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Consumer Returns: Why They Matter, and What Retailers Can Do About Them

Dr. Michael Galbreth

Professor & Head of the Department of Business Analytics & Statistics
Haslam College of Business
University of Tennessee
Friday, March 8, 2019    2:30-3:30pm
JDT 410


Owing to the generous refund policy ubiquitous among today’s retailers, returns are prevalent and expensive to manage. Implementing buyer assistance programs and adjusting return time windows are two common methods that retailers use to actively influence return rates. A buyer assistance program can improve consumer understanding and reduce returns, but to be effective it must be focused on the products that are most likely to be returned. Managing return rates by adjusting return time windows, on the other hand, requires an understanding of the time dimension of returns, a topic for which there is scant guidance in the literature. Using a large dataset of consumer electronics purchases and returns for a major U.S. retailer, our study contributes to the research and practice of retail operations by: (i) providing new insights into the drivers of product returns and (ii) analyzing the time length of consumers’ product trial, which can inform return time window decisions. We show that both product maturity (where a product stands in its life-cycle) and variety (the number of competing alternatives) are negatively associated with the probability of a return. By separating pure returns and exchanges, we further demonstrate that while more variety considerably reduces the former, it only marginally increases the latter. In addition, we find that consumers with more past returns not only have a higher probability of future returns but also tend to make late returns, with both factors increasing a retailer’s cost to serve them. Finally, our analysis of the time to return shows that retailers may benefit from customizing their return time windows across different product categories, as well as enlarging the window during holidays.


Bio Sketch:

Michael Galbreth is a Professor and Head of the Department of Business Analytics and Statistics at the Haslam College of Business, University of Tennessee, where he also holds the Pilot Corporation Chair of Excellence. He received his B.S. from the University of Tennessee and his Ph.D. from Vanderbilt University. Prior to joining the Haslam College, he was a Professor of Management Science at the University of South Carolina, where he taught a wide variety of MBA, Ph.D., and undergraduate courses and was a seven-time winner of the IMBA outstanding professor award. He has also taught MBA courses at Vanderbilt University, Vienna University of Economics and Business (Austria), Tecnológico de Monterrey (Mexico), and Chonnam National University (South Korea). His research activities are currently focused on retail operations, consumer returns, circular economy, and the interface between marketing and operations. In 2010 he was named a Fulbright Scholar and served as the Fulbright Enders Visiting Research Chair at McGill University. He is a Department Editor for Journal of Operations Management, a Senior Editor for Production & Operations Management, and an Associate Editor for Decision Sciences. His research has appeared in Management Science, Marketing Science, MIS Quarterly, Journal of Operations Management, Production & Operations Management, Decision Sciences, Interfaces, and others. He has consulted with a wide variety of companies, with a focus on building analytical decision models and developing analytics training materials and programs.  Prior to returning to academia, he was a manager in the Atlanta office of KPMG Consulting.