![]() We replicated this study with an online sample where the returned product was a gift card from a big-box retailer (i.e., Best Buy or Kohls). Only 48% of the control group used their $4 to buy the gift card, whereas 78% of participants who received the refund bought the gift card. We then offered everyone the opportunity to keep their $4 or use it to buy a $5 Starbucks gift card at a discount. Others in a control group made no initial purchase. ![]() Some of the participants were asked to use the money to buy a stress ball that they later learned they could return, which most did. In one laboratory experiment, for instance, we gave all participants $4. Research participants were more likely to spend money from a product refund than from a bonus, and even more likely to spend refunded money than unexpected income, like lottery winnings and tax refunds. In six experiments we found that consumers treat refunds as money already lost, so spending these funds on another purchase feels less painful. Our recent research identifies an effective strategy for reducing this loss of revenue that benefits everyone: cross-selling products during the product-return process. But the former strategy is costly to retailers, and the latter is costly to consumers. ![]() Typical strategies to reduce revenue lost to product returns include reducing the likelihood of returns by providing more information about products (e.g., reviews and FAQs) and increasing the financial and transaction costs to consumers who do return products (e.g., shipping costs and limited return windows). consumers returned 16.5% of merchandise purchases, costing retailers an estimated $816 billion in lost revenue. Product returns pose a major challenge for retailers.
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