Trial and Return Option Strategy in Omnichannel Retailing

TL;DR

This paper explores how trial and return options in omnichannel retailing influence customer behavior and retailer profit, emphasizing the strategic role of store clerks and the limited impact of return cost policies.

Contribution

It introduces a game-theoretic framework to analyze customer decision-making and clerk strategies in trial and return scenarios within omnichannel retailing.

Findings

Trial and return options boost profits when product fit probability is low.

Store clerks significantly influence customer trial decisions.

Return cost coverage policies have minimal effect on behavior and profits.

Abstract

This study examines the dynamics of customer behavior with trial and return options in omnichannel retailing, where retailers face challenges in integrating physical and online stores. Recently, major retailers have begun offering customers the option of trying eligible items for a set period and returning unwanted products free of charge. However, existing research has not fully explored the temporal dynamics of customer return behaviors. This study investigates how temporal dynamics affect customer return behaviors and decision-making during trial periods. Using a theoretical game structure framework, this study explores customer decision patterns regarding store visits, product trials, and returns, while examining the strategic role of store clerks in encouraging product trials. The findings suggest that retailers can maximize profit through trial and return options when product fit probability is low, emphasizing the importance of maintaining complementary physical and online channels. We also found that store clerks play a critical role in encouraging customers to try misfit products. The results further reveal that return cost coverage policies may not significantly impact customer behavior or retailer profit.