Research on Try-before-you-buy Strategy Under Product Fit Uncertainty

Abstract

With the rapid development of online retail, the drawback of product fit uncertainty in online markets are becoming more and more prominent. In order to alleviate the impact of the product fit uncertainty, online retailers continue to introduce new service strategies. Based on the uncertainty of product matching, this paper constructs and solves the model of direct sales and try-before-you-buy(TBYB) strategy by online retailers under the premise of whether to allow returns. And explore the optimal strategy for the e-retailer in different aiming. The results show that: When the product fit is low, the optimal strategy choice for online retailers is TBYB strategy. When the product fit is high, if products are allowed to be returned, sell the product directly is the optimal strategy choice; if not, both TBYB and direct sales are optimal strategies. When the product fit is moderate, for products that are allowed to be returned, sell products directly when aiming to maximize demand and adopt the TBYB strategy when maximize profits. For products that are not allowed to be returned, Online retailers should sell products directly when aiming to maximize demand.

Keywords

• try-before-you-buy
• return policies
• hassle cost
• online shopping
• product fit uncertainty