When should a live-stream e-seller offer return-freight insurance?

Consumer rights and interests have been a challenge since the emergence of live-stream selling. To solve this problem, some live-stream e-sellers have introduced an innovative return policy called return-freight insurance (RFI). However, other sellers selling the same product refuse to do so. We develop a duopoly model featuring a live-stream seller and a traditional e-seller to investigate the conditions under which e-sellers should offer RFI in the context of live-stream selling. Our model captures the key features of live-stream selling: the social value that enables consumers to interact with others and the information value that helps eliminate product-fitness uncertainty. Our results indicate that RFI conflicts with the information value of the live stream and can sometimes harm the live-stream e-seller in a competitive market. In addition, offering RFI always induces live-stream and traditional e-sellers to increase their prices. When competitors offer RFI, the traditional e-seller with a low return-freight premium will offer RFI, while the return policy of the live-stream e-seller also depends on the information value of the live stream. Furthermore, the live-stream e-seller will never offer RFI unless its competitor adopts this strategy. • We examine e-sellers’ strategy of return-freight insurance under live-stream selling. • Return-freight insurance may be harmful to live-stream e-sellers. • We derive conditions under which an e-seller should offer return-freight insurance. • The information value of live stream is the key factor.