Stemming the tide of increasing retail returns: Implications of targeted returns policies

Research regarding the pros and cons of returns policy changes is limited. We use psychological contract theory and organizational justice theory to explore the effect of a returns policy change on customer intentions to spread negative word of mouth, switch to a different retailer’s website, and switch to the retailer’s physical store. We follow a mixed-method sequential method. In Study 1, an experiment tests our theoretically developed hypotheses. In Study 2, qualitative data provides additional insight into our findings. Results indicate that the type of returns policy change was significantly related to customer intent to spread negative word of mouth. Further, the intensity of a retailer’s communication to convey returns policy changes plays an important moderating role and a moderated mediation role regarding customer intentions. Contextually, the research provides important theoretical and managerial insights into factors to consider when implementing returns policy changes.