The How & Why of Free Returns

Posted by Maeghan Hurley on Thu, Aug 14, 2014 @ 02:13 PM

The How Why of Free Returns

Reverse logistics are often an animal that no company particularly wants to handle, but for anyone in ecommerce, it’s necessary. No matter how efficient you are at picking the correct items, packaging well, and shipping, there will always be customers who decide to return an item for one reason or another. And reverse logistics aren’t necessarily cheap. They’re an added cost that must be factored in to ecommerce budgets.

However, many retailers have begun offering free returns, where quite simply if the customer decides he or she doesn’t want the ordered item, the item can be returned 100% free of charge to the retailer. This seems like a risky move, but is it?

Shopping Online

As more and more consumers move to doing the majority of their shopping online, many are spending less time out in stores where they might try on a particular item of clothing before they decide to buy. Shopping online means the consumer doesn’t get that opportunity—the buyer may have no idea if the dress is actually flattering or just makes her look flushed out.

A free return policy is almost like a dressing room. If a customer orders an item and pays for shipping, tries it on to find it doesn’t fit, and is then forced to spend additional money on shipping in order to return the item, the customer is still out money with nothing to show for it. That makes customers, on the whole, less likely to order again at the risk of spending more money in order to try an item.

Boosting Sales

In 2012, a study showed that free returns could actually raise customer spending by over 350%. Moreover, after customers had to pay for their own returns, their purchases dropped to between 74 and 100%. That means that if you’re asking customers to actually pay for their own returns, you have, at best, a 1 in 4 chance of that customer buying something from you again.

While investing upfront in free returns, keep these numbers in mind. Ultimately, the return on investment is almost assuredly there. Shoe retail powerhouse Zappos has been the subject of a number of studies that shows that this is often the case.

In Store Returns

If you are a retailer with both an ecommerce presence as well as a number of storefronts, you might be able to get around free returns. Even with a storefront nearby, many customers will still opt to order online for the convenience of delivery to their front doors. If you opt to not offer free returns, you should probably allow customers to return merchandise ordered online to storefront locations. While it may be out of the way for some, for others it’s still more convenient than paying for a return. On top of that, you get that person in one of your stores, with all of your merchandise in front of them. 



The Costs of E-Commerce White Paper

Topics: Returns, 3PL, Reverse Logistics, E-commerce