Improving supply chain Transparency: The role of blockchain technology and its impact on return shipping insurance

Using return shipping insurance (RSI) to address product returns is common in e-commerce, while adopting blockchain technology (BCT) for product traceability not only significantly reduces the inspection costs of returned products but also improves consumer utility (i.e., reduces return rates). However, despite these two distinct roles of BCT, the conditions under which retailers adopt BCT and its impact on RSI choice have not been thoroughly examined. To fill this gap, we construct six analytical models to investigate BCT-driven product traceability and its interplay with RSI. In these models, the retailer decides on the traceability level (in the BCT scenario), product price, and refund amount under different RSI strategies, depending on the retailer and consumer premiums: the retailer pays (Free RSI), the consumer pays (Faf RSI), or no RSI is provided (No RSI). We find that when the operational cost is low, the retailer always benefits from adopting BCT. However, with high operational costs, BCT is only preferred when inspection costs are also high. Notably, adopting BCT encourages retailers to offer RSI primarily under high inspection costs, without necessarily increasing product prices. RSI also has varying effects on traceability: offering a Free RSI strategy reduces the retailer’s incentive to increase traceability, while offering a Faf RSI strategy may enhance it. In summary, RSI and BCT can act as substitutes or complements. When the consumer (retailer) premium is low and the proportion of RSI-sensitive consumers is high (low), the retailer substitutes a Faf (Free) RSI for high traceability. When the consumer premium is moderate and the retailer premium is high, BCT and Faf RSI are mutually reinforcing. When both premiums are high, the retailer prefers BCT over offering RSI.