Workshop’s Topic: This paper delves into a manufacturer’s strategic decision-making regarding the management of product returns when it sells a product to consumers through a retailer but chooses to handle consumer product returns directly or delegates this responsibility to the retailer. When product returns are delegated to the retailer, the retailer sets the consumer return policy and handles returned products. By contrast, when the manufacturer handles returns directly, it sets the consumer return policy instead of the retailer. Consumers are heterogeneous in their product valuations and hassle costs associated with returning products, First, our results indicate that when the manufacturer handles returns directly. it can opt to offer consumers a money-back guarantee (MBG) policy compared to delegating returns to the retailer. This contrasts with conventional wisdom, suggesting that the retailer, who is closer to consumers, may provide better services in managing returns. Second, the manufacturer can benefit from directly managing consumer returns, even in the absence of a salvage value advantage or a hassle cost advantage. This is because by handling product returns, the manufacturer opts to offer MBG to consumers, which increases the wholesale price and expands demand. Third, both of the manufacturer’s decisions-managing returns directly or delegating them - can benefit not only itself but also the retailer and consumers, creating a win-win-win situation. It highlights the positive ripple effects that can emerge from such a strategic decision. Lastly, we consider the effects of several other factors revealing that the impacts of salvage values and consumer hassle costs on return channel decisions are the opposite. Our paper underscores the importance of the manufacturer’s direct return management, demonstrating that an upstream manufacturer engaging in consumer service activities can lead to better services and greater profits for firms.

Time and Location: 10:00 AM (GMT+8), Room A423 (School of Management)

Language: Bilingual (Chinese and English)