Green product development under competition: A study of the fashion apparel industry

Shu Guo, Tsan Ming Choi, Bin Shen

Research output: Journal article publicationJournal articleAcademic researchpeer-review

61 Citations (Scopus)

Abstract

Motivated by the observed industrial issues, we analytically develop a fashion supply chain consisting of one manufacturer and two competing retailers and investigate how retail competition and consumer returns affect green product development in fashion apparel. In the basic model, that is, the pure “product greenness level” game, we find that the optimal greenness level of the fashion product decreases along with the level of market competition. This finding implies that a more competitive market leads to a lower optimal greenness level. We also identify that when the consumer return rate increases, the optimal product greenness level is substantially reduced. In the extended model with joint decisions on greenness and pricing, we find that the optimal product greenness level for the whole channel is always higher in the scenario when both retailers charge a higher retail price than in the case with a lower retail price. As such, the underdevelopment of green fashion products is a result of fashion industry features, such as an extremely competitive environment for green product development, relatively low retail prices for fashion products, and high consumer return rates. Therefore, fashion companies should join a co-opetition game for the green product market and simultaneously enhance their efficiency in managing consumer returns. To support our analytical findings, we conduct extensive industrial interviews with various representative companies. Based on this multi-methodological approach (MMA), this paper generates practice-relevant managerial insights that not only contribute to the literature, but also act as valuable references for industrialists.

Original languageEnglish
Pages (from-to)523-538
Number of pages16
JournalEuropean Journal of Operational Research
Volume280
Issue number2
DOIs
Publication statusPublished - 16 Jan 2020

Keywords

  • Consumer returns
  • Game theory
  • Green product development
  • Multi-methodological research
  • Product greenness level
  • Retail competition

ASJC Scopus subject areas

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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