Do E-Tailers Benefit from Cooperative-Return-to-Store?

The popularity of online shopping places higher demands for e-tailers' service, especially the return process. Cooperative-return-to-store (CRS), where an e-tailer's merchandise can be returned to another retailer's stores, seems to provide a panacea for e-tailers to improve return flexibility and save on return handling costs. However, current practices indicate that only a limited number of e-tailers offer an in-store return option through CRS. This article elucidates the intuition behind this phenomenon by analyzing two asymmetric competing e-tailers' decisions on whether to participate in CRS with a third-party offline retailer who establishes a drop-off convenience level. Perhaps counterintuitively, we find that CRS's return service improvement and cost reduction for e-tailers can deter them from participating in the cooperation under certain conditions. Our analysis also demonstrates that the offline retailer could improve performance by strategically adjusting the CRS program's main appeal (e.g., return service improvement or cost reduction) to the e-tailers based on their product differentiation.