Who benefits from the refund-only policy? Consumers, platform, or retailer

Recently, major Chinese e-commerce platforms, including JD.com and Taobao.com, have implemented a “Refund-Only” (RO) policy, which permits consumers to obtain refunds for defective products without returning them. This policy has sparked significant debate among both retailers and consumers. Motivated by these developments, we develop an analytical model to investigate the impact of the RO policy on various market participants. Our analysis shows that the RO policy exerts upward pressure on retail price and drives the low-quality retailer out of the market. Moreover, the platform's commission rate critically shapes the policy's outcomes. Specifically, when the commission rate is low, the RO policy generates a “win-win-win” outcome, benefiting the retailer, platform, and consumers simultaneously. However, under a moderate commission rate, there exists a parameter region in which the RO policy increases platform profit while reducing both retailer profit and consumer surplus. As the commission rate rises further, the RO policy eventually ceases to benefit any stakeholder. Additionally, we find that the “win-win-win” region expands when the retailer's salvage value is low and when consumers face high salvage value and return cost. Within this favorable region, increasing the RO approval rate further enhances welfare for all parties involved.