Are Product Returns a Necessary Evil? Antecedents and Consequences

Abstract

The firm-customer exchange process consists of three key parts: (1) firm-initiated marketing communications, (2) customer buying behavior, and (3) customer product return behavior. To date, the literature in marketing has largely focused on how marketing communications affect customer buying behavior and, to some extent, how past buying behavior affects a firm's decisions to initiate future marketing communications. However, the literature on product returns is sparse, especially in relation to analyzing individual customer product return behavior. Although the magnitude of the value of product returns is known to be high ($100 billion per year), how it affects customer buying behavior is not known because of a lack of data availability and understanding of the role of product returns in the firm-customer exchange process. Given that product returns are considered a hassle for a firm's supply chain management and a drain on overall profitability, it is important to study product return behavior. Thus, the authors empirically demonstrate the role of product returns in the exchange process by determining the exchange process factors that help explain product return behavior and the consequences of product returns on future customer and firm behavior. In addition, the authors demonstrate that product returns are inevitable but by no means evil.

The impact of the package opening process on product returns

“…Previous research has acknowledged that various factors (e.g., product quality, product demonstration, return policies), working through a cognitive reaction process, can significantly impact consumer return behavior during the two-stage decision process of online purchasing (Anderson et al 2009;Frischmann et al 2012;Petersen and Kumar 2009;Wood 2001). However, no study has yet examined how consumer return decisions are influenced by a delivery package's appearance (e.g., the color) and contents (e.g., extra gifts, preprinted return labels), or the affective action process.…”

“…The expectation gap (also called fit of transaction in some articles) is a term frequently mentioned in the consumer return behavior literature (Anderson et al 2009;Petersen and Kumar 2009). An expectation gap exists when the perceived utilitarian and hedonic utilities at the moment of receipt are not equal to those perceived by the consumer at the moment of purchase.…”

“…Finally, researchers have also identified personality (Petersen and Kumar 2009), demographic variables, and industry characteristics (Anderson et al 2009) as influential factors in consumer return behavior; therefore, we controlled for these factors. Figure 2 shows the resulting conceptual framework of our study.…”

Reverse food logistics during the product life cycle

“…However, companies are turning to reverse logistics to improve the bottom line since return rates are estimated to 25% of total sales which accounts for approximately $100 billion in lost sales in US (Petersen and Kumar, 2009). In the food and beverage sector, the majority of product returns are unsaleables like damaged and expired products.…”

“…The lack of strategic view of reverse logistics limits even further the ability of the companies to respond effectively to customer demands and create value for money. Petersen and Kumar (2009) estimated return rates to be greater than 25% of total sales which accounts for approximately $100 billion in lost sales in US and a reduction in profits by 3.8% per retailer or manufacturer.…”