Pricing Decision Models of the Dual Channel Supply Chain with Service Level and Return

The interests of upstream, midstream, downstream companies and consumers in the supply chain are jointly affected by service levels and returns. Improving service levels can increase market demand and improve market position, as well as reduce return rates. But the increase in service level will bring an increase in service cost. How to balance the service cost and return cost through pricing decision, so that the profit of supply chain members can be improved, is the problem studied in this paper. In this paper, we consider the effect of service level of network channel on consumers’ return behavior in the context of manufacturer’s dual-channel supply chain when dual channels provide services at the same time, and discuss the effect of service level and return rate on pricing decision of dual-channel supply chain. It was found that return behavior can stimulate manufacturers to improve service levels and increase overall supply chain profits. The higher the return rate in the network channel, the greater the benefits from improved service levels by the manufacturer and the less detrimental to retailers’ returns. This study enriches the research on pricing decisions in dual-channel supply chains, increases the motivation of merchants to improve service levels, and has some guiding implications for supply chain members to develop price and service strategies.