Breaking down the pros and cons of free return shipping for eCom
Samir Kamnani
·March 25, 2024
When it comes to return shipping, there are two modes of thinking: Keep it free, or charge a return shipping fee to your customers.
Seventy-two percent of shoppers say that a brand’s returns policy directly impacts their choice on whether to make a purchase – so they’re less likely to shop with you at all if they’re experiencing friction around undesirable return shipping fees.
But even in our “the customer is always right” environment, many retailers are pulling back on free return shipping: A recent study from Loop found that 56% of merchants now charge a fee on at least some types of returns. Given the rising costs of reverse logistics, and the increasing incidence of returns fraud, many retailers are choosing to implement return fees as a way to protect their profit margin.
Of course, customers overwhelmingly prefer hassle-free returns with free return shipping – but is keeping them happy worth the additional cost burden that’s placed on you as a merchant?
In this article, we’ll weigh up:
- What are the benefits of offering free return shipping?
- What are the drawbacks of offering free return shipping?
- How can merchants build a sustainable, customer-friendly returns process?
What are the benefits of offering free return shipping?
Ecommerce customers have come to expect free shipping as a default. When it comes to receiving their items quickly versus paying for shipping, a Shippo report found that 75% of customers would choose a longer delivery time, as long as they don’t have to pay for it. In fact, 63% of shoppers said that they wouldn’t complete a purchase at all if the brand didn’t offer free shipping.
That perception carries over when it comes to return shipping: 45% of customers said that free return shipping was the most important aspect of the returns process.
That means, if your brand prioritizes free return shipping as a part of the customer experience, you’re far more likely to win over new customers who are on the fence about trying out your products. They’ll feel confident in their ability to give your brand a shot, knowing that they can easily return or exchange products without suffering any financial loss. And a great returns policy can help you build sustained customer retention.
Consider free returns as a marketing selling point, and you’ll likely see benefits in terms of increased sales and customer loyalty.
The question is, are those benefits enough to outweigh the financial impact to your brand?
What are the drawbacks of offering free return shipping?
While free return shipping can help enhance the post-purchase customer experience, it comes at a cost.
Close to 30% of products purchased online end up being returned, and if merchants are paying the price of reverse logistics, they may pay as much as 27% of the original product price to get the item shipped, inspected, and restocked.
Adding to the pain, many of the items that are sent back to warehouses end up being ineligible for resale – meaning that you’ve paid the cost of reverse shipping without even being able to recoup by reselling the product.
Offering free return shipping also makes it more likely that customers will take advantage of your generous return policy.
For example, our Consumer Fraud Report found that 54% of customers engage in bracketing – a practice where they purchase multiple variations of the same item when they only intend to keep one. Chances are, if they had to pay to return the products they weren’t keeping, they’d be less likely to make orders they weren’t likely to commit to.
By enabling customers to try out multiple options at no extra cost to them, you might be delivering a better customer experience – but it can place a heavy burden on your business operations.
How can merchants build a sustainable, customer-friendly returns process?
We’re not going to tell you whether or not to offer free return shipping. Only you can decide whether it makes sense for your business model and customer base.
But whatever you do, we can offer some ways to streamline the returns experience and reduce your reverse logistics costs.
For instance:
- Offer in-store returns
If your customers hate paying return shipping, don’t make that their only option. Some brands have set up multiple return channels – customers may need to pay a return fee if they choose to send the product by mail, but may be able to return for free if they drop off at a retail store in your network. In fact, in-store returns is the preferred method for 64% of shoppers, so they’re likely to prioritize this method if given the choice. - Use dynamic routing to find the most sustainable return path
It’s not always cost-effective to ship back items to your warehouse, particularly if the product isn’t likely to be resold. Using Loop’s Dynamic Routing feature, you can automatically determine the right return option for each product – whether that means shipping to a warehouse, a third-party reseller, a donation plant, or a recycling facility. In some cases, it may make sense to let the shopper keep the item, while providing a “returnless refund.” - Optimize for exchanges over refunds
When customers are requesting a return, your brand can use Loop to provide incentives to encourage them to make an exchange instead. For instance, by offering a shopper a $20 bonus credit to apply towards a new purchase, they’ll be motivated to choose an alternate item rather than simply request a refund. Creating a generous exchange policy will help you retain revenue from the transaction, offsetting the reverse logistics costs of processing the return. - Use Workflows to customize when to offer free returns and when to charge a fee
With both benefits and drawbacks of free returns, it may make sense to take a blended approach to return fees. With Loop’s Workflows customization engine, you can decide when is the right time to charge a fee or not. For example, offering free returns to first-time customers and VIP customers can help customer retention and loyalty. And charging a fee to known serial returners and customers that take part in practices like bracketing can help protect your margins.
By using technology to make your returns process more efficient, you’ll be able to both save on reverse logistics costs and provide a superior customer experience – regardless of whether you charge for reverse shipping or not.
Want to learn more about how Loop can optimize your reverse logistics process?
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With Loop, your brand can offer everything from refunds to direct exchanges to shopper incentives and more. Even better? These exchanges build your business.