The challenge of remanufactured products: the role of returns policy and channel structure to reduce consumers' perceived risk

Ilenia Confente,Robert Frankel,Simone Peinkofer,Ivan Russo

doi:10.1108/ijpdlm-03-2020-0089

Abstract

PurposeWhile remanufactured products represent an increasingly researched phenomenon in the literature, not much is known about consumers' understanding and acceptance of such products. This study explores this issue in the context of the theory of perceived risk (TPR), investigating return policy leniency and distribution channel choice as potential factors to foster remanufactured products' sales.Design/methodology/approachThis research utilizes an experimental design composed of a pre-test and a scenario-based main experiment to explore how return policy leniency might mitigate consumers' perceived risk and how their related purchase intention differs across two types of retail distribution channel structures (i.e. brick-and-mortar vs. online).FindingsThe investigation into the efficacy of return policy leniency within two retail distribution channel settings (i.e. brick-and-mortar vs. online) illustrates that providing a lenient return policy is an effective “cue” in increasing consumer purchase intention for remanufactured products. While prior literature has established that consumers value return policy leniency for new products, the authors provide empirical evidence that this preference also applies to remanufactured products. Notably, that return policy preference holds true in both channel settings (i.e. brick-and-mortar vs. online) under consideration. Additionally, and contrary to the authors’ predictions, consumers perceived remanufactured products sold via both channel settings as equally risky, thus highlighting that both are appropriate distribution channels for remanufactured products. Finally, while research on new products provides some initial guidance on consumer perceptions of quality and risk, the study provides empirical evidence into the difference of perceived risk with regard to new versus remanufactured products.Originality/valueBy employing the TPR, this research explored the role played by two supply chain management related factors (returns policy and channel structure) in reducing consumer's perceived risk and increasing purchase intention. In doing so, this study answers the call for more consumer-based supply chain management research in a controlled experimental research setting.

Highlights

The challengeCompanies face increased pressure from consumers about sustainable practices (Foerstl et al, of2015), and a commensurate interest has developed to understand and implement a number of supply chain initiatives by industry leaders and academics alike (Liu et al, 2018; Geissdorfer et al, 2017)
Results indicate no significant effect of age, income and education on perceived risk, but do show a significant effect with regard to the following three control variables: gender, indicating that female consumers perceive higher risk than male consumers; prior return behavior, indicating that consumers who have returned a product before perceive lower risk than consumers who have not returned a product; and overall return intention, indicating that consumers who have a generally higher intention to return a product have higher risk perceptions
We establish that consumers have higher risk perceptions for a remanufactured product than a new product which leads to lower purchase intention

Summary

Introduction

Companies face increased pressure from consumers about sustainable practices Given that the sale of a remanufactured product requires the consideration of both forward and reverse movement in the supply chain, two factors that retailers can use are the focus of this research: return policy leniency and the distribution channel. TPR (Taylor, 1974) provides an appropriate theoretical lens to examine the impact of return policy leniency and retail channel type as strategies to mitigate the perceived risk and anxiety of remanufactured products as well as to enhance consumers’ intention to purchase from a retailer. Drawing on TPR (Taylor, 1974), we conduct a pre-test and a scenario-based main experiment to address the following research question: How can return policy and distribution channel structure help reduce the perceived risk of remanufactured products in order to encourage consumers’ purchase intention from the retailer? By grounding our model in Taylor’s (1974) TPR, we extend the use and relevance of consumer-based decision theories to SCM and develop theory of the middle range (Craighead et al, 2016; Stank et al, 2017; Russo et al, 2020)

Literature background

Key findings

Results

Discussion