University research posits that offering product exchanges or gift cards for returns rather than crediting a customer’s card may be retail’s best option to reduce the cost of online returns. Consumers were found to be more open to spending money again with a retailer when consumers chose to accept an exchange or gift card rather than just get the money back.
“We theorize that this refund effect occurs because consumers psychologically realize the loss of money when purchasing products and earmark that money for spending,” wrote the researchers from the University of Toronto and Questrom School of Business at Boston University in the study. “Thus, consumers feel a smaller psychological loss when spending refunded money than unspent money on a subsequent purchase.”
