Free Returns Research Articles

How much do online consumers really value free product returns? Evidence from eBay

Consumer return rates have been steadily rising in recent years, resulting in growing costs for retailers who must manage the returns process and the disposition of returned products. This cost pressure is driven in part by extremely generous return policies, such as giving consumers a full refund upon return. Interestingly, this common retail practice of full refunds is inconsistent with the recommendations of many analytical models of returns, which nearly always show that a partial refund is optimal. Such inconsistencies between theory and practice might arise when the decision drivers included in the analytical models do not match the decision drivers in practice. It might also be the case that retailers are overly optimistic about the value that consumers assign to a full refund, and thus assume that the value of such a policy outweighs its costs. In this paper, we use data collected from eBay, where identical products are sold with different return policies, to investigate these open questions in the literature. We analyze both the return policy drivers from the retailer's perspective and the return policy value from the consumer's perspective. Our results suggest that the value of a full refund policy to consumers may not be as large as one might expect, and it also exhibits a large heterogeneity across buyers with different levels of online purchase experience. In addition, we provide empirical evidence for what has long been suspected by online retailers – that a non-refundable forward shipping charge quickly erodes any value that consumers assign to return policies. The generality of our results is limited by the fact that eBay differs from traditional retail contexts in many respects, including the fact that eBay buyers may not be representative of the general buyer population. However, our study of how eBay consumers value free returns provides new insights into an understudied area, and it can serve as a starting point for future studies of the value of return policies in other retail contexts.

Shopping Fast and Returning Plenty: How Returns Policies Affect Online Product Choices

Free-return policies are a critical aspect of online retailing, since they encourage consumers to purchase even when product fit (e.g., regarding size and taste) is not certain. Scholars usually explain the appeal of such policies in terms of increasing consumers’ net utility. In contrast, we argue that free-return policies actually discourage deliberate thinking by making the reversal of shopping decisions (i.e., product returns) less consequential. This paper takes the dual-process theory of thinking and knowing as a starting point and examines the effect of free returns on purchase decisions. We posit that free-return policies reduce shoppers’ motivation to deliberate; thus consumers are led to economize on analytical information processing and to rely more on another driver of preferences: affect. A series of four controlled experiments supports our related hypotheses and yields several implications for product choice. As compared with costly returns policies, a policy of free returns results in consumers selecting more quickly, recalling less information, shifting their preferences to affect-laden products, and ordering more of the same product. These findings offer insight — on the current debate over the usefulness of providing prepurchase information — that retailers can leverage to improve supplied information and thereby minimize the volume of product returns.

Mars double-aeroflyby free returns

Mars double-flyby free-return trajectories that pass twice through the Martian atmosphere are documented. This class of trajectories is advantageous for potential Mars atmospheric sample return missions because of its low geocentric energy at departure and arrival, because it would enable two sample collections at unique locations during different Martian seasons, and because of its lack of deterministic maneuvers. Free return opportunities are documented over Earth departure dates ranging from 2015 through 2100, with viable missions available every Earth-Mars synodic period. After constraining the maximum lift-to-drag ratio to be less than one, the minimum observed Earth departure hyperbolic excess speed is 3.23 km/s, the minimum Earth atmospheric entry speed is 11.42 km/s, and the minimum round-trip flight time is 805 days. An algorithm using simplified dynamics is developed along with a method to derive an initial estimate for trajectories in a more realistic dynamic model. Multiple examples are presented, including free returns that pass outside and inside of Mars's appreciable atmosphere.

Goodwill Can Hurt: A theoretical and experimental investigation of return policies in auctions

Will generous return policies in auctions benefit bidders? We investigate this issue using second-price common-value auctions. Theoretically, we find that the symmetric bidding equilibrium is unique unless returns are free, and when returns are free there exist multiple equilibria with different implications for sellers. Moreover, more generous return policies mitigate the winner's curse, but also push the bids higher, thus hurting bidders by eroding their surplus. In the experiment, bids increase and bidders' earnings decrease with more generous return policies as predicted. With free returns, many bidders bid above the highest possible value, subsequently returning the item regardless of value. Though consistent with equilibrium behavior, this is not optimal for sellers.

Performance Evaluation of Equity Oriented Growth and Dividend Funds of Mutual Funds in India : An Application of Risk – Adjusted Theoretical Parameters

This study attempted to evaluate the performance of fund of funds on the basis of risk-adjusted methods. The performance of fund of funds were compared with the risk free returns as well as the benchmark index (BSE 100), which was taken as the proxy for the market returns. Samples were collected from the AMFI websites and respective AMC websites from April 1, 2007 to March 31, 2014 and the returns were calculated from the respective schemes' NAV price. The methods used in the study is risk adjusted tools of Sharpe ratio, Treynor ratio, and Jensen alpha. An analysis performed on the sample of equity oriented fund of mutual funds showed that all the fund of funds in the sample earned negative returns in excess of the risk free rate of return offered by 91 days treasury bill. The comparison of rates of return of the benchmark index and the sample of fund of funds indicated that majority of the equity fund of funds included in the sample had underperformed the benchmark. Such results might be because of double layer of fees. The results revealed that the performance of fund of funds had posted a negative Sharpe, Treynor, and Jensen alpha. The underperformance of fund of mutual funds strongly explained the double layer of fees.

