From the Editor's Desk

How Retailers Can Capitalize on the Refund Effect

In 2022, U.S. consumers returned 16.5% of purchases, costing retailers an estimated $816 billion in lost revenue. Research suggests that cross-selling products during the return process is an effective strategy to reduce this revenue loss. Across a number of experiments, researchers found that consumers treat refunds as money already lost, so it’s less painful to spend these funds on another purchase, so long as cross-selling occurs before the money is reissued to the customers’ original payment method and consumers initially expected to keep the goods they were planning to buy. The researchers also found that this “refund effect” applies across categories. Creating return policies and practices informed by the refund effect can reduce revenue loss from product returns in a way that benefits both consumers and retailers.

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