Free Returns Research Articles

Order basket contents and consumer returns

AbstractAlthough lenient return policies can drive sales and customer loyalty, they have also resulted in enormous returns volumes and reverse logistics costs. Online retailers often feel compelled to offer free returns, but are then faced with numerous operational challenges, ranging from accurately forecasting returns volumes to identifying presales strategies to reduce the likelihood that a (costly) return occurs. In this research, we consider how the complementarity of the products within an order basket is related to consumer returns. By developing an understanding of the link between basket contents and returns, we can improve order‐level returns forecasts, while also providing insights into the effect of basket recommendations on the expected return rate. We take a multimethod approach to this problem. First, we use a stylized model to generate theoretical predictions regarding how within‐basket complementarity should influence return probability. Next, we propose a data‐driven measure of complementarity, degree of copurchase (DCP), which is based on the machine learning concept of association rule and is implementable using standard retail sales data. Finally, utilizing a unique data set provided by a leading online specialty retailer, we implement the DCP measure and test the predictions of our analytical model. We find, as expected, that there is a decreasing relationship between within‐basket complementarity and return probability. However, we also show that this decrease is convex, indicating that the return probability impact is more notable when the complementarity is increased from a lower base. Our results have practical implications for both reverse logistics planning and online product recommendations.

Open innovation in shariah compliance in Islamic banks – Does shariah supervisory board attributes matter?

This study extends the literature on shariah compliance in Islamic banks (IBs) based on interest free returns for Investment Account Holders (IAH) and to examine the role of the attributes of the shariah supervisory board (SSB) on shariah compliance. The study sample included 102 fully-fledged IBs from 27 countries over the period from 2010 to 2019. We use panel data estimation techniques and the system generalized method of moments (GMM) estimation to address potential endogeneity concerns. The results show that banks with more members on their SSBs are likely to have less shariah compliance. The findings also indicate that cross-membership and economic/finance/accounting expertise of SSB has positive impact on shariah compliance. This impact of SSB to increase shariah compliance is more pronounced in unlisted IBs than listed IBs. The results can be used by different stakeholders such as policy makers, bank supervisory agencies, other boards, and managers of IBs to mitigate shariah compliance.

A Study of Investment Awareness and Preference of Individuals Toward Various Mutual Fund Schemes with Reference to Islampur City

Mutual fund is an investment option which includes bonds, stock or securities used by the professional money managers. Investment is done for earning the regular and risk free returns from investment. In our country number of investment options are available, they are ranging from insurance policies to stocks. The study aims at finding the awareness of individuals towards mutual fund and preferences toward it. In our study it is found that the more number of respondents are aware about mutual fund. Investors purchase funds from brokers and asset management companies in large numbers. The majority of respondents are satisfied with mutual fund investment

A Study of Investment Awareness and Preference of Individuals Toward Various Mutual Fund Schemes with Reference to Islampur City

Mutual fund is an investment option which includes bonds, stock or securities used by the professional money managers. Investment is done for earning the regular and risk free returns from investment. In our country number of investment options are available, they are ranging from insurance policies to stocks. The study aims at finding the awareness of individuals towards mutual fund and preferences toward it. In our study it is found that the more number of respondents are aware about mutual fund. Investors purchase funds from brokers and asset management companies in large numbers. The majority of respondents are satisfied with mutual fund investment

A cost-based comparative analysis of different last-mile strategies for e-commerce delivery

