Unboxing product returns: What drives return policy leniency in the fashion industry?

Purpose Return policy leniency is a strategic approach to managing product returns, as it affects the quantities of products sold and returned, as well as profitability. Despite its importance, little is known about the drivers of return policy leniency. This paper aims to fill this research gap by identifying the factors that explain the variation in sellers’ return policy leniency in the fashion industry. Design/methodology/approach Based on a novel, manually constructed dataset comprising the online return policy leniency of 208 USA-based fashion brands, the authors develop a multidimensional construct called the Return Leniency Index that captures the different attributes of return policy leniency. We analyse its antecedents using regression analysis with suitable proxy variables capturing six hypotheses informed by theory and real-life observations. Findings The results suggest that return policy leniency is reduced by supply chain leanness. On the other hand, counterfeiting concerns, online channel importance and asset intangibility positively impact return policy leniency. The findings are robust to several alternative regression specifications. Originality/value This paper presents a novel framework on the antecedents of return policy leniency, introducing a comprehensive measure that incorporates dimensions of time, monetary, effort and scope leniency. Using the USA fashion industry as its empirical context, it identifies statistically significant relationships between return policy leniency and various antecedents. The findings offer a foundation for future research and provide managers and policymakers with valuable insights into how companies design their return policies, thereby aiding the development and regulation of future return practices.