The customer consequences of returns in online retailing: An empirical analysis
| Author | Thomas J. Goldsby,Shashank Rao,Stanley E. Griffis,Tarikere T. Niranjan |
| Date | 01 May 2012 |
| Published date | 01 May 2012 |
| DOI | http://doi.org/10.1016/j.jom.2012.02.002 |
Journal
of
Operations
Management
30
(2012)
282–294
Contents
lists
available
at
SciVerse
ScienceDirect
Journal
of
Operations
Management
jo
ur
n
al
homep
a
ge:
www.elsevier.com/locate/jom
The
customer
consequences
of
returns
in
online
retailing:
An
empirical
analysis
Stanley
E.
Griffisa,∗, Shashank
Raob,1,
Thomas
J.
Goldsbyc,
Tarikere
T.
Niranjand
aLogistics,
Eli
Broad
College
of
Business,
Michigan
State
University,
East
Lansing,
MI
48824,
USA
bSupply
Chain
Management,
Auburn
University
College
of
Business,
Auburn,
AL
36849,
USA
cLogistics,
Fisher
College
of
Business,
The
Ohio
State
University,
Columbus,
OH
43210,
USA
dSupply
Chain
Management,
Shailesh
J.
Mehta
School
of
Management,
Indian
Institute
of
Technology,
Bombay,
India
a
r
t
i
c
l
e
i
n
f
o
Article
history:
Received
15
June
2011
Received
in
revised
form
11
February
2012
Accepted
13
February
2012
Available
online
10
March
2012
Keywords:
Product
returns
Repurchase
behavior
Archival
data
Supply
chain
Logistics
Seemingly
Unrelated
Regression
(SUR)
Procedural
justice
Customer
satisfaction
Service
recovery
Transaction
cost
a
b
s
t
r
a
c
t
Pressure
continues
to
build
on
the
operations
management
function
to
facilitate
system
and
firm
level
benefits.
In
the
online
marketplace,
one
area
of
growing
interest
is
that
of
product
returns.
Though
com-
monly
viewed
as
a
cost
center
from
an
operations
perspective,
operations’
actions
have
the
potential
to
strongly
influence
future
customer
buying
behavior
in
several
ways.
Using
an
archival
database
of
actual
purchase
and
returns
history
provided
by
a
moderately
sized
online
retailer,
this
study
examines
the
relationship
between
a
customer’s
experience
of
product
returns,
and
subsequent
shopping
behav-
ior.
Employing
transaction
cost,
consumer
risk,
and
procedural
justice
theories,
we
demonstrate
that
the
returns
management
process,
rather
than
being
regarded
as
an
afterthought
to
the
production
and
deployment
of
goods,
can
significantly
and
positively
influence
repurchase
behavior.
Additionally,
we
provide
evidence
that
certain
customers
should
be
considered
for
prioritization
in
the
returns
process.
We
suggest
ways
through
which
operations
managers
can
take
care
in
discharging
their
responsibilities
in
this
area
–
to
make
returns
processing
more
than
simply
a
“necessary
cost
of
doing
business”
rather,
using
it
to
their
advantage
in
engendering
repeat
and
increased
purchase
behavior.
©
2012
Elsevier
B.V.
All
rights
reserved.
1.
Introduction
The
use
of
the
Internet
as
a
channel
for
the
sale
and
distribution
of
goods
from
businesses
to
consumers
(B2C)
continues
to
grow,
as
does
the
research
interest
it
garners
from
Operations,
Logis-
tics,
and
Supply
Chain
Management
researchers.
Online
retailing
increased
from
just
about
3%
of
total
retail
sales
in
2002
to
over
6%
of
total
retail
sales
in
the
United
States
by
2008
(Forester,
2010).
In
fact,
online
retail
store
growth
appears
robust
even
in
the
face
of
economic
hardships
given
that
online
retailers
registered
11%
year-
over-year
sales
growth
in
2009,
even
as
most
conventional
retailers
were
struggling
to
generate
sales.
Forrester
(2010)
expects
the
com-
pounded
annual
growth
rate
of
online
retail
to
average
10%
over
the
next
five
years.
The
reasons
for
this
are
twofold:
firstly,
the
number
of
people
connected
to
the
Internet
has
increased
substantially
in
the
last
decade.
Secondly,
the
percent
of
Internet
users
who
make
purchases
on-line
has
gone
up
from
10%
in
2005
to
40%
in
2007
(Nielsen,
2008).
∗Corresponding
author.
Tel.:
+1
517
432
4320.
E-mail
addresses:
griffis@bus.msu.edu
(S.E.
Griffis),
Shashank.rao@auburn.edu
(S.
Rao),
Goldsby.2@osu.edu
(T.J.
Goldsby),
ttniranjan@iitb.ac.in
(T.T.
Niranjan).
1Tel.:
+1
334
844
6845.
While
the
above
arguments
indicate
good
tidings
for
the
online
retailing
industry,
individual
retailers
nevertheless
continue
to
face
several
challenges.
One
key
issue
faced
by
online
retailers
is
returns
management
(Ryder,
2010;
Brohan,
2005).
Returns
management
is
defined
as
the
process
by
which
activities
associated
with
returns,
gatekeeping,
and
avoidance
that
are
managed
within
the
firm
and
across
key
members
of
the
supply
chain
(Rogers
et
al.,
2002).
Long
considered
the
forgotten
step-child
of
operations
and
logistics
managers,
returns
become
increasingly
important
as
firms
seek
to
maximize
the
value
they
create
for
themselves
and
for
customers
(Mollenkopf
et
al.,
2007;
Stock,
1998).
In
a
recent
industry
sur-
vey
of
supply
chain
managers,
87%
of
the
respondents
mentioned
that
effective
management
of
returns
was
either
important
or
very
important
to
their
organization’s
operational
and
financial
success
(Aberdeen,
2009).
Returns
management
is
an
extremely
important
issue,
causing
reductions
to
profit
of
3.8%
per
year
(Petersen
and
Kumar,
2010).
It
has
been
further
been
argued
that
returns
are
even
more
relevant
in
online
retailing
than
offline
retailing
given
that
consumers
often
do
not
have
the
opportunity
to
examine
the
product
physically
(Dholakia
et
al.,
2005),
an
important
aspect
of
product
evaluation
and
assessment
(Peck
and
Childers,
2003).
Yet,
limited
knowledge
exists
regarding
if
and
how
returns
experience
actually
impacts
customer
loyalty,
given
that
very
few
academic
studies
have
heretofore
quantified
the
impact
of
product
0272-6963/$
–
see
front
matter
©
2012
Elsevier
B.V.
All
rights
reserved.
doi:10.1016/j.jom.2012.02.002
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