Optimal Return Policy of Competitive Retailers’ Pre-Sale Products Based on Strategic Consumer Behavior
Round 1
Reviewer 1 Report
The extensions are not necessary. Align the formulas in the text in line with the text. Figure should be improved.
Author Response
The extensions are not necessary. Align the formulas in the text in line with the text. Figure should be improved.
Response: This is a good summary of our paper. We appreciate your helpful suggestions to guide us in our revision. We have aligned the formulas of the paper and checked and revised the figures of the paper as you suggested. We believe that the quality of this work has improved significantly with your help.
Reviewer 2 Report
Dear Authors, Greetings!
First, congratulations on your paper. In general, the paper is solid and very well done. Below, please find my only two comments:
1. Managerial Implications: this is a critical topic that affects strategic planning and the retail industry; therefore, production, logistics, operations, finance, administration, marketing, etc. A subtitle with solid managerial implications will improve the importance of your research for scholars and practitioners.
2. Future research: based on the above, future research should be extended.
I wish you the best with your paper.
Regards,
Author Response
First, congratulations on your paper. In general, the paper is solid and very well done. Below, please find my only two comments:
Response: Thank you for reading our manuscript carefully and providing very constructive comments. We carefully revised our manuscript based on your comments, and quite a lot of changes have taken place. In the following, please find our point-by-point response.
Major Comments:
- Managerial Implications: this is a critical topic that affects strategic planning and the retail industry; therefore, production, logistics, operations, finance, administration, marketing, etc. A subtitle with solid managerial implications will improve the importance of your research for scholars and practitioners.
Response: This is certainly an important concern. We agree with you that this is a key topic that affects strategic planning and retailing, and therefore production, logistics, operations, finance, administration, marketing, etc. After reading your comments and those of the other reviewers, we have revised the management insights in the paper in this revised edition, in the Abstract ,the Introduction and the Conclusion section detail management insights relevant to this paper.
In the Abstract section, our modifications are as follows.Due to incomplete information on pre-sold products, consumers face uncertainty about the value of what they have purchased, which leads to a mismatch between supply and demand and a large number of returns. By developing appropriate return policies and effectively managing and handling consumer returns, retailers can not only reduce waste but also ensure better resource utilization, which is essential for sustainable development. In this paper, we analyze the full-refund and full-and-freight-refund policies of retailers and develop a game model based on binary competition for selecting the optimal return policy for the pre-sold products of two retailers. The study shows that when both retailers have low capacity, there is no pre-sale stage. However, when their combined capacity is high and exceeds the demand of non-strategic consumers, equilibrium depends on their combined capacity and the proportion of strategic consumers who choose to keep the pre-purchased product under both return policies. When the number of strategic consumers who retain pre-order products is low under the full-refund policy and both retailers have moderate capacity, equilibrium is achieved when an asymmetric return policy is followed rather than a symmetric return policy. Specifically, when the percentage of strategic consumers who keep their reserved products under the product return strategy is small and the capacity of the two retailers is moderate, the maximum benefit is achieved if one of the retailers adopts the policy of a full refund and the other adopts the policy of a full and freight refund. Otherwise, when one retailer adopts the policy of a full refund or a full and freight refund, its competitor should adopt the same strategy to gain maximum revenue. The research on retailers' pre-sale and return strategies in this paper helps to optimize the operational strategies and operational processes of e-retailers, further improve the management and decision making of their joint pre-sale and return strategies, and help optimize retailers' profits(Lines 10 to 34, Page 1).
We have revised the Introduction section as follow.According to the study, both retailers do not use the pre-sale stage when the retailer capacity is less than the demand of the non-strategic consumers. However, when the retailer capacity exceeds the demand of non-strategic consumers, the equilibrium results for both retailers are proportional to the percentage of strategic consumers who retain their purchases under the two return policies. In contrast, when the proportion of retention under full refunds and freight refunds is high, equilibrium between both retailers depends on their capacity. In particular, when the capacity of both retailers is low, when one retailer adopts a full-refund return strategy, the other retailer is able to achieve optimal returns by adopting the same return strategy. When the capacity of the two retailers is moderate, when one retailer adopts a full-refund return strategy, the other retailer adopts a full-and-freight-refund return strategy to achieve optimal revenue. When the capacity of the two retailers is high and one retailer adopts a full-and-freight-refund return strategy, then the other retailer adopts the same full-and-freight-refund return strategy to achieve the optimal revenue (Lines 122 to 135, Page 3).
