In 2018, L.L. Bean announced in a letter to customers that it had ended the century-old “lifetime” return policy, which allowed customers to return items they purchased anytime for a full refund. The new policy allowed customers to return items within 365 days of the purchase date.
Many customers protested, and a few filed lawsuits against the retailer.
When the news broke, I was a doctoral student studying consumer return policies. Reading the news, I wondered: How do restrictions to longstanding lenient return policies affect customers? Is it prudent to inform all customers about these restrictions, or is it better to update policies silently, not drawing any attention?
Our recent study, published in the Journal of Operations Management, provides answers.
Return policy restrictions hurt consumer trust
We conducted a series of scenario-based online experiments with about 1,500 participants living in the U.S. Participants assumed the roles of loyal customers of a fictional retailer, and we randomly assigned them into different return policy restriction treatment groups or a control group with no restriction.
We found that when the retailer restricted its lenient return policy, such as by imposing a return deadline or return fees, customers’ trust in the retailer’s goodwill and ability to offer a good-quality service decreased. This, in turn, led to lower rates of purchase, positive word-of-mouth and loyalty intentions. The more severe the restriction was, the stronger the negative reactions. Interestingly, we found that even those consumers who said they usually don’t return any products reacted negatively.
Communicating the decision and its rationale helps
The dramatic case of L.L. Bean might have deterred other retailers from openly communicating their return policy restriction decisions to their customers using official channels. In the research article, we provided numerous examples of such “silent” restrictions from major retailers since the case of L.L. Bean.
However, I knew that no return policy restriction could go truly “silent” in today’s connected world. A quick search on Reddit returned to me dozens of discussion threads where people discussed these changes, speculating about the “actual” reasons behind the policy restrictions: decline in product quality, financial troubles, etc.
Our experiments revealed that communicating policy restrictions directly and providing a rationale significantly mitigates customers’ negative reactions. We tested the effectiveness of two rationales: citing increased return policy abuse and the increased cost of processing returns. We found both to be effective in reducing negative reactions to policy restrictions.
Why this research is timely
In 2024, Americans returned products worth an estimated US$890 billion to retailers. Processing a single item typically costs $21 to $46, and most of this merchandise ends up in landfills.
Many retailers realize that overly lenient return policies that have become an industry norm are no longer sustainable. Over the past five years, the tide has shifted against “leniency,” but many retailers are still reluctant to step away from their lenient policies.
Our research provides insights into the negative consequences of return policy restrictions for retailers and emphasizes managerial transparency as a cost-efficient and effective way to mitigate them.
This story is part of Science X Dialog, where researchers can report findings from their published research articles. Visit this page for information about Science X Dialog and how to participate.
More information:
Huseyn Abdulla et al, The point of no return? Restrictive changes to lenient return policies and consumer reactions to them, Journal of Operations Management (2024). DOI: 10.1002/joom.1346
Bio: Huseyn Abdulla is an Assistant Professor of Supply Chain Management at The University of Tennessee, Knoxville. Abdulla holds a Ph.D. degree in Business Administration from Texas A&M University and researches the management of retail supply chains and operations.
Citation:
Avoiding customer backlash: Study highlights importance of transparency in return policy changes (2024, December 23)
