Product returns on the Internet: A case of mixed signals?

In two studies, we investigate the interrelationship between return policy leniency and retailer quality. In the first study, we content analyze the return policies of e-tailers randomly selected from those listed at BizRate.com. Then we relate the return policy characteristics to these quality ratings. Consistent with signaling theory, we find that as the ratings of e-tailer quality increase, return policy leniency increases in non-consumable product categories. However, the positive quality/return policy leniency relationship does not hold in consumable product categories. In a follow-up experiment, we investigate how consumers interpret the return policy signal. Specifically, we find that consumers' ability to control their shopping experience and their general trust of e-tailers moderate their reactions to return policies that differ in leniency. Finally, we discuss the theoretical and managerial implications of this research.