The impact of returns policies on profitability: A fashion e-commerce case

Research on returns policies is scarce and inconclusive. This study is a first attempt to empirically analyze and describe the effects of returns policies on consumer behavior and the moderating effects of the policies on profitability. The method involves analyzing the transactional data of a Swedish online fashion retailer. The results of the regression analyses show that with a lenient returns policy, repeat customers generate a significantly higher contribution per order, while returners and customers who enjoy free returns generate a significantly lower contribution per order. In addition, returners and repeat customers generate a significantly higher total contribution, while customers who enjoy free returns generate a significantly lower total contribution. Hence, returns policies that are free of charge do not necessarily benefit retailers in terms of long-term profitability. From a managerial perspective, the results provide guidance on how to address the recent changes in European consumer legislation.

Consumer acceptance of apparel e-commerce–Ethiopia

In Ethiopia e-commerce for apparel products is growing by leaps and bounds among customers. It plays a significant role in the development and economic growth of country. Moreover, many companies are more active in focusing on online trade. It is very important to focus on the consumer acceptance towards e-commerce for apparel. According to famous researches consumer acceptance is one important ingredient for the companies to be successful and profitable. An investigation has been made to identify the key factors related to acceptance of e-commerce for apparel products in Ethiopia. An online survey has been used for this research to obtain the feedback from the customers all around Ethiopia; their feedback/response has been assessed using statistical analysis techniques. The results revealed that the inability to physically interact with an item, fear of risk security and privacy and lack of e-commerce infrastructure are the main barriers that prevent the consumers from online apparel product shopping. Acceptance levels are likely to be influenced by offering infrastructure like encouraging the use of Information and Communication Technology (ICT), improving the level of information on clothing sizes and fit on product web pages, trailing different checkout processes and different levels of information on product web pages, adding customer ratings and reviews to the website, offering free returns, providing virtual fitting, robotic mannequin which can adopt their precise, individual body shape and Substantial changes have been identified in this work to broaden the acceptance of e-commerce for apparel in Ethiopia.

Shipment policy optimisation in a return supply chain for online retailers via stochastic discrete event simulation

Limiting the costs for return of products is a key competing factor for online retailers. In fact, free returns are considered an important performance to the customer. However, to guarantee free returns, the company has to precisely estimate the costs implied in the return supply chain. In this paper, we specifically look at the problem of international online retailers that have to manage the shipment of return products between different countries. In this scope, we first formalise the return process and we propose a two-parameters strategy to manage the shipment of returned products across countries. In order to solve the problem, we propose to use simulation-optimisation, resulting in a general solution approach not limited by stringent assumptions.

Fast Free Returns to Mars and Venus with Applications to Inspiration Mars

Mars free-return trajectories are investigated both with and without the use of Venus for gravity assist. Launch dates are searched from 2015 to 2060, and focus is placed on identifying opportunities that have a short total time of flight (that is, that are “fast” among the available free-return opportunities) so that they may be used for a human mission to flyby Mars. Constraints on Earth launch and Earth arrival are based on those used for the nominal Inspiration Mars opportunity in 2018. All attractive Mars free-return candidates found are shown to be rare, with launch opportunities only repeating (approximately) every 15 years, or every 32 years if a Venus flyby is used. A set of near-term candidate trajectories are found using the gravity-assist path Earth–Venus–Mars–Earth, which may be suitable for backup to (or replacement for) the nominal Inspiration Mars free return. One such candidate, with a launch date on 22 November 2021, has an Earth launch of ( of ) and an arrival of (entry speed of ), both of which are lower than the nominal Inspiration Mars trajectory, with a total flight time of 582 days. Venus free-return opportunities are also found, with promising application for a human flyby mission to Venus. An entry analysis is done for select cases (including the 2018 and 2021 opportunities) and shown to be feasible using present-day or near-term technology. An opportunity in 2023 is also found, which may be feasible if aerocapture is available.

