Joint Strategy of Advance Selling and Resalable Returns for Fashion Products

Abstract

Advance selling strategy is often adopted by retailers to encourage customers to make pre-order to avoid the risk of out of stock. However, during advance selling, customers can only estimate the actual value of the product perceived at the time of receipt. This uncertainty about the actual value of the product may prevent customers from buying in advance. This paper proposes a joint strategy of advance selling and resalable returns for retailers to encourage customers to make pre-orders, where both customers’ estimated values and realized values are heterogenous. The optimal advance selling price and buyback price are derived. The expected profits resulted form the proposed joint strategy and that from a single advance selling strategy are compared. Moreover, conditions in which the proposed joint strategy outperforms the single advance selling strategy are identified.