Essays on Consumer Returns and Retail Operations

Abstract

This dissertation offers two essays that together represent a deep investigation into consumer returns, channel integration via ship-to-store service, and omnichannel retailing practices. The results provide strong managerial insights regarding some of the widely implemented industry practices associated with consumer return abuse and omnichannel retailing. The first essay investigates return abuse with respect to both fraudulent and opportunistic consumer returns and two potential technology-enabled countermeasures to deal with them: customer profiling and product tracking. A customer profiling system identifies opportunistic customers by using their personal identification and transaction history. In contrast, a product tracking system identifies fraudulent returns by recording each transaction of a product through the use of unique identifiers. We demonstrate how these countermeasures impact a retailer's profitability, demand structure, and policy parameters with respect to price and refund.

The second essay looks into channel integration via ship-to-store service and investigates the impact of this omnichannel retailing practice on sales and returns across both online and brick-and-mortar channels. The advent of omnichannel retailing technologies enable integration of both physical and electronic marketplaces that is designed to deliver a seamless shopping experience to customers. For a retailer, these capabilities require significant investment, yet hold the promise of enhancing the revenue streams from both online and brick and mortar channels. We assess this promise by using transactional data from a national retailer to analyze the impact of introducing ship-to-store capability on a retailer's performance. Contrary to expectations, our findings show that online sales decrease after ship-to-store is implemented, although store sales increase. Some customers switch from the online channel to the brick-and-mortar channel. This occurs mainly for high-value purchases. The customers who actually use the ship-to-store service are those that typically buy low-value items. Our results also show that implementing ship-to-store increases returns of online purchases to physical stores. At the same time, these types of returns generate additional selling opportunities. About 28 percent of the online purchases returned to a store are associated with a new purchase, amounting to more than $7 million in additional revenue.