The growth of e-commerce has bridged the gap between the consumer and the retailer, bringing prosperity for both. However, in a quest to achieve even larger profits and market share, e-retailers compete to offer consumers cheaper shipping, expedited deliveries, free returns, and other lucrative deals. To keep pace with these growing needs of e-commerce, e-retailers have piloted various alternative distribution strategies. To aid a fuller understanding of the costs and benefits of these distribution strategies in diverse delivery environments, this work develops a multi-echelon last-mile distribution model using Continuous Approximation (CA) techniques. The model results suggest that traditional last-mile delivery with diesel trucks is a good fit for e-retailers delivering in dense environments with lenient temporal constraints (parcel service), a strategy that allows for demand consolidation and thus low-cost low-emission distribution. For e-retailers delivering in sparsely populated environments with stringent temporal constraints (grocery delivery), this work finds outsourcing alternatives (crowdsourced delivery, customer self-collection) to render low-cost distribution albeit with high emissions. As a result, the authors suggest the use of low-volume low-pollution vehicles from smaller consolidation facilities close to the market to provide expedited deliveries at fairly low costs and emissions. The analysis bolsters the case for the use of electric trucks for last-mile deliveries, as the study finds an electric truck fleet to not only eliminate tailpipe emissions but also to lower distribution costs compared to a diesel truck fleet. Thus, with this work the authors discuss the opportunities and challenges associated with different last-mile strategies for e-commerce delivery.

Single Index Model: An Implication on Bankex Stocks

The objective of the study is to find out whether the Bankex stocks (17 bank stocks) are undervalued or overvalued with respect to the current Sensex high levels using Single Index Model. It also aims at finding out the future expectations from these stocks. In the financial economics literature, it is generally assumed that risk-averse investors expect higher returns for investing in relatively riskier assets and therefore, the risk premium represents the compensation to the investor for assuming risk. The non-zero risk premiums are not only directly unobservable but also vary substantially over time. Apart from the 'animal spirits' driving investor exuberance, short-term volatility in risk premiums could result from shifts in inflation expectations, monetary policy shocks, changes in market perceptions relating to the underlying 'fundamentals', all of which cause frequent corrections in expectations about future cash flows. The relationship between premiums or excess returns, representing the excess of expected returns over risk free returns and risk, measured by the volatility of market prices of assets is an intensely debated theme in the literature. In particular, the focus of empirical investigation has been on the dynamics of the risk-return relationship in equity markets. This paper undertakes an empirical verification of the rational markets excess returns and stock excess return based on Single Index Model.

Operational Strategies for Distributing Durable Goods in the Base of the Pyramid

Problem definition: Novel life-improving products, such as solar lanterns and energy-efficient cookstoves address essential needs of consumers in the base of the pyramid (BOP). However, their profitable distribution is often difficult because BOP customers are risk-averse, their ability to pay (ATP) is lower than their willingness to pay, and they face uncertainty regarding these products’ value. Academic/practical relevance: We examine two practical strategies from distributors in the BOP: (1) improving the product’s affordability through a discount and (2) increasing awareness of the product’s value. Our results identify BOP-specific operational trade-offs in implementing these strategies. We also propose strategies to manage these trade-offs that can increase consumer surplus in the BOP. Methodology: We introduce a supply chain model for the BOP and analyze the distributor’s pricing problem with refunds as well as the distributor’s optimal budget allocation between strategies (1) and (2). Results: We find that, in the BOP, the distributor’s profit-maximizing budget allocation often yields the lowest consumer surplus. This misalignment between profits and consumer surplus disappears if customers’ ATP is high. Moreover, the misalignment can be resolved if the distributor offers free product returns and commits to a maximum retail price. We confirm the robustness of our results through numerical simulations. Managerial implications: Best operations strategy practices in the BOP can differ significantly from developed markets. Furthermore, BOP customers’ limited ATP and high risk aversion generate a BOP-specific misalignment between profits and consumer surplus. Operational commitments, such as free returns, reduce this misalignment and can serve as a signal to investors of a social enterprise’s focus on consumer surplus.

Bracketing of purchases to manage size uncertainty: Should online retailers be worried?

