Return or Not? Joint Pricing and Refund Optimization for Omni­channel Retailing

Speaker: Prof. Yun Fong Lim

Time: 8: 30-10:30, 23rd March 2022 (Beijing time)

Place: https://meeting.tencent.com/dm/M9kXcnm4CtTY

Tencent Meeting ID: 937-944-186

Code: 706708

Abstract: 

We study a return problem of a retailer selling multiple substitutable products through an online channel and a physical store. Online purchases can be returned either by mail or to the physical store. The retailer decides each product’s price and refund value in each channel to maximize his expected revenue. We characterize a consumer’s sequential decisions on making a purchase and returning the product using a generalized Markovian logit choice (MLC) model, which allows us to formulate a joint pricing and refund optimization problem. If no constraints on the prices and refund values are imposed, this optimization problem is convex and we obtain analytical expressions of its optimal solution. By allowing products with larger salvage values to be returned or making the return process more convenient, the retailer can increase his revenue. The retailer can also leverage substitution effects to modulate the products’ market shares across the channels. If constraints are imposed on the prices and refund values, the problem may become non­convex and we approximate it using a mixed­integer linear program. Furthermore, the generalized MLC model is flexible and predicts the demand well. Numerical experiments under various parameter settings using synthetic data demonstrate that an estimation­and­optimization framework based on this generalized MLC model yields a revenue close to a theoretical benchmark. The generalized MLC model can be estimated based on partially observable data. A case study using data with some unobservable consumer choices from a major fashion retailer in China demonstrates that our approach is effective.

Bio: 

Yun Fong LIM is Associate Professor of Operations Management at the Lee Kong Chian School of Business, Singapore Management University (SMU). He is also Academic Director of the MSc in Management (MiM) Program at SMU. He has been a Chang Jiang Chair Professor, an MPA Research Fellow, a Lee Kong Chian Fellow, and an NOL Fellow. Yun Fong’s research has appeared in Operations Research, Management Science, Manufacturing and Service Operations Management, and Production and Operations Management. He has delivered keynote and plenary speeches in several international conferences. In addition, his work has received funding by MOE, A*STAR, and NNSF, and media coverage by The Business Times, CNA938, and Channel 8. His current research interests include e-commerce and marketplace analytics, online platforms, warehousing and fulfillment, sustainable urban logistics, and flexible workforce and resource management. Yun Fong serves as Senior Editor for Production and Operations Management and Associate Editor for Naval Research Logistics. Yun Fong is a recipient of the SMU Teaching Excellence Innovative Teacher Award. He teaches both undergraduate and postgraduate courses in Operations Management. He has provided consulting service and executive development to corporations such as Alibaba, Maersk, McMaster-Carr Company, Resorts World Sentosa, Schneider Electrics, Temasek Holdings, and Zalora. Yun Fong obtained both his PhD and MSc degrees in Industrial and Systems Engineering from the Georgia Institute of Technology.