A Dual-Channel Strategy for Online Recovery Platforms to Increase Recovery Quantity and Profits

Abstract

With the rapid development of information technology and communication technology, several online recovery platforms have introduced offline channels to encourage customers to participate in product acquisition and improve profits. Motivated by this reverse supply chain practice, we develop a game theory model under three scenarios (single offline channel, single online channel, and dual-channel structures) to assess the effect of a newly added offline channel for online recovery platforms and explore the factors that have significant impacts on the dual-channel strategy for recovery platforms. We conduct static analyses to solve the model and perform a numerical study to examine the robustness of the results. The results reveal that a recovery platform can always gain more profit and set lower recovery prices under the dual-channel structure. However, the relatively high shipping cost might cause the recovery platform to recover a smaller quantity under the dual-channel structure compared with the single offline channel structure. In addition, the recovery platform is more likely to adopt a dual-channel structure with low shipping cost, high average hassle cost or hassle cost uncertainty, and less uncertainty on the reservation value. Moreover, the recovery platform can use the price difference between online and offline channels as a tool to split product holders and induce them to choose the most appropriate channel. Our findings highlight the profit and recovery quantity benefits brought by the dual-channel structure, and provide management insights for recovery platforms.