Taking stock of consumer returns: A review and classification of the literature

• Published date: 01 September 2019
• DOI: http://doi.org/10.1002/joom.1047
• Date: 01 September 2019

RESEARCH ARTICLE

Taking stock of consumer returns: A review and classification

of the literature

Huseyn Abdulla | Michael Ketzenberg | James D. Abbey

Information and Operations Management

(INFO), Mays Business School, Texas

A&M University, College Station, Texas

Correspondence

James D. Abbey, Information and

Operations Management (INFO), Mays

Business School, Texas A&M University,

MS 4217 TAMU, College Station, TX

77843.

Email: jabbey@mays.tamu.edu

Handling Editor: Michael Galbreth

Abstract

Coincident with the rapid growth of consumer returns and their corresponding

importance in the retail marketplace, academic interest in the area of consumer

return policy design has significantly increased. In fact, the growth in academic

publications has been tremendous, with almost half of the published works appe-

aring within the past 6 years. The influx of new and evolving research spans across

multiple disciplines and various methodologies. To provide clarity for the contin-

ued evolution of the field, we provide a comprehensive review and classification of

the literature predicated on a holistic conceptual framework. The scope of the

review includes all peer reviewed journal articles published prior to the end of

2018, along with any working papers cited therefrom, that specifically address

(a) managerial decision-making related to return policies or (b) consumer behavior

in response to such decision-making. Examining the state of the literature and prac-

tice on return policy design through the lens of a unified conceptual framework—a

framework that spans both analytical and empirical research—reveals numerous

managerial and theoretical opportunities for future research.

KEYWORDS

consumer returns, retail operations, return policy, systematic literature review

1|INTRODUCTION

Consumer returns continue to grow and recently surpassed

$643 billion globally (Cheng, 2015) and $369 billion in the

United States alone (National Retail Federation, 2018).

Academics have taken notice of the increase and signifi-

cance of returns as evidenced by a recent surge in research

on the topic. While research on returns extends back several

decades in the economics literatures on money back guaran-

tees and product warranties (Heal, 1977), the preponderance

of the recent research largely has shifted to the disciplines of

operations and marketing. Because of the rapid growth, the

state of the literature regarding consumer returns remains

unclear. To this end, we systematically review the literature

and classify the contributions according to a holistic concep-

tual framework—a framework that clarifies the state of the

research and also identifies theoretical gaps and opportunities

for future research.

As this manuscript will highlight, research on consumer

returns examines a wide range of managerial issues. The

return policy establishes restocking fees, length of time

allowed to make returns, channel restrictions, and more.

Further, operational planning and execution activities

(e.g., inventory management, product pricing, and assortment

planning) influence return policy decisions or are themselves

influenced by return policies. Of course, research on con-

sumer returns also involves the management of the returned

products themselves, which includes their acquisition,

processing, and disposition. Return policies also influence

consumer perceptions and behaviors. The consumer is inti-

mately involved with purchase and return processes. As such,

the sociological and psychometric factors that influence and

Received: 21 October 2018 Revised: 28 May 2019 Accepted: 29 May 2019

DOI: 10.1002/joom.1047

560 © 2019 Association for Supply Chain Management, Inc. J Oper Manag. 2019;65:560–605.wileyonlinelibrary.com/journal/joom

explain consumer behavior play a significant role in setting

policy and developing managerial insights. Consequently, the

validity and relevance of research in this area necessitate a

strong empirical foundation. Yet, as will become clear in the

comprehensive review, relatively little is empirically

established regarding consumer behavior in relation to return

policies.

The review process began with an identification of search

terms (consumer returns, return policy, money-back guarantee)

with a resulting database (Google Scholar, ScienceDirect, Web

of Science, JSTOR) search and abstract evaluation. To be

included in the review, papers had to consider the return policy

decisions of a retailer or manufacturer making direct sales. Any

works not meeting the return policy decision criterion, such as

those solely focused on returns from retailers to manufacturers

due to buyback contracts or those that only addressed process

aspects of consumer returns, were excluded. At this stage,

each paper meeting the inclusion criteria also required an

additional search of all works cited (i.e., citation snowballing),

which led to the final set of 100 works spanning multiple

decades. In sum, our review's scope includes, to the best of

our knowledge, all research contributions that have been pub-

lished until the end of 2018, as peer reviewed journal articles,

along with any working papers cited therefrom, that specifi-

cally address (a) managerial decision-making related to return

policies or (b) consumer behavior in response to such

decision-making. Our inclusion criteria for the working papers

are that (a) they should not be active (i.e., not undergoing

peer-review but publicly available on Social Science Research

Network) and (b) they should be cited in published works

and therefore have influenced the subsequent research in

the area. In total, the papers included in our review have

been published in 43 different academic journals from vari-

ous disciplines, including operations management, opera-

tions research, information systems, marketing, economics,

and management.

We begin in Section 2 by introducing a conceptual frame-

work on consumer returns. In Section 3, we transform the

conceptual framework into a classification framework. We

then proceed to our review and classification in Sections 4

and 5, organized separately according to the natural split that

arises between analytical modeling and empirical papers. In

Section 6, we conclude with a comprehensive discussion that

integrates the insights from the conceptual framework, sum-

marizes the state of the literature, characterizes the ongoing

momentum of the domain, andreveals opportunities for future

research.

