Optimal trade-in strategy of retailers with online and offline sales channels

Due to consumers' online shopping habits, more and more traditional retailers are operating online sales channels for survival. Many retailers selling durable products offer trade-in service to keep regular customers. In practice, these retailers have three channel choices to offer trade-in service: only offline channel (OFC); only online channel (ONC); double channel (DBC). Thus, a retailer with double channel who plans to offer trade-in service needs to pick the optimal choice from OFC, ONC and DBC. To this end, our paper investigates the optimal product price and trade-in rebate under the three choices, respectively, and explores which choice is the best for the retailer. We find that the three channel choices have no effect on the optimal product price, and the retailer under each choice may set the largest trade-in rebate which depends on the magnitude of the consumers' waiting psychological cost of online shopping and the unit shipping cost. Interestingly, we find that the optimal trade-in demand under DBC is not always larger than those under OFC and ONC. Moreover, no choice always benefits to replacement consumers. Most importantly, we find that if the unit shipping cost is relatively small, OFC is the best choice for the retailer; and if the unit shipping cost is relatively medium, DBC is the best choice; otherwise, ONC is the best choice.