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In this paper, we formulate a dual-channel model of the supply chain with and without channel competition. We shall also consider the return–refund policy and retail service. The retail service is given by the retailer to customers to build up goodwill between them. We examine the retail service's effect on the profits and the pricing decisions under four return strategies. We compare the profits, pricing decisions, and demands under the Stackelberg setting, strategic alliance, and no improved retail services system in each strategy. We obtain a range of the efficacy of the retail service through which the retailer should improve his service to make more profits. Analysing the sensitivity of the parameters, we fix some partitions on the value of return rate and the perceived value, and we specify the best profitable strategy in each partition for each player. With the help of this, the members can decide which strategy is most profitable by observing the return–refund policy's values. We also provide an absolute difference between the retail service's efficacy on the demand rate of the direct and indirect channels that should be maintained to make a profit from the retail services.

Pricing and service strategies in a dual-channel supply chain under return–refund policy