AbstractFor online apparel retailers, sizing has proven to be a particularly thorny challenge—no matter how much information is provided online, it is often impossible for an online shopper to determine exactly which size of an apparel item will fit her best. Given the increasing ubiquity of free returns (full refund, no return shipping charge), consumers often manage this size uncertainty by bracketing their online apparel purchases, that is, ordering two additional sizes (one smaller, one larger) with the intention of keeping the one that fits best and returning the others. Since bracketing is a relatively new phenomenon in retailing, its net effect on retailer profits is not well‐understood. From a retailer's perspective, bracketing is detrimental since it leads to an increase in consumer returns and the associated costs, which can be quite substantial. On the other hand, bracketing can also be beneficial to the retailer by alleviating consumers' concerns about size, and driving higher net sales. In this paper, we establish how price can be used as a lever to influence consumer bracketing behavior, and examine the impact of bracketing on the profits of a monopolist retailer who offers free returns. We provide prescriptions for when retailers should encourage or discourage bracketing based on three key parameters: the retailer's reverse logistics cost, consumers' return hassle cost, and the product's match probability. As expected, in many cases it is optimal for the retailer to price such that consumers are discouraged from bracketing, and thus the related returns processing costs are avoided. However, we also find that when the product's match probability is moderate, consumers' hassle cost is low and retailer's reverse logistics cost is low, a price that encourages bracketing is the optimal strategy for the retailer, challenging the conventional wisdom that bracketing by consumers is always bad for retailers.

E-Commerce Free Returns: Are they really free?

The expansion of the e-commerce industry is at the speed of thought. However, a big debate arises out of a small question that can the e-commerce industry be ever considered an environmentally clean way of doing business. This research aims to trace how the e-commerce free returns policy adversely affects the environment. The present study is exploratory cum descriptive in nature. The research work is purely doctrinal and is a result of a comprehensive analysis of the existing literature on the said issue. The researcher seeks to add to the existing literature by providing suggestions and a future action plan for the problem so stated above. Based on the findings of this study, it is evident that the e-commerce industry can lead to environmental pollution, especially with fast fashion. The study makes recommendations based on the findings of the study. Keywords: e-commerce; environment; fast fashion; free returns; online returns.

CaMKIIδ post-translational modifications increase affinity for calmodulin inside cardiac ventricular myocytes

Persistent over-activation of CaMKII (Calcium/Calmodulin-dependent protein Kinase II) in the heart is implicated in arrhythmias, heart failure, pathological remodeling, and other cardiovascular diseases. Several post-translational modifications (PTMs)—including autophosphorylation, oxidation, S-nitrosylation, and O-GlcNAcylation—have been shown to trap CaMKII in an autonomously active state. The molecular mechanisms by which these PTMs regulate calmodulin (CaM) binding to CaMKIIδ—the primary cardiac isoform—has not been well-studied particularly in its native myocyte environment.Typically, CaMKII activates upon Ca-CaM binding during locally elevated [Ca]free and deactivates upon Ca-CaM dissociation when [Ca]free returns to basal levels. To assess the effects of CaMKIIδ PTMs on CaM binding, we developed a novel FRET (Förster resonance energy transfer) approach to directly measure CaM binding to and dissociation from CaMKIIδ in live cardiac myocytes. We demonstrate that autophosphorylation of CaMKIIδ increases affinity for CaM in its native environment and that this increase is dependent on [Ca]free. This leads to a 3-fold slowing of CaM dissociation from CaMKIIδ (time constant slows from ~0.5 to 1.5 s) when [Ca]free is reduced with physiological kinetics. Moreover, oxidation further slows CaM dissociation from CaMKIIδ T287D (phosphomimetic) upon rapid [Ca]free chelation and increases FRET between CaM and CaMKIIδ T287A (phosphoresistant).The CaM dissociation kinetics–measured here in myocytes–are similar to the interval between heartbeats, and integrative memory would be expected as a function of heart rate. Furthermore, the PTM-induced slowing of dissociation between beats would greatly promote persistent CaMKIIδ activity in the heart. Together, these findings suggest a significant role of PTM-induced changes in CaMKIIδ affinity for CaM and memory under physiological and pathophysiological processes in the heart.