2|CONCEPTUAL FRAMEWORK

Investigating the anatomy of a purchase and return transac-

tion serves as a starting point to develop a conceptual frame-

work for classifying and reviewing the literature. Figure 1

provides a simplified view of the purchase and return process,

from prepurchase to postreturn, and distinguishes epochs by

the consumer's purchase and return decisions. Figure 1 is nota-

ble for providing a clear, integrated, and parallel view of the

return process from both consumer and retailer perspectives,

emphasizing the significant role of consumer behavior in man-

aging consumer returns. Chircu and Mahajan (2006) conceptu-

alize the retail transaction as a sequence of steps, including

store access, search, evaluation and selection, ordering, pay-

ment, order fulfillment, and post-sales service. Each of these

steps has associated costs: price-type costs (credit charges,

taxes, etc.), time-type costs (waiting time, delivery time), or

psychological-type costs (perceived ease of use, convenience,

frustration, annoyance, anxiety, etc.).

Customers evaluate a return policy in terms of conve-

nience for product evaluation, hassles for potential returns,

learning through product experience during the return win-

dow, and the possibility of a need for continued search.

Returns arise due to a multitude of factors that include

uncertainties regarding product fit and valuation, along with

product defects and opportunistic behavior, among others.

Even prepurchase, a retailer's return policy can have a

demonstrable effect on consumer behavior. More than 70%

of online consumers consider return policies before making

FIGURE 1 Anatomy of a

purchase and return transaction

ABDULLA ET AL.561

a purchase decision (Su, 2009). Managerial decision-making

with respect to the return policy, along with many other

operational considerations, may affect consumer behavior at

each step of the process.

From the retailer's perspective, there are distinct sets of

decisions and activities to be managed prepurchase, post-

purchase, and postreturn. Prepurchase, the retailer must design

a return policy, provide information, set pricing, and perform

all the other operational planning activities necessary for retail

execution. Of course, retailer performance also continues in

the context of postsales support that includes customer rela-

tionship management, warranty services, and physical man-

agement of returned products.

Collectively, from both the consumer and retailer perspec-

tives, four broad and interrelated domains of research emerge:

return policy (RP), consumer behavior (CB), planning and exe-

cution (PE), and return management (RM). These four domains

are illustrated graphically in Figure 2 to form a conceptual

framework. Each domain appears as a circle with interrelation-

ships among domains denoted by their overlapping regions. We

proceed by defining and characterizing the scope of research

that pertains to each of the four domains, beginning with the

focal RP domain.

The RP domain pertains to research that designs, describes,

and prescribes return policies in the context of managerial

decision-making. Return policies are generally characterized in

terms of their leniency, which refers to the convenience and

ease with which consumers are allowed to make returns. Some

retailers have remarkably lenient return policies that allow any

return for any reason, at any time, and provide a full refund of

the price paid. Less lenient retailers impose restrictions, such as

restocking fees, limitations on the allowable time to return, or

even outright denial of returns for certain products. Research

on return policy design investigates return policy leniency in

various forms and analyzes the operating conditions that influ-

ence leniency choices.

The RM domain concerns the efficient and effective

acquisition, processing, and disposition of returns. RM falls

under the umbrella of closed-loop supply chain management

(CLSC). This considerably larger body of literature is con-

cerned with the management of product returns at their end-

of-life and end-of-use, in addition to consumer returns.

For reviews of the CLSC literature, we refer the interested

reader to Atasu, Guide Jr, and Van Wassenhove (2008),

Souza (2013), and Govindan, Soleimani, and Kannan (2015).

A retailer's return management infrastructure and practices are

likely to influence return policy decisions, and vice-versa, a

retailer who views its lenient return policy as an important

part of the value proposition seeks ways to reduce the cost

burden of returns through effective return ma nagement str at-

egies. Thus, the inquiries in the intersection of RP and

RM domains promise actionable insights for retail

managers.

The CB domain explicitly considers the consumer decision-

making process, with respect to both sales and returns. The pri-

mary motivation behind the study of consumer behaviors in

reaction to return policies is the conjecture that sales, as well as

returns, can be influenced by return policy decisions. In gen-

eral, research in the intersection of CB and RP domains either

(a) empirically tests relationships between return policy

leniency and various constructs that reflect various cognitive,

affective, and behavioral responses or (b) provides return policy

prescriptions by utilizing analytical models in which consumer

behaviors are operationalized through specific modeling

constructs.

The PE domain captures how returns influence forward

logistics and supply chain management. Our review and clas-

sification highlight several distinct areas of managerial

decision-making, such as pricing, inventory, channel, assort-

ment, competition, coordination, and quality. Moreover, deci-

sions and actions may be taken to either reduce returns or

mitigate-related costs. Whereas RM domain research addresses

decision-making regarding management of returns in the

reverse supply chain, PE domain research addresses decision-

making regarding returns in the forward supply chain. In

general, the research in the overlap of RP and PE domains

studies interplay between return policy and other operational

decisions in a broad variety of settings.

Collectively, the four domains of RP, RM, CB, and PE

combine to form a conceptual framework that can meaning-

fully differentiate, and at times integrate, research contributions

within the domain of consumer returns. From this perspective,

FIGURE 2 Conceptual framework [Color figure can be viewed

at wileyonlinelibrary.com]

562 ABDULLA ET AL.