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The impact of returns policies on profitability: A fashion e-commerce case

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  • Hjort, Klas
  • Lantz, Björn

Abstract

Research on returns policies is scarce and inconclusive. This study is a first attempt to empirically analyze and describe the effects of returns policies on consumer behavior and the moderating effects of the policies on profitability. The method involves analyzing the transactional data of a Swedish online fashion retailer. The results of the regression analyses show that with a lenient returns policy, repeat customers generate a significantly higher contribution per order, while returners and customers who enjoy free returns generate a significantly lower contribution per order. In addition, returners and repeat customers generate a significantly higher total contribution, while customers who enjoy free returns generate a significantly lower total contribution. Hence, returns policies that are free of charge do not necessarily benefit retailers in terms of long-term profitability. From a managerial perspective, the results provide guidance on how to address the recent changes in European consumer legislation.

Suggested Citation

  • Hjort, Klas & Lantz, Björn, 2016. "The impact of returns policies on profitability: A fashion e-commerce case," Journal of Business Research, Elsevier, vol. 69(11), pages 4980-4985.
    • Handle: RePEc:eee:jbrese:v:69:y:2016:i:11:p:4980-4985
    DOI: 10.1016/j.jbusres.2016.04.064
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    References listed on IDEAS

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    Cited by:

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    2. Rokonuzzaman, Md & Iyer, Pramod & Harun, Ahasan, 2021. "Return policy, No joke: An investigation into the impact of a retailer's return policy on consumers' decision making," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    3. Shuai Yang & Yiping Song & Siliang Tong, 2017. "Sustainable Retailing in the Fashion Industry: A Systematic Literature Review," Sustainability, MDPI, vol. 9(7), pages 1-19, July.
    4. Björn Stöcker & Daniel Baier & Benedikt M. Brand, 2021. "New insights in online fashion retail returns from a customers’ perspective and their dynamics," Journal of Business Economics, Springer, vol. 91(8), pages 1149-1187, October.
    5. Yan, Ruiliang & Cao, Zixia, 2017. "Product returns, asymmetric information, and firm performance," International Journal of Production Economics, Elsevier, vol. 185(C), pages 211-222.
    6. Wenting Pan & Candice H. Huynh, 2023. "Optimal operational strategies for online retailers with demand and return uncertainty," Operations Management Research, Springer, vol. 16(2), pages 755-767, June.
    7. Overstreet, Robert E. & Morgan, Tyler R. & Laczniak, Russell N. & Daugherty, Patricia J., 2022. "Stemming the tide of increasing retail returns: Implications of targeted returns policies," Journal of Business Research, Elsevier, vol. 151(C), pages 551-562.
    8. Shao, Bingjia & Cheng, Zhendong & Wan, Lijuan & Yue, Jie, 2021. "The impact of cross border E-tailer's return policy on consumer's purchase intention," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    9. Moreau, C. Page, 2020. "Brand Building on the Doorstep: The Importance of the First (Physical) Impression," Journal of Retailing, Elsevier, vol. 96(1), pages 155-167.
    10. Xu, Xun & Jackson, Jonathan E., 2019. "Investigating the influential factors of return channel loyalty in omni-channel retailing," International Journal of Production Economics, Elsevier, vol. 216(C), pages 118-132.
    11. Niu, Baozhuang & Chen, Lei & Zhuo, Xiaopo & Yue, Xiaohang, 2018. "Does buy-back induce more fashion sub-sourcing? Contract property and performance analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 113(C), pages 22-37.
    12. Wang, Chong & Chen, Jing & Chen, Xu, 2019. "The impact of customer returns and bidirectional option contract on refund price and order decisions," European Journal of Operational Research, Elsevier, vol. 274(1), pages 267-279.
    13. Dailey, Lynn C. & Ülkü, M. Ali, 2018. "Retailers beware: On denied product returns and consumer behavior," Journal of Business Research, Elsevier, vol. 86(C), pages 202-209.
    14. Givi, Julian, 2020. "(Not) giving the same old song and dance: Givers’ misguided concerns about thoughtfulness and boringness keep them from repeating gifts," Journal of Business Research, Elsevier, vol. 117(C), pages 87-98.

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