Abstract
This study aims to explore the influence of free delivery and free returns on the purchasing and return behaviour of real e-customers in the marketplace. To accomplish this goal, we conducted the study as a fully randomised and controlled experiment in cooperation with nelly.com, a Nordic e-commerce site that specialises in fashion and beauty. Our results suggest that a lenient delivery policy is associated with increased order frequency, decreased average value of purchased items, increased probability of return, and increased average value of returned items. In addition, a lenient return policy was found to be associated with increased order frequency, a decrease in the average value of orders, a decrease in the average value of purchased items, and increased probability of return. However, the effect sizes are generally small, and we conclude that factors such as legislation and competition often force e-tailers to offer free delivery and free returns even though such offers probably would not have been profitable otherwise.
Similar content being viewed by others
Notes
The relatively low degree of model fit suggests that it would be optimal to add additional explanatory variables to the analysis in order to capture additional variability of the data generating process and to improve the robustness and reliability of the results.
Because we observed a statistically insignificant increase in the number of orders per unique customer, the increase in total purchases per customer (as found by Petersen & Kumar [25]) may have been a consequence of an increased number of purchases despite a decreased average order value. The study does not provide sufficient data to test this hypothesis.
References
Autry, C. W. (2005). Formalization of reverse logistics programs: a strategy for managing liberalized returns. Industrial Marketing Management, 34, 749–757.
Bae, S., & Lee, T. (2011). Gender differences in consumers’ perception of online consumer reviews. Electronic Commerce Research, 11, 201–224.
Bonifield, C., Cole, C., & Schultz, R. L. (2010). Product returns on the Internet: a case of mixed signals? Journal of Business Research, 63(9–10), 1058–1065.
Cao, Y., Gruca, T. S., & Klemz, B. R. (2003). Internet pricing, price satisfaction, and customer satisfaction. International Journal of Electronic Commerce, 8(2), 31–50.
Chen, I.-C., & Hu, S.-C. (2012). Gender differences in shoppers’ behavioural reactions to ultra-low price tags at online merchants. Electronic Commerce Research, 12, 485–504.
Davis, S., Hagerty, M., & Gerstner, E. (1998). Return policies and the optimal level of “hassle”. Journal of Economics and Business, 50(5), 445–460.
EU. (2011). Better protection for online shoppers. Retrieved 26 Jan 2012 from http://www.europarl.europa.eu/en/pressroom/content/20110323IPR16151/html/Better-protection-for-online-shoppers.
Girish, P. (2011). Impulse buying and variety seeking: similarities and differences. Journal of Business Research, 64(7), 745–748.
Goel, L., & Prokopec, S. (2009). If you build it will they come?—an empirical investigation of consumer perceptions and strategy in virtual worlds. Electronic Commerce Research, 9, 115–134.
Gupta, S., & Hee-Woong, K. (2007). The moderating effect of transaction experience on the decision calculus in on-line repurchase. International Journal of Electronic Commerce, 12(1), 127–158.
Gurnani, H., Sharma, A., & Grewal, D. (2010). Optimal returns policy under demand uncertainty. Journal of Retailing, 86(2), 137–147.
Hardesty, D. M., & Bearden, W. O. (2009). Consumer behavior and retailing. Journal of Retailing, 85(3), 239–244.
Hernández, B., Jiménez, J., & Martín, M. J. (2010). Customer behavior in electronic commerce: the moderating effect of e-purchasing experience. Journal of Business Research, 63(9–10), 964–971. doi:10.1016/j.jbusres.2009.01.019.
Horton, R. (1976). The structure of perceived risk: some further progress. Journal of the Academy of Marketing Science, 4(4), 694–706. doi:10.1007/bf02729830.
Kalla, S. M., & Arora, A. P. (2011). Impulse buying. Global Business Review, 12(1), 145–157. doi:10.1177/097225091001200109.
Koufaris, M., Kambil, A., & Labarbera, P. A. (2001). Consumer behavior in Web-based commerce: an empirical study. International Journal of Electronic Commerce, 6(2), 115–138.
Kukar-Kinney, M., Ridgway, N. M., & Monroe, K. B. (2009). The relationship between consumers’ tendencies to buy compulsively and their motivations to shop and buy on the Internet. Journal of Retailing, 85(3), 298–307.
Lantz, B. (2009). The double marginalization problem of transfer pricing: theory and experiment. European Journal of Operational Research, 196, 434–439.
Lewis, M. (2006). The effect of shipping fees on customer acquisition, customer retention, and purchase quantities. Journal of Retailing, 82(1), 13–23.
Lewis, M., Singh, V., & Fay, S. (2006). An empirical study of the impact of nonlinear shipping and handling fees on purchase incidence and expenditure decisions. Marketing Science, 25(1), 51–64.
Lindsey-Mullikin, J., & Petty, R. D. (2011). Marketing tactics discouraging price search: deception and competition. Journal of Business Research, 64(1), 67–73.
López-Bonilla, J. M., & López-Bonilla, L. M. (2008). Sensation seeking and e-shoppers. Electronic Commerce Research, 8, 143–154.
Mukhopadhyay, S. K., & Setoputro, R. (2004). Reverse logistics in e-business: optimal price and return policy. International Journal of Physical Distribution & Logistics Management, 34(1), 70–88.
Padmanabhan, V., & Png, I. P. L. (1995). Returns policies: make money by making good. Sloan Management Review, Fall, 65–72.
Petersen, J. A., & Kumar, V. (2010). Can product returns make you money? MIT Sloan Management Review, 51(3), 84–89.
Stern, H. (1962). The significance of impulse buying today. Journal of Marketing, 26(2), 59–62.
Su, X. (2009). Consumer returns policies and supply chain performance. Manufacturing & Service Operations Management, 11(4), 595–612.
Ulbrich, F., Christensen, T., & Stankus, L. (2011). Gender-specific on-line shopping preferences. Electronic Commerce Research, 11, 181–199.
Wang, X. (2009). Retail return policy, endowment effect, and consumption propensity: an experimental study. The B.E. Journal of Economic Analysis & Policy, 9(1).
Wells, J. D., Parboteeah, V., & Valacich, J. S. (2011). Online impulse buying: understanding the interplay between consumer impulsiveness and website quality. Journal of the Association for Information Systems, 12(1), 32–56.
Wilson, R. (1993). Nonlinear pricing. New York: Oxford University Press.
Wood, S. L. (2001). Remote purchase environments: the influence of return policy leniency on two-stage decision processes. Journal of Marketing Research, 38(2), 157–169.
Yan, R. (2009). Product categories, returns policy and pricing strategy for e-marketers. Journal of Product & Brand Management, 452–460.
Zikmund, W. G., & Babin, B. J. (2007). Exploring marketing research (9th ed.). Mason: Thomson Higher Education.
Author information
Authors and Affiliations
Corresponding author
Appendix: The newsletter
Appendix: The newsletter
This letter is a translated version of the letter that was sent to the subjects in group A. The subjects in the other groups received corresponding letters.
Rights and permissions
About this article
Cite this article
Lantz, B., Hjort, K. Real e-customer behavioural responses to free delivery and free returns. Electron Commer Res 13, 183–198 (2013). https://doi.org/10.1007/s10660-013-9125-0
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10660-013-9125-0