Stretch Your Dollar: Researchers find bundling deals end up costing shoppers
Nov 29, 2024
WASHINGTON (DC News Now) -- Bundling deals and similar promotions often backfire on major retailers and consumers, researchers found.
Schemes are designed to clear inventory to make way for new products, often offering buyers a discount if they purchase multiple products.
A study conducted by researchers at the University of Maryland Smith School of Business found that retailers see more returns when running such promotions than they would if there were no promotions at all.
"The goal isn't just to get things out the door the first time around, but it's to keep them in the hands of the consumers because this flow of returns is a headache for retailers," said Dr. Wedad Elmaghraby.
Emlaghraby is the Dean's Chair of Operations Management at the Robert H. Smith School of Business and led the study.
She analyzed data from a major retailer known for selling jeans. She found that the retailer processed more returns when running bundle discounts than it would if there were no sale.
"The return process means that if you're a brick-and-mortar retailer, about 15 to 20% will go back into your physical stores. If you're an online retailer it can be an upwards of 35% of the items that are purchased are coming back to you in your virtual shelves, your warehouses," she said.
1 dead, 4 injured after crash in Prince George’s County
There are costs for the buyer too. Often, they will end up paying full price for the items in the bundle that they decide to keep.
"They're gonna dangle all these carrots in front of you to try to get you to increase the amount that you spend or the number of things that you buy," said Elmaghraby. "You buy something and think 'I like this, but let me go home, let me try it, let me see how it feels.' We call this fit uncertainty. When I come to return one, I end up paying full price on the other, because the only way I get the discounted price is if I keep two."
Return policies also pose a cost and potential complications for shoppers. Sometimes purchases include free or reduced shipping.
If items are returned, bringing the order total under the threshold for the shipping benefit, the buyer will shoulder the cost of shipping the item back.
"I would just say to the consumers out there, read the fine print. And for retailers, it's beneficial for them that the consumers read the fine print," said Elmaghraby.
Adobe is forecasting that shoppers will spend more than $240 billion online this holiday shopping season.