Pricing, Returns, and Donations in Single- and Dual-Channel Retailing

Abstract

In this dissertation, we study the operational planning problem of a retailer under single- and dual-channel settings with product returns and donations considerations. It is composed of 6 chapters. Having provided the overview and motivation of this work in Chapter 1, we present a structured literature review of the bricks-and-clicks dual-channels in Chapter 2. Next, we propose a quality-dependent newsvendor problem, which models a socially responsible food-retailer's operational planning problem for a continuously deteriorating inventory over two periods with the consideration of donation and quality-sensitive customers in Chapter 3. The retailer's operational planning comprises of inventory and pricing decisions, where she plans not only for the purchase of the goods but also for donating them. We assume each unit of donation generates a constant reward derived from a blend of government incentives and the improved public image of the company due to its corporate social responsibility effort. Our results reveal that charitable donations can enhance the profit while at the same time mitigate the waste and the retailer's optimal donation volume is increasing (decreasing) in the donation reward (quality of the goods). We extend this model in Chapter 4 to incorporate a tax deduction policy into the retailer's problem and examine the impacts of quality and tax subsidy parameters on the retailer's optimal decisions. Although the retailer is still better off engaging in donations, we observe that a larger tax subsidy (higher quality) does not always bring in more (less) donations. In Chapter 5, we develop an analytical model to help a bricks-and-clicks dual channel retailer determine the optimal price in each channel and whether to welcome the cross-channel returns to her physical facility. We find that the cross-channel returns are likely to cannibalize the physical channel sales and may hurt the retailer's profit when customer returns are highly sensitive to refund. Finally, Chapter 6 summarizes our main contributions and proposes future research directions.