Try-Before-You-Buy: Online retailing strategy with customer self-mending

In this study, we investigate Try-Before-You-Buy (TBYB) strategy for an online retailer while considering customer self-mending (CSM) behaviors. We show that CSM behaviors have great impacts on the TBYB strategy. Without CSM, the strategy is viable as long as the member segment size is relatively large. Besides, the strategy works as a Pareto improvement mechanism, even a “win-win” strategy for the society. With CSM, the adoption of the strategy critically depends on the operation cost, product value, and the size of member segments. Specifically, the strategy is viable if: 1) the operation cost is low enough; or 2) the operation cost is relatively high, but the product value is large enough; or 3) although the operation cost is relatively high, and the product value is relatively small, the size of member segment is large enough. Additionally, the strategy reduces customer surplus on average, but increases social welfare under some conditions.