Product returns, rebates, and restocking fees: A story of carrot and stick

Data dell'evento: 
Tuesday, 22 January, 2019 - 14:30
Aula A4 DIAG
Paolo Roma, Università di Palermo
Product returns policy is widely adopted in both retail and manufacturing industries as it helps diminish uncertainty about product valuation and/or product fit, and thus facilitate purchases. However, this policy may result in serious financial concerns for sellers. For instance, US consumers returned about 8% of everything bought in 2015, or approximately $260 billion worth of merchandise. For this reason many sellers utilize restocking fees to control product returns (e.g., Amazon, Best Buy, Macy’s, Dell, Sears, Newegg, etc., with fees varying from 15% up to 50%). The use of restocking fees to manage product returns and sellers’ profitability has been largely examined in the extant literature. However, there exist no works on the use of rebates in the context of product returns, although we observe that some sellers do not allow returns if a rebate is redeemed for the product (e.g., Tamron). In this paper, we investigate whether the provision of rebates can mitigate product returns and whether it can be a more effective policy than restocking fees in terms of product returns reduction, seller’s profitability, and consumer surplus. Our findings demonstrate that the seller’s choice between rebate policy and restocking fee policy has non-trivial consequences on product returns, seller’s profitability, and consumer surplus.   
Joint work with Rachel R. Chen (University of California at Davis); Eitan Gerstner (Technion – Israel Institute of Technology); Daniele Ragaglia (University of Palermo)
Short bio: Paolo Roma is an Assistant Professor of Marketing at the University of Palermo, Italy. He obtained Italian National Qualification for Associate Professor positions on March 2017. He received his Ph.D. in Industrial Engineering and Management from the University of Palermo in 2009. He has been a visiting scholar multiple times at the University of California at Davis, University of Pittsburgh, and Toulouse School of Economics. He also collaborates with other important Universities such as Technion – Israel Institute of Technology, University of Tennessee at Knoxville, Warwick University, Lappenraanta University of Technology. His research focuses on topics at the interface between marketing and operations management, such as distribution channel management, online pricing, two-sided market platforms, mobile app market, social media, crowdfunding, sharing economy, and other innovative business models on the Internet. Outlets of his research include Information Systems Research (Financial Times Top 50 Journal List), Operations Research (Financial Times Top 50 Journal List), Production and Operations Management (Financial Times Top 50 Journal List), Research Policy (Financial Times Top 50 Journal List), European Journal of Operational Research, Journal of Business Research, International Journal of Production Economics, Decision Support Systems, Technological Forecasting and Social Change, Transportation Research Part E, Applied Economics, Electronic Commerce Research and Applications, International Journal of Innovation Management, Review of Marketing Science, and International Journal of Electronic Marketing and Retailing. His research has been awarded with recognized prizes, preceding in some occasions researchers from prestigious Universities such as MIT, Harvard University and INSEAD. Finally, he has been involved with different roles (unit coordinator, work package coordinator, operative coordinator, participant) in numerous international and national applied research projects conducted in collaboration with companies and other public institutions, such as Engineering Spa, Centro Ricerche FIAT, Elasis Scpa, Italtel Spa, Consiglio Nazionale delle Ricerche, Regione Sicilia, DHITECH Distretto Tecnologico Pugliese, UPMC Italy, Universidad Politecnica de Madrid, Buckinghamshire New University, Universitat de les Illes Balears, Universidade da Madeira, among the others.
Tiziana D'Alfonso