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View from Academia

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by Mark Ferguson, Guangzhi Shang, and Michael Galbreth , , Univ of South Carolina,Florida State Univ, Univ of Tennessee

Reverse Logistics Magazine, Edition 97

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Many companies are reluctant to enter the remanufacturing market because of concern with cannibalization of new sales, competition from current remanufacturers, and the willingness of consumers to purchase remanufactured products. What is often missing, however, is an in‐depth understanding of how consumers make complex purchase decisions involving remanufactured items among numerous other options. This study examines how consumers evaluate remanufactured products when there are multiple conditions and generations of the item available, and evaluates the risk that remanufactured products pose to new product sales. We leverage transaction data of iPad sales from eBay because this is one of the few platforms where a product is sold side-by-side with competing versions of the same product but in different conditions and by different sellers.

We find that the generation of the product (first, second, third generation), condition, and seller attributes are all highly influential in shaping consumers’ purchasing decisions and that the relationship between new and remanufactured products is much more nuanced and context‐specific than previously shown. Counter to industry intuition, we find that remanufactured products pose the same amount of threat to new‐condition goods as do used goods of the same product. This leads us to conclude that remanufactured products carry almost no additional risk of cannibalizing new product sales than does the always present used product market. Through these and other findings, we provide insights on how manufacturers and other organizations exploring entry into the remanufacturing business may achieve more profitable remanufacturing strategies.

The above is a condensed summary of McKie, E., Ferguson, M., Galbreth, M. and S. Venkataraman, 2018, “How Consumers Choose Between Multiple Product Generations and Conditions” Production and Operations Management 27(8), 1574-1594

An online copy of the paper can be found here:
This recurring series provides plain-English summaries of leading academic research in the area of consumer returns. It is co-produced by Mark Ferguson (Univ. of South Carolina), Michael Galbreth (Univ. of Tennessee), and Guangzhi Shang (Florida State Univ.).
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