The Influence of Retail Return Policies on Brand Image: An Abstract

Abstract

U.S. retailers lose in excess of $350 billion in sales per year due to returns (Appriss 2017). The area of product returns continues to be an under-researched area, despite its significance to manufacturers and retailers (Yon Seo et al. 2015). To date, a large amount of the research on product returns seeks to identify personality traits of customers, which can be used to pinpoint and predict who will return products (e.g., age; Daunt and Harris 2012), or to provide evidence that strategically increasing the stringency of return policies will reduce returns (e.g., Petersen and Kumar 2010; Powers and Jack 2013). In contrast, the current research investigates whether a strict return policy is always in the best interest of the retailer. We investigate whether a lenient return policy can have a positive long-term impact on retailers by favorably influencing brand image and other related brand outcomes.

Drawing on cue utilization theory, we study the influence of return policy stringency on retail brand image and consumer behavioral outcomes, such as willingness to pay and intentions to revisit a retailer. We test our hypotheses in an online experiment with 80 participants. We find empirical evidence that a lenient return policy was effective in increasing consumers’ brand image and trust, and that brand trust mediates the relationship between return policy stringency and brand image. As consumers’ brand trust increases, a lenient return policy improves brand image faster than a strict return policy. Further, a lenient return policy increased consumers’ intentions to purchase from the retailer, but may have no impact on the amount of money consumers spend, only increasing their likelihood of purchasing the brand when they know it is easy to return. For supply chain and brand managers, the results of this study reveal that the strictness of the return policy impacts more than the effort consumers exert to return products and the firm’s bottom line—the return policy also directly influences brand image, brand trust, and purchase intentions.