In the Conclusion section, we have revised the paper as follow. In this study, two retailers adopted a pre-sale policy and offered a return policy only when their capacity was higher than the demand of non-strategic consumers. The competition between the two retailers rose with the increase in capacity. When capacity was sufficient and the market was fully covered, both retailers tended to lower their pre-sale prices to compete for consumers. Eventually, one retailer chose to lower the pre-sale price to increase bookings, at which point, the other retailer could maximize revenue only by setting a higher pre-sale price to meet the remaining market demand.By comparing the revenue functions of the two retailers, this study concludes that both the proportion of strategic consumers who book pre-order products and the retailers' capabilities affect their equilibrium revenue and equilibrium strategies. Equilibrium revenue is such that the revenue of two retailers with the same return policy increases with their retention rate but the revenue of two retailers with different return policies is influenced by the intersection of their retention rates. When the percentage of strategic consumers who retain pre-order products under a full-refund policy is minimal and the retailer has moderate capacity, its equilibrium refund policy is asymmetric; otherwise, it is symmetric. When the proportion of strategic consumers retaining pre-order products under full refund is the smallest, if one retailer adopts a full-refund approach, the other retailer should adopt the full-and-freight-refund approach to achieve the optimal benefit. Otherwise, it should adopt the same return policy as its competitor to achieve the optimal benefit. Overall, in this paper, for retailers whose products are sold in two sales phases, on the basis of the competitive market environment, we have designed a reasonable return scheme based on the choice of pre-sale and return policies, combined with a diversified real-world environment, to provide practical guidance for the development of enterprises that is conducive to improving the efficiency of matching supply and demand and is of great significance to the development of the e-commerce industry(Lines 567 to 591, Page 17) .
- Future research: based on the above, future research should be extended.
Response: Taking into account the recommendations of the review panel, we have extensively revised the future research part of the thesis. In addition to the limitations arising from the complexity of the actual situation, this study can be expanded in 3 areas based on the requirements of sustainable economic development.
First, it is the logistics and distribution issues highly relevant to sustainable development. This study does not discuss the logistics and distribution issues in the pre-sale and return model, however, the the large amount of resource waste and environmental pollution in logistics and distribution cannot be ignored. Therefore, the pre-sale inventory allocation problem and the path optimization problem based on pre-sale order information in the retail e-commerce platform can be a direction for future research. Second, the uncertainty problem of two sales stages is considered. In this paper, we assume that consumers face uncertainty in product valuation in the pre-sale stage and all uncertainties completely disappear in the normal sale stage. However, in future studies, it can be assumed that uncertainty exists simultaneously in both periods and that the risk of uncertainty decreases over time. This scenario could lead to more complex consumer behavior and more wasted resources. Finally, future empirical studies are considered. In this paper, we mainly study consumer returns under the pre-sale policy from the perspective of model analysis and lack of corresponding data analysis, so empirical studies are also an important direction for future research, and real data will help to solve the wasteful problem caused by the mismatch between supply and demand (Line 593 to 607, Page 18).
Author Response File: 
Author Response.pdf
Reviewer 3 Report
The object of study and the gap that is intended to be solved in the literature is not clear.
The Introduction section is confusing, not allowing a clear understanding of the object of study and its contribution to the literature
It is difficult to understand the relationship between sustainable development and optimal return policies; a clear explanation of this relationship is needed.
It is not clear the methodology used to answer the research question
It is necessary to present the theoretical contributions and practical implications
Overall, the English language must be corrected.
Author Response
Minor Comments:
- The object of study and the gap that is intended to be solved in the literature is not clear.
Response: Thank you for your careful reading, we are very sorry for the lack of clarity in the description of the study population and the gaps intended to be addressed in the literature, and we have made extensive changes based on your suggestions.