Does sustainability really matter to consumers? Assessing the importance of online shop and apparel product attributes

Although there is a shift in consumers' consumption behavior towards more sustainable patterns across a variety of different contexts, sustainable apparel has still not become a mainstream trend despite the textile industry's excessive usage of valuable resources. Albeit extant research found different potential barriers elucidating why consumers hesitate to purchase such apparel, it remains unclear whether sustainability really matters to consumers in a clothing context and further, which aspects are of relevance during consumers' purchase decision. We thus conducted two studies with four best-worst scaling experiments in which 4,350 online shoppers assessed the importance of both conventional and sustainable apparel attributes, as well as sustainable apparel attributes only, and the willingness to pay for sustainable product attributes. We further inquired the importance of conventional as well as sustainable online shop attributes. Our findings indicate that conventional apparel attributes such as fit and comfort, price-performance ratio, and quality are of higher relevance to consumers than sustainable attributes. The most important sustainable apparel attributes are the garment's durability, fair wages and working conditions, as well as an environmentally friendly production process. Consumers also indicated to prefer the latter three attributes to a 20% discount. Moreover, consumers demand less as well as sustainable packaging, free returns, and discount campaigns. Our findings reveal a gender gap regarding green consumerism with female respondents assessing most sustainable attributes as more important than male respondents do.

A Metro-Based System as Sustainable Alternative for Urban Logistics in the Era of E-Commerce

Business to consumer e-commerce (B2C) has increased sharply in recent years driven by a growing online population and changes in consumer behavior. In metropolitan areas, the “Amazon effect” (online retailers’ vast selection, fast shipping, free returns, and low prices) has led to an increased use of light goods vehicles. This is affecting the rational functioning of the transport system, including a high degree of fragmentation, low load optimization, and, among other externalities, higher traffic congestion. This paper investigates the potential of a metro system, in a big city like Madrid, to provide delivery services by leveraging its existing carrying capacity and using the metro stations to collect parcels in lockers. It would be a new mixed distribution model for last-mile deliveries associated with e-commerce. To that end, the paper evaluates the cost and impacts of two alternative scenarios for managing the unused space in rolling stock (shared trains) or specific full train services (dedicated trains) on existing lines. The external costs of the proposed scenarios are compared with current e-commerce delivery scenario (parcel delivery by road). The results show that underground transport of parcels could significantly reduce congestion costs, accidents, noise, GHG emissions, and air pollution.

The impact of free returns on online purchase behavior: Evidence from an intervention at an online retailer

AbstractWhether free returns create economic value for online retailers is a question of increasing importance. Using order‐level data from an online fashion retailer in Sweden, we investigate the introduction of free returns for customers in Denmark starting November 1, 2017, but not for customers in Sweden, Norway, Finland, France, Germany, and the rest of Europe (the control group). Using difference‐in‐differences, with and without sample matching, the introduction of free returns increased the order bill by 54.95 Swedish Krona (SEK) (9.15%), product variety per order by 0.057 (8.74%), gross margin per order by 29.90 SEK (9.71%), and returns by 0.195 items per order (7.86%). This likelihood of increased returns was generally similar across different product categories. The findings are robust to parallel trends, event studies, placebo effects, alternative control groups (with Scandinavian countries, Sweden and Norway), country‐time trends, and correlations between outcome variables. Based on back‐of‐the‐envelope calculations, the cost of offering free returns is greater than the increase in gross profit driven by free returns. Though our results show that free returns may not be of short‐term benefit, retailers must also consider the long‐term strategic implications of free returns.

