When to Carry Eccentric Products? Optimal Retail Assortment under Consumer Returns

• 成果类型: Article
• 署名作者: Alptekinoglu, Aydin; Grasas, Alex
• 署名单位: Southern Methodist University; Pompeu Fabra University
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12081
• 发表日期: 2014
• 页码: 877-892
• 关键词: assortment planning; product variety; consumer returns; retail operations; nested logit

摘要

To understand whether retailers should consider consumer returns when merchandising, we study how the optimal assortment of a retailer is influenced by its return policy. The retailer selects its assortment from an exogenous set of horizontally differentiated products. Consumers make purchase and keep/return decisions in nested multinomial logit fashion. Our main finding is that the optimal assortment has a distinct structure for relatively strict return policies: it is optimal to offer a mix of the most popular and most eccentric products when the refund amount is sufficiently low, which can be viewed as a form of risk sharing between the retailer and consumers. In contrast, if the refund is sufficiently high or when returns are disallowed, the optimal assortment is composed of only the most popular products (a common finding in the literature). We provide preliminary empirical evidence for one of the key drivers of our results: more eccentric products have higher probability of returnconditional on purchase. In light of our analytical findings and managerial insights, we conclude that retailers should take returns into account when merchandising.