mv AT qiyuanli returnstrategiesofcompetingesellersreturnfreightinsurancevsreturnpickupservices
AT yanlifang returnstrategiesofcompetingesellersreturnfreightinsurancevsreturnpickupservices
AT yanchen returnstrategiesofcompetingesellersreturnfreightinsurancevsreturnpickupservices