Abstract:

With the popularization of the internet and the development of e-payment， online shopping has become one of the main shopping methods for consumers. However， online shopping also has the problem of high product return rate. To reduce the return rate of products， more and more e-commerce enterprises open up showrooms to provide product samples for consumers to experience before they purchase the products. The existence of showrooms will affect consumers' original purchase behavior， and the existence of return cost will also affect the decision and profit of each member of the supply chain. In this paper， an offline to online supply chain consisting of a manufacturer and an online retailer is studied with customer returns considered. The online retailer offers a refund guarantee， which allows consumers to return the products that do not meet their expectations to the online retailer for a full refund.The main work in this paper includes four parts. First， a two-stage game model is established between the manufacturer and the online retailer with the product return considered. The optimal decisions and profits of supply chain members are obtained. Second， the impact of the existence of showrooms on the pricing strategies， product return rates and profits of online retailers as well as their upstream manufacturers are analyzed. Third， the effects of the refund guarantee provided by online retailers are investigated to consumers on the performance of pricing strategies and profits of supply chain members. Finally， the effects of the existence of showrooms and refund guarantees on consumer surplus are further explored.The results show that， under different refund guarantee conditions， online retailers have different strategies on whether to develop showrooms. With refund guarantees， the development of showrooms can increase product demand and reduce product return rate. Whether online retailers develop showrooms， the effects of the refund guarantee on the pricing strategies of both partners depend on the product return rate and the return loss of online retailers. Moreover， the impact of the existence of showrooms and the refund guarantee on consumer surplus depends on product return rate and the return loss of consumers. With the refund guarantee， the showrooms can always effectively improve consumer surplus since product returns can be avoided through product experience before purchase.In summary， the existence of showrooms and the return guarantees have a significant impact on consumers’ purchase behavior. The effects of the existence of showrooms and the return guarantees on the pricing strategies， product return rates and profits of supply chain members are investigated in this paper and the conclusions will be instructive for online retailers and manufacturers in practice.

Key words: online retailer, showroom, consumer returns, refund guarantees