Post-purchase warranty and knowledge monetization: Evidence from a paid-knowledge platform

Knowledge trading through online paid-knowledge platforms (i.e., knowledge monetization) has enjoyed tremendous growth in recent years. As experience goods, knowledge products often suffer from low sales due to information asymmetry. Therefore, some platforms have launched free return policies as post-purchase warranties to reduce uncertainty and stimulate sales. The impact of free returns on knowledge product sales is explored. Using data from a Chinese paid-knowledge platform, the results suggest that a free return policy negatively influences sales. Also, this relationship is weakened by information richness of extant reviews. The findings contribute to the literature and help platforms design optimal return policies.

Multichannel retail competition with product returns: Effects of restocking fee legislation

Abstract The Internet’s explosive growth enabled new ways to reach customers, but product returns became problematic. Today, most brick-and-mortar stores have either been integrated into or replaced by the online channel. We model the competition among sales channels and analyze its equilibrium structure. We consider two competing retailers and three sales channel configurations—brick-and-mortar, click-and-mortar and strictly online—and derive the conditions under which a Nash equilibrium exists. We rule out product returns in the brick-and-mortar channel, but online purchases can be returned (possibly subject to a restocking fee). Our model allows for repeated returns of an item and its reintroduction into the forward supply chain. We investigate the effect of restocking fees and customer’s perceived channel value on the equilibrium as well as the impact of EU legislation addressing free returns. We also analyze some extensions of the model and conduct a numerical analysis to explore whether restocking fee legislation helps or hinders online business. Our results indicate that the equilibrium structure is determined by the values of the return rate, the refund rate, and the online channel attraction. Also, it results profitable to refurbish and reintroduce returned items into the forward chain multiple times. Lastly, in the context of whether to charge or not a restocking fee and the introduction of a new EU legislation, we can conclude that retailers charging a restocking fee should put more effort in order to increase consumer’s perceived value, meaning that customers will accept a restocking fee provided they view the online purchase as having higher quality than a brick-and-mortar purchase.

Abstract WP185: How to Design Woke Stroke Tech: The STORIES Project

Introduction: There is little foundational evidence describing needs, wants, and concerns of stroke survivors and their carers regarding stroke rehabilitation technology. The aim of the STORIES Project (Stroke Tech- Overviews in Rehabilitation, Insights, and Experiences of Survivors & carers) was to identify, characterize, and prioritize these needs and concerns, as well as differences in characterizations across subgroups, to inform socially inclusive design. Methods: Mixed-method, semi-structured interviews were conducted with 29 stroke survivors and 16 carers, including 12 matched patient-carer dyads. Participants used a 1-5 scale to rate confidence and interest in using technologies for stroke rehabilitation and to rate the importance of 41 aspects of rehabilitation technology use. Differences between subgroups were compared via student t-tests. Qualitative data was coded to add depth of understanding to quantitative results. Results: Across all participants, aspects rated most important were clear instructions, ability to return a product from home, ease of use, ability to see progress over time, and that technology use did not replace time with a therapist. Human interaction in rehabilitation was deeply important for motivation, effectiveness, and mental health. Compared to carers, patients found the following less important: training carers in rehabilitation technology use ( p =.006), ability to share progress ( p =.001), and ability to do exercises with therapists rather than carers ( p =.001). Non-whites more strongly valued including music in the rehabilitation technology experience ( p =.001). Medicaid beneficiaries cared more about time & financial risk-minimization strategies ( p <.000), but not direct cost ( p =.72). People without a Bachelor’s degree had less technology familiarity and interest ( p =.003). Finally, patients and carers of patients less than 12 months post-stroke were less interested in stroke rehabilitation technologies ( p <.000). Conclusion: To increase adoption of stroke rehabilitation technologies, development should focus on improving multiple parts of the product experience, including clear instructions, ease of use, progress tracking, music inclusion, free trials, and free returns from home.