On the basis of a review of the literature: (1) The current research on strategic consumer behavior, pre-sale strategy, and return strategy usually places them in a monopolistic setting, examining only one aspect or two aspects jointly, there being little literature that simultaneously incorporates all three aspects into a model framework and examines their effects on retailers' strategic choices in a competitive market. (2) Of the literature that has examined both pre-sale strategy and return strategy together, more academic literature has examined retailers' zero-return policy and partial-return policy, and many scholars' findings suggest that the partial-return policy is optimal, which is inconsistent with the popular full-refund or full-and-freight-refund policy. Currently, seven-day no-excuse returns and shipping insurance returns are becoming an important trend in online retailing. We will discuss this trend in this paper. In contrast to studies on the problem of consumers returning goods after receiving them in a single sales stage, this paper focuses on the return behavior of consumers who purchase products before the products are released for pre-sale. (3) This paper discusses and models the purchase decisions of consumers and the profits of two retailers under different pre-sale return strategies, obtains the equilibrium revenue and equilibrium strategies of two retailers under different pre-sale return strategies, and finds the optimal pre-sale return strategies of two retailers through comparative analysis, which will supplement the gaps in the research related to retailers' pre-sale and return, has important guiding significance for practical life, and provides an opportunity for competing retailers to develop optimal pre-sale return strategies in online sales. This will provide a theoretical reference for developing optimal sales strategies for competing retailers in online sales (Line 237 to 257, Page 5).
- The Introduction section is confusing, not allowing a clear understanding of the object of study and its contribution to the literature
Response: Thank you for your kind comments on our manuscript. We appreciate your constructive comments to guide our revision work. Based on your suggestions, we have focused on revising the Introduction section to more clearly clarify the research subject and its contribution to the literature.
In this paper, based on previous studies, we further investigate the following three aspects. (1) We analyze the purchasing behavior of strategic consumers in competitive markets. Most previous studies in the relevant literature have only explored consumer buying behavior in monopoly markets, while few scholars have analyzed consumer buying utility in competitive markets when retailers adopt pre-selling strategies. We rationalize the model by analyzing consumer utility to formulate retailers' sales strategies by considering consumer behavior as the main decision factor for retailers. (2) We explore retailers' return strategy choices in a two-stage sales model in a competitive market where strategic consumers exist. Based on the impact of pre-sales on future demand and the proportion of supply in the pre-sales stage, we explore the impact of retailers' return strategies and the impact of complex consumer behavior on retailers' profits under different market conditions and different combinations of return strategies. (3) We focus on the impact of remarketability of returned products in competitive markets on retailers' presale and return strategies. In addition, by constructing a Bertrand competition model for two retailers, we analyze the following three competitive scenarios. (1) both retailers offer full refunds, (2) both retailers offer full and shipping refunds, and (3) both retailers offer full refunds and full and shipping refunds(Line 100 to 121, Page 3).
- It is difficult to understand the relationship between sustainable development and optimal return policies; a clear explanation of this relationship is needed.
Response: This is certainly an important concern. We agree with you that the relationship between the research question and sustainable development is poorly addressed and not sufficiently clear in the article. Based on your suggestions, the paper has been extensively revised and this relationship is clearly explained in the Abstract ,the Introduction and the Conclusion section of the paper.
In the Abstract section, our modifications are as follow. Due to incomplete information on pre-sold products, consumers face uncertainty about the value of what they have purchased, which leads to a mismatch between supply and demand and a large number of returns. By developing appropriate return policies and effectively managing and handling consumer returns, retailers can not only reduce waste but also ensure better resource utilization, which is essential for sustainable development(Lines 10 to 15, Page 1).
