Imagine you bought a product online, and it was faulty. How cheap would that product have to have been for you to not bother to return it?
I once bought a book for 1 British penny (about 20 cents) and I have to admit, when it didn’t arrive, I didn’t bother to chase it up!
Now the results of a survey by online dispute resolution service Youstice have found that many Europeans fail to bother returning products worth far more. The survey of 3,000 British, French, and German respondents discovered that exactly one-third would not bother to return a faulty product bought online that cost less than a certain price, which was, on average, 18.01 pounds (about $31).
This is a huge source of financial detriment: a Which? report showed that such non-returns cost British consumers alone 1.2 billion pounds a year (about $2.1 billion).
This is a shocking figure. But why does it exist?
The crux of the matter is this: Consumers are not rational. Is there any better argument against homo economicus than the fact that many of us would not bother to return a poor purchase?
There is a saying in psychology that “our modern skulls house a stone age brain” (Stankus, 2011). Despite living in an age of amazing technological advances, humans are subject to ancient cognitive biases. In fact, these biases may even be more pronounced in contemporary times.
Richard Dawkins uses a fantastic analogy: For millions of years, flying towards the light has served moths extremely well; after all, they are still around today. In very recent history, however, candles and light bulbs have made this behaviour sub-optimal.
Likewise, our heuristics and biases, like loss aversion and scarcity, may have ensured our evolutionary survival but become somewhat inappropriate today. While the ancestry of these innate drivers is clear from the fact that they even exist in animals (e.g. Chen, Lakshminarayanan & Santos, 2006), money has only appeared relatively recently in our evolutionary history—and internet shopping even more so. The heuristics which kept us alive and thriving for millions of years may be doing us harm online.
There are three biases to be aware of:
First, we are all cognitive misers—that is, we have very limited mental resources for any one task. Timothy Wilson (2009) estimated that only 0.0004% of all sensory processing is conscious. Other research has shown that conscious systems are rather limited in their processing power (e.g. Miller, 1956; Shiv & Fedorikhin, 1999). The upshot is that consumers will simply avoid a task if it is too difficult; for example, making a decision when faced with too many choices. A famous example comes from Iyengar and Lepper (2000), who found that the proportion of browsers making a purchase from a stall selling jams increased from 3% to 30% when the number of flavours was culled from 24 to 6. Returning a product to an online retailer is, essentially, a lot of faff (fuss). For many consumers, who are tired, distracted, or busy, it requires far too much of their limited attention.
The second principle is concreteness. We are better able to process stimuli which are concrete rather than abstract—for example, there is ample evidence that we process pictures better than words (e.g. Glaser & Dungelhoff, 1984). Concreteness is important in terms of e-commerce because consumers are likely to feel more detached and ambivalent towards a product they have neither seen nor touched. Indeed, Peck and Childers (2006) showed that encouraging shoppers to touch products can increase impulse purchases; Brasel and Gips (2014) demonstrate that mobile devices induce feelings of ownership via their touchscreens.
Similarly, Kahneman, Knetsch and Thaler (1990) showed half of the subjects of a study a mug, and asked how much they would pay for it; the other half were given the same mug and asked how much they would sell it for. While people would pay $2.25 on average for the mug, when it was touched—and, virtually, owned—the average proposed selling price was $5.75.
This may explain why consumers are less likely to bother returning a faulty product bought online—without experiencing it properly, they feel less of an emotional attachment.
The third and final principle to play a part may be payment depreciation. The further back in time a sunk cost is made, the less important it generally becomes to us. For example, people are more likely to lend a TV to a friend if it had been bought longer ago (Gourville & Soman, 1998), and people are more likely to replace a lost theatre ticket if it was lost several days before the show as opposed to the day it plays (Henderson & Peterson, 1992).
While a payment made online might initially be viewed as a loss, over time it gradually becomes incorporated into the status quo—the pain of loss is numbed by the passage of time. Therefore, the time delay between purchasing a product online and receiving it may make the outlay more abstract and less painful, and thus there may be less motivation to seek redress.
What's Wrong With Us
So, fully a third of us may be failing to return products bought online below the value of £18.01 ($31) because: we are cognitive misers; products bought online are less concrete to us; and payments made online are dulled by the time delay between purchase and delivery.