Boosting Sales with Strategic Display of Returned Items

Selling returned products as open-box is becoming increasingly popular in the retail landscape, leaving retailers devising different ways to display those products along with the new product offerings. Research from Assistant Professor Necati Ertekin and Professor Karen Donohue explores different visual merchandising strategies for new and open-box products.

The researchers examined two methods: selling open-box products side-by-side with new products and selling them separately. After completing an online laboratory experiment, they tested their ideas in a field study by partnering with a North American retailer that used the two strategies at different store locations.

The researchers found that selling open-box products separately from the new products increased new product sales by 3.6 percent compared to selling them side-by-side. However, the separate strategy also led to higher costs in the form of more new product returns. Ertekin says their findings are predicated on how the display strategies influence customers’ valuation of new products.

“When customers see returned products next to the new ones, they are more likely to attribute the returns to new products having low quality. Hence, their valuation for the new products goes down, deterring some customers from buying them under the side-by-side strategy,” he shared. “Those deterred customers already have a high tendency to return items, leaving only customers with a low tendency to return items left buying the new products, leading to lower returns under the side-by-side strategy.”

Ertekin and Donohue suggest that the best visual merchandising strategy will vary by product profile, so retailers should consider a tailored approach. Ultimately, the researchers estimate selling open-box products could increase a retailer’s profits by as much as 3.3 percent—earnings otherwise missed out on if they had shipped off the returned items to a third-party seller or the landfill.

“Selling open-box products allows retailers to very quickly put the items out for sale again,” explained Donohue. “This creates a revenue-generating mechanism, which is also good for the environment. Our research helps guide their strategy with how to best display those returned items.”