Offline Returns for Online Retailers via Partnership.

This article examines the emerging business practice of "return partnerships," where online retailers collaborate with physical store retailers to enable customers to return online purchases offline at store locations. It analyzes when such partnerships benefit both parties by modeling customer purchase and return decisions across online and offline channels, considering product differentiation and store visit convenience. The study finds that partnerships are mutually advantageous when online and store retailers offer differentiated products with conveniently located stores, or when they offer similar products but the store network is limited, as seen in examples like Everlane-Cost Plus World Market and Amazon-Kohl’s. The research highlights that while return partnerships reduce online retailers’ reverse logistics costs and increase store foot traffic, they may also increase return rates if offline returns become too convenient, especially when products are similar and stores are numerous. Extensions of the model address valuation correlation, customer heterogeneity, multiple store locations, and consumers keeping both products, confirming the robustness of the main insights and providing guidance for retailers considering such partnerships.