Mars Double-Flyby Free Returns

A subset of Earth-originating Mars double-flyby ballistic trajectories is documented. The subset consists of those trajectories that, after the first Mars flyby, perform a half-revolution transfer with Mars before returning to Earth. This class of free returns is useful for both human and robotic Mars missions because of its low geocentric energy at departure and arrival, and because of its extended stay time in the vicinity of Mars. Ballistic opportunities are documented over Earth departure dates ranging from 2015 through 2100. The mission is viable over three or four consecutive Mars synodic periods and unavailable for the next four, with the pattern repeating approximately every 15 years. Over the remainder of the century, a minimum Earth departure hyperbolic excess speed of , a minimum Earth atmospheric entry speed of , and a minimum flight time of 904 days are observed. The algorithm used to construct these trajectories is presented along with several examples.

Automated Design of Optimal Finite Thrust Orbit Insertion with Ballistic Flyby Constraints

An automated method is developed to generate a minimum-fuel, finite thrust orbit insertion sequence while simultaneously generating a flyby trajectory of the same body that satisfies pre- and postflyby conditions in a general force field with ephemeris-level dynamics. The initial estimate requires no user input, and an impulsive solution is automatically converted to an optimal finite thrust transfer. As part of the initial estimate, a new method of generating ephemeris-level single flyby free returns is presented. A hybrid method is implemented for the optimal control solution whereby the costates are added to the vector of free parameters and the cost function is minimized directly. Analytic gradients are derived to decrease computation time and aid convergence of the optimization algorithm. The method is successfully applied in the Earth–moon system with application to human spaceflight and in the Saturn–Titan system with application to robotic spaceflight.

Real e-customer behavioural responses to free delivery and free returns

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.

Generation of Multisegment Lunar Free-Return Trajectories

To support the mission and trajectory design problems associated with the Earth-to-moon trajectories for a crewed vehicle, a multisegment lunar free-return trajectory is proposed. The multisegment free return differs from hybrid profiles in that it consists of free-return sections only; however, it maintains the advantages of hybrid returns. The analysis presented here is limited to a two-segment class of trajectories. In this profile, the translunar injection puts the spacecraft onto a free-return trajectory with a high perilune altitude; then, the spacecraft performs a transfer maneuver onto a new translunar coast trajectory that has an approximate perilune altitude of 100 km. This new translunar coast trajectory is also designed as a free-return trajectory that can perform a safe return. With a finite sphere of influence model, an analytical model of the multisegment free-return trajectories is developed by the matched-conic technique. Characteristics of the injection velocity, flight time, and lunar approach inclinations of the multisegment lunar free returns have been extensively investigated. The results indicate that multisegment free returns allow a wider range of lunar approach inclinations and freer launch window than free-return profiles.

Return Shipping Policies of Online Retailers: Normative Assumptions and the Long-Term Consequences of Fee and Free Returns

To limit costs associated with product returns, some online retailers have instituted equity-based return shipping policies, requiring customers to pay to return products when retailers determine that customers are at fault. The authors compare the normative assumptions about customers that underlie equity-based return shipping policies with the more realistic, positivist expectations as predicted by attribution, equity, and regret theories. Two longitudinal field studies over four years using two surveys and actual customer spending data indicate that retailer confidence in those normative assumptions is unjustified. Contrary to retailer assumptions, neither the positive consequences of free returns nor the negative consequences of fee returns were reversed when customer perceptions of fairness were taken into account. Depending on the locus and extent of blame, customers who paid for their own return decreased their postreturn spending at that retailer 75%–100% by the end of two years. In contrast, returns that were free to the consumer resulted in postreturn customer spending that was 158%–457% of prereturn spending. The findings suggest that online retailers should either institute a policy of free product returns or, at a minimum, examine their customer data to determine their customers’ responses to fee returns.

Optimal Lunar Orbit Insertion from a Variable Symmetric Free-Return Trajectory

A method for the optimization of a multiple-impulse lunar orbit insertion sequence from a symmetric free-return trajectory is presented. Both the inclination and altitude at lunar periapsis along the free return are variable. The algorithm systematically optimizes the orbit insertion sequence while simultaneously generating a free-return outbound trajectory. With a direct multiple-shooting method, optimization is performed in the circular restricted three-body model with a constrained sequential quadratic programming algorithm. The necessary gradients are derived with linear perturbation theory, and a closed-form expression is derived for computing gradients along a general n-impulse trajectory. Examples are presented for two classes of symmetric free returns, and a range of lunar orbit orientations is examined to assess the impact on velocity impulse requirements.

Automated Generation of Symmetric Lunar Free-Return Trajectories

A procedure for free-return trajectory generation in a simplified Earth-moon system is presented. With two-body and circular restricted three-body models, the algorithm constructs an initial guess of the translunar injection state and time of flight. Once the initial trajectory is found, the Jacobian of the constraints is derived analytically using linear perturbation theory, and a square system of nonlinear equations is solved numerically to target Earth entry interface conditions leading to feasible free-return trajectories. No trial and error is required to generate the initial guess. Possible free returns include departures from both posigrade and retrograde Earth orbits coupled with circumlunar or cislunar flight, in and out of the Earth-moon plane.

