Information Search and Product Returns across Mobile and Traditional Online Channels(CEIBS Working Paper, No. 033/2020/MKT, 2020)

Product returns will soon cost firms a trillion dollars annually and e-commerce is detrimentally affected the most, compared to offline channels. To facilitate firm operations, strategic insights are needed to better understand what factors increase the return propensity of customers and when the short-term costs of returns can be offset by future customer purchases. To address these gaps, we execute two studies using transaction data across two large apparel etailers. Study 1 demonstrates that consumers engage in fundamentally different information searches on mobile versus traditional online channels, and this difference in search spills over to impact return rates. The return rates are lower in the mobile channel and utilization of the mobile channel can alter the effect of discount promotions. Study 2 suggests that future spending by consumers following a return is contingent on category characteristics. In categories that facilitate learning from customers’ previous return experience, product returns positively increase future spending, but the opposite is true in categories where limited learning takes place.