Reactive or proactive? An online retailer’s omnichannel strategy for managing consumer returns

This study investigates two popular omnichannel strategies for managing consumer returns. The reactive strategy is online–offline return partnership, which offers eco-friendly and cost-effective reverse logistics. The proactive strategy involves conveying fit information through showrooms, in order to reduce returns. We apply a game-theoretic model to explore online retailers’ optimal choice among four strategies, namely, the benchmark strategy of pure online channel, the reactive strategy of return partnership, the proactive strategy of fit information, and the hybrid strategy of joint implementation. Our main findings are as follows. First, online retailers should not implement any omnichannel strategy on extremely low-end products. Second, offering fit information is essential for online retailers who sell sufficiently high-end products. Third, the single reactive strategy is optimal in terms of standardized products with moderate valuation. Finally, implementing both omnichannel strategies simultaneously may hurt online retailers, especially those owning an efficient logistics system.