Cross-Industry Consequences of Terrorism

Given the growing importance of terrorism in today’s world, it is essential to understand its impact on the global economy. This paper examines the case of Israel to consider the impact of this phenomenon on the nation’s economy. Specifically, it will aim to determine whether the Israeli financial market is sensitive to terror attack, how sensitive are the various sectors of the Israeli financial markets and whether sectors react differently from one another. This study considered various financial indices to assess the impact of the amount of fatal and non-fatal terrorism-related daily casualties and the amounts of daily cumulated terror events on industries’ unit-root free daily returns. In this time series analysis, the variables were run through an Orthogonalisation process to prevent multicolinearity and the time series filtered to remove economic and global trends. The statistical analysis methods comprise of Multi-Variables Linear Regression, Seemingly Unrelated Regression and Spearman ranking test. The results of this study reveal that the Israeli financial market and all its sectors do suffer from terrorism (-25 percent cumulated loss for TA100). Industries dependent on domestic demand tend to react stronger to terror attacks than those based on exports with the exception of the housing industry. From a statistical point of view, the hypothesis of similar reaction of all sectors of the Israeli economy could not be rejected. The results of this study apply to a vast array of countries thanks to Israel’s level of development and free market. An interview was also done with an expert who confirmed most of the theoretical results. The main weaknesses of the study are that the orthogonalisation process biased the weight of the terror data variable and the time series/daily return perspective does not match a certain long-term reality of terrorism. The majority of results match those of previous studies and complete the perspective on the consequences of terrorist conflicts. The process of filtering the time series and variables to remove undesirable data employed in this study is to the author’s knowledge novel to this specific area of academic research.

Exploiting Arbitrage Opportunities Imbedded in the Litterman and Scheinkman Term Structure Model

Litterman and Scheinkman (1991) show that a three factor PCA model of the term structure fits the data in a remarkable way and is useful for hedging. However, this model is not arbitrage free under the assumption that markets are frictionless. That is, there are zero cost portfolios with instantaneous risk free returns which may be different from zero. The paper derives a formula to computes those return, and shows that this formula holds quite accurately in real markets. This is despite of the fact it is inconsistent with no arbitrage in frictionless markets.

Malaysian unit trust aggregate performance

PurposeThis paper seeks to focus on examining unit trust performance in Malaysia over the period 1991‐2001.Design/methodology/approachThe broad based study covers full economic cycles using 7 different performance measures: raw return, market adjusted return, Jensen's alpha, adjusted Jensen's alpha, Sharpe Index, adjusted Sharpe Index, and Treynor Index.FindingsThe results show that on average the performance of Malaysian unit trust falls below market portfolio and risk free returns. However, the variance of unit trust monthly returns is less than the market. Performance by type of funds indicates that bond funds show relatively superior performance, over and above the market and equity unit trusts. This is due to the high interest rate kept during the crisis period. Findings also suggest that there is no persistency in performance as there is no significant inter‐temporal correlation between past and current performance.Research limitations/implicationsThe issue of inferior performance needs further investigations to adjust for great importance placed on maintaining consistent dividend distribution. In addition, ill‐managed funds must be separately analysed to see if limited budget, less qualified managers, use of limited information and less sophisticated software could explain the poor performance.Practical implicationsA very useful source of information for potential investors and portfolio management companies looking for opportunities to invest.Originality/valueThe paper contributes to the present body of knowledge by offering broad based performance evidence from an emerging market with strong government back up for unit trusts investment.

Trajectories for Human Missions to Mars, Part I: Impulsive Transfers

Earth-Mars trajectories with low energy requirements that also limit the (transfer) time a crew spends in interplanetary space are essential to the design of cost-effective, minimal-risk missions. We compute optimal A V trajectories with constraints on the transfer time of flight for launch years 2009 through 2022. We further explore the consequences of specifying different time of flight limits (from 120 to 270 days) for human missions to Mars. In addition to conjunction class trajectories, we calculate free-return, Mars-Earth semicycler, Earth-Mars semicycler, and cycler trajectories. The trades between powered and aeroassisted planetary capture for each trajectory type are also examined. We find that as the number of flybys increase (i.e., free returns have one flyby, semicyclers may have from two to four flybys, and cyclers have an unlimited number of flybys), the V ∞ increase, but the mission mass decreases because less maneuvers are performed by the crew transfer vehicle. The energy requirements of the trajectories decrease with increasing flight times, and the optimal A V is reduced by up to 50% when the flight time limit is increased from the NASA-recommended 180 days, to 270 days. Our results are compiled into sets of plots that describe the optimal, constrained time of flight trajectories for use in Mars mission studies.