Buy online and return in store: the case of substitute products

Motivated by the Amazon returns at Kohl's programme, the article analyzes under what conditions buy-online-and-return-in-store (BORS) improves the profit of an e-tailer and a store when they offer substitute products. Firstly, BORS enhances the e-tailer's profit if the unit BORS handling cost is below a threshold, and continues to do so even when the cost exceeds another threshold under a duopoly with multichannel returns. BORS boosts the store's profit if the unit BORS handling cost exceeds a threshold. Secondly, when BORS leads to a monopoly market, BORS is a win-in strategy if the unit BORS handling cost is below a threshold. But when competition still exists with BORS, the unit BORS handling cost should exceed a threshold. Finally, without BORS, a higher consumers' hassle cost of returning online benefits the store but hurts the e-tailer, while with BORS, it benefits both retailers or exerts no impacts under certain conditions.