Remote Purchase Environments: The Influence of Return Policy Leniency on Two-Stage Decision Processes

Abstract

The growth of catalog sales and the enormous potential of e-commerce elevates the importance of understanding remote purchase. Remote purchase environments differ from traditional bricks-and-mortar purchases in that the purchase decision is more likely to be framed as two separate decisions: consumers' decisions to order and, upon receipt, their decisions to keep or return the item. These two decisions are separated by a period of time, and crucial experiential information often is available only at the second decision point (i.e., after receipt). Consumers' initial lack of experiential information makes product choice more risky. Return policy leniency is one way to minimize the inherent consumer risk, but retailers may avoid instituting overtly lenient policies because they expect increased return rates. However, the endowment effect suggests some surprising benefits of return policy leniency to the retailer. Results from three experiments provide support for the idea that product ownership depends more on perception than possession.