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

Abstract

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.