Optimal retail return policies with wardrobing

摘要

It has been observed that consumer returns are not driven exclusively by mismatch of needs, but also used by the consumer as a rental opportunity. This renting via the sales channel is well-known among retailers and is commonly referred as opportunism or wardrobing. Wardrobing is possible only when there is a trial period combined with a return opportunity in the sales channel. The study examines the extent and benefit of wardrobing. Results show that the optimal price and refund are never increasing in the extent of wardrobing. And in terms of profits, it was found that, although to a larger extent wardrobing hurts firm profits, if the benefit of wardrobing is high, firm profit can actually increase when more consumers are opportunistic. The study also shows that effective screening exists only when the extent of wardrobing exceeds a threshold. Profit implications of the extent and benefit of wardrobing remain qualitatively unchanged when incorporating ex ante heterogeneity in consumers' product valuation and when considering a retailer facing a large procurement cost of the product. The results also show that where opportunistic consumers are extra careful and their returns are in better condition (having higher salvage value than those made by ordinary consumers), both extent and benefit of wardrobing increase profit. (3 refs.)