Managing Internet Product Returns: A Focus on Effective Service Operations

Product returns present one of the biggest operational challenges in the world of Internet retailing due to the sheer volume and cost of processing returns. But returns also represent an often-missed opportunity to manage customer relationships and build customer loyalty to the retailer. Based upon data from a survey of 464 customers of five different Internet retailers, this article explores how firms’ returns management systems affect loyalty intentions. We draw upon extant literature in the fields of Internet retailing, service quality, supply chain management, and customer satisfaction/loyalty to develop a model and a set of hypotheses relating ten latent variables in the service returns offering area. Our resulting structural equation model provides evidence of the impact of the returns management system upon customer loyalty intentions. The model also identifies effects on loyalty intentions arising from customers’ satisfaction with, and perceptions of, the value of the returns service offered. These findings will help inform managers’ choices regarding investment in the returns management system as an element of service quality improvement and a potential means of improved profitability. In addition, this study’s empirical exploration and testing of a returns management model in the Internet retailing environment is a contribution to the currently underrepresented body of academic literature linking marketing and supply chain management in the context of end consumers. Subject Areas: Customer Loyalty, E-commerce, Internet Retailing, Returns Management, Service Operations, and Service Recovery. †Corresponding author.