Free Returns are the new Free Shipping
Updated August 26, 2021
For many store owners, returns are lurking in the darkness, waiting to attack the bottom line. Having a solid returns strategy is important in preventing and managing return requests. According to Saara, 75% of online store owners surveyed are focusing on protecting the bottomline, and returns are a key area for improvement.
Returns in eCommerce: The Facts
In 2021, ecommerce sales are expected to account for 18.1 percent of retail sales worldwide. The number one reason people shop online is free delivery, and thanks to big box etailers like Amazon, customers have been trained to expect free shipping. Other key reasons include the ability to use coupons and apply discounts (41 percent), read other customers’ reviews (35 percent), easily return their items (33 percent), and have a quick checkout process (30 percent). In the United States, for example, UPS average daily volume increased 13.8 percent year over year, totaling 20.4 million packages per day during 2020’s third quarter. According to the 2017 UPS Pulse of the Online Shopper survey, 68% of shoppers view returns policies before making a purchase. 58 percent of people stop doing business with a company because of poor customer experience, including the post-purchase experience. 62% “would buy again” from a brand offering free returns or exchanges (Dotcom Distribution, 2018) and 90% “highly value” free returns. 96% would shop with a retailer again based on an “easy” or “very easy” return experience (Narvar, 2018).
Returns Can Increase Customer Loyalty
While many retailers fear shoppers with a high return rate, there are multiple returner profiles to consider. The most profitable customers have a ~32% return rate, which means they buy a lot, but they also return a lot. These customers present an opportunity for store owners to increase spending and customer loyalty with a seamless returns and exchanges strategy. For example, the advanced features of the EcoReturns app allow store owners to let AI offer incentives to customers who are requesting returns based on metrics like purchase history and SKU.
Returns Fraud is a Problem
In contrast to the best customers who have high return rates, there are returners who return a lot without keeping anything. Some fraudulent returners are snapping pictures in new clothes and returning them right after. Others may wear clothes for an event and keep the tags on. These returners with bad behavior tend to flock to apparel most frequently. It’s important for store owners to craft a return policy to prevent returns fraud, and monitor returns analytics on an ongoing basis.
Budgeting for a Free Returns Policy
When considering a flexible or free returns policy, look at the numbers. Planning for free shipping is more straightforward, as every order requires shipping and many vendors provide flat rate or predictable shipping costs. Returns on the other hand don’t happen on every order (thankfully), and the cost of reverse logistics is more complex depending on the structure of your store’s supply chain. The first step to budgeting for returns is to calculate your store’s return rate and costs of returns to consider. Understanding these numbers will assist you in budgeting for a free returns policy without losing profit.