Impact of return shipping insurance in live-streaming retailing

The growing prevalence of return shipping insurance (RSI) in live-streaming commerce presents a critical strategic dilemma. While RSI can stimulate demand by lowering consumers’ return costs, it simultaneously increases the seller’s operational costs and return rates. This paper develops an analytical framework to examine the impact of RSI in two dominant modes: self-operated and third-party live-streaming sales. We derive equilibrium outcomes with and without RSI and compare them to uncover its impacts. Our findings indicate that the seller chooses to provide RSI only under specific conditions: when the product dissatisfaction rate is high, but consumer sensitivity to return costs remains low. This finding suggests that offering RSI does not necessarily signal high product quality. Moreover, the effect of RSI on promotional effort is highly mode-dependent. In self-operated live-streaming, RSI may lead to lower seller effort for most cases, as the accompanying rise in return rates diminishes the marginal benefit of aggressive promotion. In contrast, third-party streamers, who do not bear RSI or return-related costs, are incentivized to increase effort to capitalize on heightened consumer demand. Additionally, in both modes, the introduction of RSI does not necessarily lead to higher prices. In fact, when RSI significantly raises return rates and reduces effective demand, sellers may strategically lower prices to stimulate orders. These insights provide valuable guidance for sellers and streamers in understanding RSI and designing RSI strategies aligned with their operational models and market environments.