Return fees in online retailing - Psychological mechanisms across fee designs and product categories

Abstract

Product returns, particularly in the fashion industry, are rising rapidly, costing billions annually. While research highlights the role of return fees in managing returns, it lacks guidance on setting fee types and levels aligned with psychological mechanisms, product categories, and effective communication strategies. To address these gaps, we examine the effects of return fees on unfairness perceptions, purchase likelihood, and return behaviour, incorporating theories of justice sensitivity, regret aversion, loss aversion, and mental accounting. Using a mixed-method approach with 1,083 western European customers and scenario-based experiments involving 812 participants, our findings reveal direct links between return fees, purchase and return likelihood, mediated by unfairness perceptions. We also identify variations in fee impacts across fast and luxury fashion products, influenced by retailers’ sustainability perceptions. Our study advances retailing research in the industry by suggesting strategic managerial implications for tailoring optimized return policies.