Why do you personally think return rates are lower when a physical product is included?

There are few reasons return rates are lower for physical products than they are for digital products. First, physical products can’t be pirated. Oftentimes with digital products, people will just download the video or PDF or whatever the product is, and then turn around 15 minutes later and return the product. Retailers are out of luck in situations like this because many bigger wholesalers, like Amazon, require that sellers accept returns on all products.

Another reason return rates are lower with physical products is that, for the most part, people value physical products more than purely digital products. Physical products have a higher perceived value. Anybody can put a PDF together, but having a physical product shows a certain amount of effort was put forth. Plus, there are generations of people who like tangible goods. It’s like having a book on your shelf versus a book on your kindle. 

Also, convenience is a factor. If someone makes a $15 purchase on a physical product and wants to return it, but has to go to the post office and pay for shipping, they probably won’t make the effort. Small purchases are often not returned because the customer doesn’t want to deal with it. Whereas, with digital products, returns are much easier. No going to the post office, no paying for shipping.

In short, there’s several reasons physical products have lower return rates, it depends on the circumstances. But I’d say, for the most part, it comes down to perceived value.