In the Introduction section, the language has modified as follow. The rapid economic development of modern society has gradually led to many adverse consequences, such as the depletion of natural resources, increased environmental pollution, and the greenhouse effect, which poses a serious threat to the sustainable development of human society. In this context, a "low-carbon wave" has emerged globally. A low-carbon economy relies on science and technology, policies, and market mechanisms to achieve the best economic and social benefits with minimal resource consumption and environmental impact, leading to sustainable development goals of economic and social development and resource conservation and environmental protection. One of the most serious problems facing the e-commerce industry is returns, and according to Accenture e-Research, up to 95% of consumer returns involve non-defective goods. How to develop a reasonable return strategy and how to effectively manage and handle consumer returns have become key issues that e-commerce companies must urgently address. According to a study by the Chinese Consumers Association, the traditional ways enterprises handle consumer returns can generally be summarized as remanufacturing, scrapping, and donation. When products with qualified quality and less serious damage are returned, enterprises generally remanufacture or donate them according to the attributes of the products; when poor-quality products are returned, enterprises generally take scrapping measures to deal with them . In this study, based on the requirements of sustainable economic development, products returned by consumers that do not have quality defects are considered without considering the cost of product processing, and the returned products can be resold directly or after simple processing. This will help to establish a low-carbon economy with higher resource utilization and more environmental protection, which is important for enterprises to adapt to future social development(Lines 122 to 135, Page 3).
In the Conclusion section, we have revised the paper as follow. On the one hand, technological advances have given rise to complex behaviors of strategic consumers, exacerbating the risk of supply–demand mismatches that are detrimental to sustainable economic development, while harming the interests of retailers. On the other hand, the selection of an appropriate pre-sale return policy, as well as the appropriate handling of returned products, is crucial for retailers, not only to help them achieve optimal returns, but also as an important reflection of their active social responsibility to promote sustainable development(Lines 554 to 560, Page 17).
4. It is not clear the methodology used to answer the research question.
Response: Thank you for your careful reading, which has been extensively revised based on your suggestions, and the model of this paper and the process of its construction are described in detail in the Introduction.
Because sustainable development is critical, in this paper, we consider a situation where there are strategic consumers and returned products can be re-sold, accordingly construct a Bertrand competition model for two competing retailers with capacity constraints, and solve the equilibrium return strategy of their pre-sold products by the inverse recursive method. In our model, two retailers selling homogeneous products (1) decide on the basis of their capacity whether to set up a pre-sale stage, (2) decide the price of their normal sale stage, and (3) decide the pre-sale capacity, the pre-sale price, and the full-refund return policy or full-and-freight-refund return policy that they should offer for their pre-sale products(Line 95 to 103, Page 5).
5. It is necessary to present the theoretical contributions and practical implications.
Response: This is clearly an important question. We strongly agree with you, and after reading your comments and those of other reviewers, we have revised the management insights in the paper in this revised edition, detailing the differences with this paper in the Abstract, Introduction, and Conclusion sections of the paper. Theoretical contributions and practical implications.
In the Abstract section, our modifications are as follows.The research on retailers' pre-sale and return strategies in this paper helps to optimize the operational strategies and operational processes of e-retailers, further improve the management and decision making of their joint pre-sale and return strategies, and help optimize retailers' profits(Line 31 to 34, Page 1).
In the Introduction section, the language has modified as follow. In this study, based on the requirements of sustainable economic development, products returned by consumers that do not have quality defects are considered without considering the cost of product processing, and the returned products can be resold directly or after simple processing. This will help to establish a low-carbon economy with higher resource utilization and more environmental protection, which is important for enterprises to adapt to future social development(Line 57 to 61, Page 2).
In the Conclusion section, we have revised the paper as follow. On the one hand, technological advances have given rise to complex behaviors of strategic consumers, exacerbating the risk of supply–demand mismatches that are detrimental to sustainable economic development, while harming the interests of retailers. On the other hand, the selection of an appropriate pre-sale return policy, as well as the appropriate handling of returned products, is crucial for retailers, not only to help them achieve optimal returns, but also as an important reflection of their active social responsibility to promote sustainable development(Line 554 to 560, Page 17).
6. Overall, the English language must be corrected..
Response: We have carefully checked the words and grammars and corrected the errors accordingly. We use one of the editing services listed at https://www.mdpi.com/authors/english..
Author Response File: Author Response.pdf
Round 2
Reviewer 3 Report
Accept for publication.
