Return Policies

Description

Given the record number of store closures costing thousands of jobs (Bulter, 2020), how can we help retailers adapt to the rapid growth of e-commerce by managing returns?  

Shoppers love lenient return policies. 82% of UK shoppers agreed that returns are a normal part of shopping (Klarna, 2019). To cater to the shift to online shopping (Eley, 2020), retailers like Amazon and Zalando offer generous return policies allowing customers to return their purchases for free, months after delivery (Zalando, 2020). However, sustaining such generous return policies have become increasingly unaffordable. Returns cost UK retailers an estimated £60 billion a year (Ram, 2016). E-commerce return rates have spiked 95% in the last 5 years, with 20% of online purchases returned (Shopify, 2019). With the pandemic accelerating retail's move online, retailers face increasing pressure to make up for reduced footfall by extending return windows (Thomas, 2020). 

 

How to market products to maximize satisfaction and minimize returns?  

This project examines decision reversibility, the underlying factor among return policies. Some return policies are restrictive - preventing the consumer from reversing their product choice (i.e., return); others are more lenient, allowing them to reverse their decision (i.e., no quibble refunds). Although consumers generally prefer reversible decisions, they report higher satisfaction levels for irreversible compared to reversible decisions. Addressing this discrepancy, we investigate how retailers can overcome decreased satisfaction ratings in reversible purchases by framing the decision as one based on taste rather than quality. In a series of experiments, we show that framing a reversible decision in terms of quality terms decreases post-choice satisfaction. However, if the very same decision is framed in terms of taste, post-choice satisfaction restores to levels equal to those of irreversible purchase decisions. 

To complement these studies, we intend to conduct a meta-analysis by synthesizing data from original studies that examine how reversible decisions affect post-choice satisfaction. We will also include substantive moderators (e.g., framing of decision, product type) to support our experimental findings.

From a managerial perspective, these findings could help managers minimize product returns by providing them with a tool to maximize post-choice satisfaction. Quality-based products can benefit from more stringent returns. When lenient returns are commonplace, retailers can market products in terms of taste.  

 

How do payment methods such "try before you buy" affect returns and financial-well-being? 

Rather than providing traditional return policies, some retailers have reframed returns as "try before you buy" where consumers do not pay anything upfront. Instead, returns management companies such as Klarna would pay the retailer first and takes on the debt. Shoppers then get up to 30 days to make up their mind about what they want to keep and simply pays these companies for the purchases they keep without interest or fees. While the concept seems beneficial to both consumers and the retailers, debt charities have deemed these services are misleading and could put the consumer's finances at risk.

In collaboration with AprissRetail, we will examine how payment methods like "try before you buy" affects retailers and consumers.  

The findings will help consumers minimize the detrimental effects on their credit score and enable retailers to structure these policies in a manner that reduces its costs without harming the consumer.