JOURNAL OF BUSINESS LOGISTICS, Vol. 30, No. 1, 2009 33 PRODUCT RETURNS PROCESSING: AN EXAMINATION OF PRACTICES OF MANUFACTURERS, WHOLESALERS/DISTRIBUTORS, AND RETAILERS by James R. Stock University of South Florida and Jay P. Mulki Northeastern University INTRODUCTION Processing product returns has become a critical activity for organizations in the as the volume of goods flowing back through the supply chain rapidly increases (Guide et al. 2006). It has been reported that the value of products being returned exceeds an estimated $100 billion per year and averages about 6 percent of sales (Guide et al. 2006; Stock 2001). It is estimated that product returns could range from 15% for mass merchandisers to 35% for e-commerce retailers (Gentry 1999). Product returns are part of reverse logistics which includes a combination of other activities such as recycling, refurbishing, and repair, as well as waste disposal (Stock 2001). It is believed that while product returns are known to account for a large proportion of reverse logistics activities, manufactures are able to recover only a portion of the value of the returned products because of processing delays (Guide et al. 2006). For more than two decades, practitioners and researchers have been concerned with issues relating to “product returns” and “reverse logistics.” They have repeatedly advocated the need for more specific data, that is, empirical research on the topics (e.g., product remanufacturing and refurbishing, product returns, environmental aspects of packaging, product disposal, recycling, reusable containers, source reduction, life cycle analysis, product stewardship, green marketing, sustainability). Organizations have also realized that a better understanding of product returns and efficient management of reverse logistics can provide them with a competitive advantage. Sound practices in product returns and reverse logistics can be a “win-win” situation benefiting both customers and the firm (Stock 2004). When effectively handled, product return processes can help firms recover value. Furthermore, they can aid in the development of customer return policies that can increase customer loyalty (Rogers et al. 2002) and improve product sales (Mukhopadhyay and Setoputro 2005). Better understanding of issues related to product returns can also help identify areas in manufacturing or marketing where corrective actions might be necessary. In addition, with growing environmental concerns and legal regulations associated with green marketing and sustainability, activities related to product disposal in reverse logistics can provide insights into strategies for sustainable development (Srivastava and Srivastava 2006). However, it is possible that some organizations still do not realize the critical nature of product returns as it relates to profitability and customer service, nor the benefits associated with efficient product returns. Organizations are more likely to perceive the product returns function as an additional cost to be incurred in their normal business practices (Stock 2004). In view of this, there is a need to understand the place of product returns and reverse logistics in an organization’s marketing mix strategy, and the level of importance they would assign to reverse logistics as compared to traditional forward logistics. Product return policies and processes differ by type of business. For example, manufacturers may want to define return policies in stricter and narrower terms and may be concerned about the more liberal return policies of retailers