Thirty days! Wow! That’s plenty of time to make sure those leather Cole Haan wingtips are the perfect fit, the Kate Spade handbag you bought for your wife’s birthday is precisely the one she wanted, or that new Star Wars video game functions properly with your teen’s PlayStation.
If not, Amazon—the online retail giant—will provide
a full refund.
The world of online shopping is growing, whether it’s Amazon, Walmart, or otherwise. In fact, Forrester Research predicts that online sales in the US will account for 17 percent of all retail. Between 2010 and 2016, Amazon’s North American sales leapt from $16 billion to $80 billion. Obviously, more people are finding it convenient to shop from a desktop—or perhaps a smart phone. But you can’t try on a dress in front of a computer . . . or shoes, or jeans, etc.
In their co-authored paper, “Return Time Leniency in Online Retail: A Signaling Theory Perspective on Buying Outcomes,” supply chain management associate professor Shashank Rao, management professor Brian Connelly, and business analytics associate professor Kang Bok Lee, reveal that extended product return time policies attract more customers and cultivates customer trust. Their work was published by Decision Sciences, an elite journal.
Imagine . . . you sell a product, give the buyer more time with said product—and profit from your generosity.
“It can be demonstrated that there are ancillary benefits to the retailer liberalizing the return policy,” Rao says. “We not only know that people are more likely to buy—but also that people are willing to pay more. You can sell the same item for a higher amount by liberalizing a return policy than if you tried to sell it with a very stringent return policy. The argument that comes out of this is—if you are a retailer—you could make money off of a liberal return policy.”
Why is this important? Rao says that prior research has revealed that more than 66 percent of shoppers pay attention to an online retailer’s return policy before making a purchase—making the policy an important marking tool.
Purchase situations between buyers and sellers are asymmetric. In other words, a seller has a product and obviously knows far more about that product than the buyer, who is peering at the product through the lens of a computer monitor. They cannot touch it. They cannot hold it. They cannot try it on. They can only hope the product description meets their expectations.
But longer return policies establishes the signal of transparency. If you don’t like it, you have plenty of time to return it.
“This liberal (extended) return policy sends a signal to the buyer that says, ‘You know what . . . maybe this is a product where I don’t need to be worried because the seller doesn’t have anything to hide,’” Rao says.