Fresh product e-tailer’s optimal fresh-keeping strategy under three scenarios

Abstract

In the direct sales model, the e-tailers sell fresh products to consumers in the online market and promise consumers a full-refund policy without return. Consumers are always concerned the products’ freshness level before purchasing online fresh products. Third-party logistics (3PL) providers will be motivated to exert a fresh-keeping effort to keep the fresh product at the optimum level when offering consumers or e-tailers fresh-keeping services. Considering the fresh-keeping service provided by 3PL providers, to alleviate consumers’ concerns about the freshness level and encourage them to purchase fresh products, some e-tailers will purchase fresh-keeping services from 3PL providers and offer them to consumers for free. However, some e-tailers have stopped offering the free service; they have offered consumers the opportunity to purchase fresh-keeping services. To explore an e-tailer’s optimal fresh-keeping strategy, we consider a market consisting of an e-tailer and a 3PL provider. Three alternative scenarios are discussed, scenario N: no fresh-keeping service; scenario C: some consumers voluntarily purchase fresh-keeping services; and scenario S: the e-tailer offers a complementary fresh-keeping service. We find that introducing a fresh-keeping service increases the retail price in scenario C when the coefficient of fresh-keeping cost is high and the unit fresh-keeping service fee is low, but that decreases in scenario S when the unit fresh-keeping service fee is low. Comparing the e-tailer’s equilibrium profits, we find that introducing a fresh-keeping service does not necessarily benefit the e-tailer. The coefficients of fresh-keeping costs and unit fresh-keeping service fees play a critical role in selecting the fresh-keeping strategy. Meanwhile, the 3PL provider is biased; specifically, the 3PL provider’s fresh-keeping effort is related to that of the policyholder.