On packaging and product returns in online retail—Mailing boxes or sending signals?

Abstract

Considerable research on merchandise returns has looked at marketing elements of the sales process (e.g., product display) and how they influence returns. However, marketing and order fulfillment processes are temporally decoupled in remote purchase situations such as online retail. While both are intricate parts of the overall sales transaction, it is logical to believe that elements of order fulfillment may also be influential in explaining and controlling merchandise return. This study focuses on the packaging aspect of the order fulfillment process to explore how it may influence return incidents in online retail. Following insights from Signaling Theory, we propose that a product's package is a signal that communicates valuable information about the product to the buyer. We partner with an online retailer to study the outcome of a natural experiment involving product packaging during order fulfillment. Our results show that packaging influences returns, reducing them most significantly if the signaling is consistent across packaging levels.