Digital Commerce and the Digitally Connected Enterprise
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Paper Type
Short
Paper Number
1772
Description
Although researchers have investigated the effect of product associations on sales, studies on their impact on product returns are sparse. We focus on functionality-based (complementarity and substitutability) and non-functionality-based associations between products. We hypothesize that complementarity of the products purchased together reduces return due to reduced product uncertainty, while substitutability increases return because of the potential signal of uncertainty. We further hypothesize that non-functionality association increases return because unplanned purchases might lead to the misfit between product quality and consumer needs. Analyzing the unique large-scale transaction data, we find that complementarity, substitutability, non-functionality association all increase returns. That is, products purchased with other related products in terms of functionality or demand are more likely to be returned. Additional analysis with interaction terms indicates that such effects can be contingent on customer or product characteristics. We discuss the cost implications for the online marketplaces.
Recommended Citation
Park, Junyoung; Wang, Pengcheng; Ge, Chunmian; and Xue, Ling, "The Impact of Functionality- and Non-Functionality-Based Product Associations on Product Return" (2020). ICIS 2020 Proceedings. 9.
https://aisel.aisnet.org/icis2020/digital_commerce/digital_commerce/9
The Impact of Functionality- and Non-Functionality-Based Product Associations on Product Return
Although researchers have investigated the effect of product associations on sales, studies on their impact on product returns are sparse. We focus on functionality-based (complementarity and substitutability) and non-functionality-based associations between products. We hypothesize that complementarity of the products purchased together reduces return due to reduced product uncertainty, while substitutability increases return because of the potential signal of uncertainty. We further hypothesize that non-functionality association increases return because unplanned purchases might lead to the misfit between product quality and consumer needs. Analyzing the unique large-scale transaction data, we find that complementarity, substitutability, non-functionality association all increase returns. That is, products purchased with other related products in terms of functionality or demand are more likely to be returned. Additional analysis with interaction terms indicates that such effects can be contingent on customer or product characteristics. We discuss the cost implications for the online marketplaces.
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