FREE PRODUCT TRIALS: DISCLOSING QUALITY AND MATCH VALUE

A prepurchase trial allows a consumer to learn both a product's quality and how well it matches her idiosyncratic taste. By offering a trial, the marginal seller thus shifts up demand by increasing perceived quality and rotates demand by revealing match. In contrast to classic results,a trial is offered only when quality is sufficiently high, and sometimes not at all. Fewer trials are offered when match is more important and when there are fewer gains from trade. “Cooling off” rules allowing free returns are effectively mandatory trials, benefiting consumers but decreasing welfare when there are sufficient gains from trade. (JEL D18, L15, L5)

Lean and agile supply chains of e-commerce: empirical research

ABSTRACTE-commerce is currently one of the main factors in economy development. An increasing number of customers order products via the Internet because of lower prices, convenience, a wider range of products, etc. They expect these products to arrive at their destination, preferably as soon as possible, with the possibility of various forms of payment, free returns. This requires efficient supply chains that simultaneously encompass two opposing concepts: leanness and agility. However, there is a research gap because no empirical studies have been carried out into how these concepts are used in supply chains of e-commerce at the same time. The goal of this paper is to identify the nature of supply chains in terms of their lean and agile approach in the context of the type of product being moved (which can be sold via e-commerce), logistical solutions and supply chain management, and trends that shape the image of supply chains. The basic source of empirical materials was the author’s survey.

Price Markdowns to Induce Customers to Opt Out of Free Returns

We study a newly emerging product return policy in the retail e-commerce industry. Alongside the conventional free return option, consumers (who face valuation uncertainty pre-purchase) are offered an additional return alternative called opt-out of free return (FO). If the free return option is chosen by consumers, they can return the purchased item over a predetermined grace period for a full refund. However, if consumers forego free return and self-select FO, the firm offers them a price markdown. If the consumers pick this option, they can still return the product during the grace period, but they will have to pay a fixed penalty and a variable penalty proportional to the product's purchase price. With consumers increasingly relying on online shopping, returns have become a considerable issue for e-retailers. This research is primarily motivated by practice where a major e-retailer (Jet.com, the new e-commerce operation of Walmart) has recently initiated implementing the FO policy for some categories of their products. We aim to derive managerial insights on when offering FO would be beneficial to firms, and if they offer it, how the firm can set the optimal markdown level. We formulate the problem as a stochastic optimization problem and analyze and characterize the structure of the optimal policy. We characterize the conditions that lead to the offering of the FO option alongside the free return option. (i) We find that the uncertainty level in the consumers' valuation distribution has a subtle impact on the profitability of providing the FO option alongside the free returns. While conventional wisdom suggests that offering the FO option is more likely to be beneficial as customers' uncertainty about the product's valuation pre-purchase increases, we show that the opposite could be true. Specifically, we show that if the product's expected valuation is large, higher uncertainty in the valuation distribution makes it more likely that offering FO alongside FR is advantageous to the firm. However, with low expected valuation, the lower the uncertainty in consumers' valuation distribution is, the more likely that the FO option is advantageous. (ii) We also examine how the profitability of the FO option is affected when the product's valuation (stochastically) decreases. We find that the salvage value of returns plays a crucial role in how the firm can benefit from offering the FO option as product's valuation decreases. Specifically, offering FO along with FR is more likely to be beneficial as consumers' valuation decreases if the salvage value of a returned product is sufficiently small. Our analysis reveals that offering FO alongside free returns can indeed have a significant positive impact on a retailer's profitability across various settings, demonstrating that the FO policy can be effectively used as a practical remedy in retail to partially recoup the revenue losses associated with returns.

Raising Interest Rates: IOER vs. OMO: Interest On Excess Reserves Vs Open Market Operations

We demonstrate that IOER should make the excess reserves even larger, continuing the problem of monetary policy control and rewarding the banks for their policy errors fostering the Great Recession by giving them risk free returns on the $2.5 trillion of idle funds that are benefiting no one except the banks themselves, or having the banks invest those idle funds in some useful manner such as helping finance the government deficit and fix our roads and bridges. The number 1 priority should be to get rid of the troublesome excess reserves and utilizing open market operations (OMO).