Research

Retailers face a challenging trade-off in maintaining versus restricting long-established lenient return policies. On the one hand, lenient return policies have become an important part of retailers’ value propositions and play a significant role in stimulating consumer purchases. On the other hand, lenient return policies increase volume of product returns, which hurts profitability. Motivated by observing an increase in restrictive changes to long-established lenient return policies, we investigate consumer reactions to such changes and their managerial implications. Through a series of experiments with diverse consumer samples, we find that restrictive changes, such as shortening return time windows or introducing restocking fees, decrease consumer trust in retailers and lead to lowered purchase, positive word-of-mouth, and loyalty intentions. We also find that providing managerial transparency, in the form of communicating the rationale for restrictive changes, can attenuate the negative consumer reactions to such changes. Moreover, rationales that emphasize cost of handling returns versus opportunistic and abusive returners are similarly effective. Our findings contribute to the growing academic literature on consumer return policy design and provide actionable insights to retail managers. 

In this editorial, we build upon the increased attention of the operations management (OM) community toward field experiments and the recent publication of the Pre-Approved Research Designs Special Issue that provided an initial test of Registered Reports as a novel review process for field experiments in OM. Addressing lingering concerns voiced by the editorial team and learning from the experiences of journals from other disciplines that implemented Registered Reports, we introduce a new initiative and outline a new review process in the Journal of Operations Management (JOM) to motivate theory-focused field experiments in OM. 

We study the effectiveness of two theoretically and practically relevant interventions designed to increase familiarity with and thereby stimulate the appeal of and willingness to pay (WTP) for remanufactured (refurbished) consumer products that are often found repulsive by consumers: 1) educating consumers about the remanufacturing process, 2) providing physical exposure to remanufactured products. We find that education does not cause an increase in the appeal of and WTP for remanufactured consumer products. Providing physical exposure to remanufactured products, relative to text and text-plus picture or video modalities, significantly increases both the appeal and WTP as a result of increasing perceived quality and decreasing disgust. Sellers can benefit from marketing remanufactured consumer products through physical channels (i.e., brick-and-mortar, outlet, showroom stores) as opposed to solely through online channels, which is the common practice among many sellers. 

Consumer return policies have been long recognized and studied by operations management scholars as an important managerial lever in a retail environment. Yet, the behavioral aspects of return policy decision-making and interaction of return policy decisions with other common operational decisions have not been investigated to date. We present a behavioral analysis of return policy decision-making in a retail environment with aggregate demand and individual product valuation uncertainties. Leveraging a generalized newsvendor context, we conduct a randomized behavioral experiment to understand how individuals make each of the three key retail decisions-refund amount, price, and order quantity-and the causal effect of salvage value on these decisions. We find that decision-makers exhibit behavioral regularities in making decisions across the three levers and they react to changes in the operating conditions in a boundedly rational manner, suggesting the use of heuristics. Based on behavioral regularities that we observe in our data, i.e., responses, time-dependent effects, and decision dependencies, we develop a process theory based on behavioral decision-making tenets that offers a new direction with testable hypotheses for future research. The process theory describes a conditional decision-making heuristic that leads to a propagation of decision errors across different levers as well as lever-specific decision biases.

Due to the ongoing and dramatic growth in the volume of consumer returns, retailers continue to struggle with the trade-off in returns service strategies between implementing stricter return policies to lower operational costs versus providing customers with lenient return policies to positively stimulate customers' value perceptions and patronage intentions. We argue that an effective management of this trade-off requires a deep understanding of the process through which customers perceive, evaluate, and respond to return policies that vary in terms of leniency across five key dimensions identified in the literature: monetary, time, effort, scope, and exchange. To this end, we propose a theory-based, cognitive process model and test it in completely randomized experiments with diverse consumer samples. By viewing each of the five leniency dimensions as returns service design levers, we examine 1) how a retailer's return policy leniency across different levers impacts a customer's intention to purchase from a retailer, through the influence of leniency on the perceptions regarding returns service quality and transaction costs that jointly form perceived returns service value and 2) how different leniency levers compare in terms of their impacts. We find significant heterogeneity in the effectiveness of different leniency levers in influencing customers' purchase intentions through increased perceived service quality, reduced perceived transaction costs, and subsequently increased perceived service value.

We empirically examine a complementary behavioral source of the bullwhip effect that has been previously overlooked in the literature: that individuals order more aggressively (i.e., overreact) when they face shortages than when they hold inventory.  We conduct a behavioral experiment using the Beer Distribution Game. We estimate decision rules using multi-level modeling approaches that overcome several drawbacks of the estimation methods used in the earlier literature. We find robust evidence that, contrary to the overreaction when in backlog hypothesis and reports from popular press, decision-makers order less aggressively and become insensitive to the scope of the problem when in backlog---a scope neglect phenomenon. We propose a dual-process theoretical account predicated on affective reactions to explain this scope neglect. Our results suggest that affective reactions under novel operating conditions or dramatic events in supply chains, such as the COVID-19 pandemic, can overwhelm cognitive processing of managers and make them fail to recognize the full scope of the problems faced and update decision models accordingly. Understanding the cognitive-affective drivers of ordering behaviors that generate supply chain instability is important in designing interventions to mitigate their negative effects.

Coincident with the rapid growth of consumer returns and their corresponding importance in the retail marketplace, academic interest in the area of consumer return policy design has significantly increased. In fact, the growth in academic publications has been tremendous, with almost half of the published works appearing within the past 6 years. The influx of new and evolving research spans across multiple disciplines and various methodologies. To provide clarity for the continued evolution of the field, we provide a comprehensive review and classification of the literature predicated on a holistic conceptual framework. The scope of the review includes all peer reviewed journal articles published prior to the end of 2018, along with any working papers cited therefrom, that specifically address (a) managerial decision‐making related to return policies or (b) consumer behavior in response to such decision‐making. Examining the state of the literature and practice on return policy design through the lens of a unified conceptual framework—a framework that spans both analytical and empirical research—reveals numerous managerial and theoretical opportunities for future research.