The effects of out-of-stock, return, and cancellation amounts on the order amounts of an online retailer

Junghwa Son, Sungkyunkwan University
Ji Hye Kang, University of Rhode Island
Sungha Jang, San Francisco State University


Despite the spectacular success of online retailers in recent decades, some inherent weaknesses, including out-of-stock, returns, and order cancellations, still negatively influence the financial performance of online retailers. The aims of this study are: 1) to examine the effects of these undesirable sales situations on the financial performance (in this study, the order amounts) of an online retailer; and 2) to investigate the moderating effects of price ranges (low, medium, and high) on the relationships of these undesirable sales situations with financial performance. A total of 2484 transaction data sets involving 260 brands obtained from an online fashion retailer are used to test the proposed hypotheses. In the pooled model, out-of-stock amounts have a negative impact, return amounts have no impact, and cancellation amounts have a positive impact on order amounts. Interestingly, however, these relationships vary with price groups, which verifies the moderating effects of price groups. Our findings provide new insights into managing undesirable sales situations by price group.