Abstract:

It aims to maximize the retailer's revenue based on the inventory of omni-channel retailers in this paper. The impact of return loss on the retailer's maximum revenue is analyzed， considering customers' channel preference， product quality， and types of customers. It is assumed that customers can purchase products from both the online and offline channels. Drawing from existing surveys， how retailers should determine the optimal store inventory is explored， especially when a few customers prefer offline shopping channels. The characteristics of the optimal store inventory concerning product quality， return loss， and the probability of customer channel preference are detailed. Four new customer utility functions and retailer profit models are established corresponding to the four cases proposed. Firstly， the basic model is deseribed， which allows customers to return products from both online and offline channels without considering customer loss. Secondly， the mode is introduced that accounts for customer loss when stores face shortages and yet allows returns from both channels. To prevent customer loss， the third mode is then described， which suggests that retailers establish showrooms to alleviate customers' uncertainty regarding products. Finally， based on the third mode， a model is presented where setting up showrooms can reduce both the probability of returns and customer loss， though some customers may still leave if store shortages occur. The optimal inventory outcomes are then compared from the above scenarios. Our research reveals that， firstly， when customers' belief in a product is low， they will prefer offline purchases. From the retailer's perspective， increasing the store's inventory can minimize customer loss and maximize profit due to the relationship between inventory levels and loss probability. Secondly， when retailers introduce showrooms， they should reduce store inventory to maximize revenue. This scenario significantly reduces the likelihood of returns and customer loss. Thirdly， when the probabilities， influenced by product quality， are high for both channels， the decision to increase or decrease store inventory is determined by the return loss from both channels and the probability distribution of customers with channel preference. Our research offers valuable insights for omni-channel retailers to set reasonable inventory levels while considering return losses.

Key words: omni-channel, channel preference, revenue management, return loss, inventory, optimization