Return fees vs free returns: pros, cons, and key differences
Carly Greenberg
·November 25, 2024
As an ecommerce retailer, reverse logistics costs can really cut into your profit margins.
In fact, the cost of managing the returns process can cost up to 66% of the original item’s purchase price. And if you’re not able to resell the item, you’re coming out at an even bigger loss after factoring in return shipping costs.
On the other hand, shoppers expect a great customer experience all the way through their purchase journey—including during the returns process. By asking them to foot the bill for product returns, will you damper their experience and alienate them from your brand?
In this article, we’ll look at the pros and cons of offering free return shipping vs. customer-paid returns. You’ll be able to understand what makes the most sense for your brand, and how you can balance a great customer experience with sustainable business expenses.
Free return shipping
First, let’s focus on the obvious: Customers want free returns, and they may not go through with a sale if they’re not happy with the available return options.
Shoppers said that box-free, drop-off free returns were their preferred returns method, and half of shoppers have abandoned carts due to a lack of convenient return options.
And while free shipping was still the top priority in making a purchase, 79% of shoppers said that free returns was also an important factor, coming in ahead of fast shipping or omnichannel returns.
By offering your customers access to free returns, you’ll help them feel more confident in their purchase. They’ll know that if they’re not happy with their purchase, they won’t be out of pocket for any expenses if they decide to send it back. That may make them more likely to try out a more expensive item they’re not sure about, or even to make a purchase in the first place if they’re new to your brand.
Offering free returns also helps you demonstrate your commitment to giving them a great customer experience—but it comes at a high cost to your brand. Promoting free returns can quickly become unsustainable in the face of growing operating expenses, particularly if you’re not strategic with who you offer free returns to.
Fortunately, there are other opportunities to elevate your customer experience without cutting into your profit margins on return shipping.
Charge return fees the right way
Learn howCustomer-paid returns
Are you worried that asking customers to foot the bill for returns will push customers away?
You’ll be relieved to learn that more than 40% of retailers are now charging return fees on at least some forms of returns, including major brands like Amazon, H&M, J. Crew, and Zara. It is fast becoming the norm.
Charging return fees helps brands cover the rising costs associated with processing returns, particularly given the rising incidence of “bracketing,” in which shoppers purchase multiple items with the intention of sending most of them back. By implementing return fees, you’ll introduce friction into the process that will make shoppers less likely to purchase items they’re not sure about keeping.
To ensure that charging for returns doesn’t create a poor customer experience, consider these tactics:
- Offer free exchanges
- Consider charging a fee only if the shopper is requesting a refund. If they’re open to an instant exchange or store credit, you can waive the return shipping fees—after all, retaining them as a customer is worth far more than the cost of return shipping.
- Provide the option of free in-store returns
- If you have physical stores in the customers’ area, offer them the chance to bring their products in for a free return. This helps your brand reduce reverse logistics costs, as the products can be restocked locally rather than shipped to a warehouse. Plus, by encouraging foot traffic, your shoppers are more likely to browse your inventory and discover other products they’ll love.
- Employ a consumer paid returns model
- With our new return fees feature, Offset, you can give your shoppers the option to pay a small fee up front at the point of purchase, for the peace of mind of a free return later. By asking a small fee (typically $2 or $3), you can guarantee them access to a free and convenient return later, ensuring a great post-purchase experience while still protecting your profit margins.
- Let shoppers keep products that won’t be resold
- If certain products aren’t likely to be resold for a profit, it makes more sense to let the customer keep it than pay to ship the product back. Using Loop, you can tag specific products or categories that will default to “returnless refunds”—the shopper will get their money back, but they can keep or donate the product.
Whether you offer customers free returns or ask them to pay for return shipping, make sure that you’re prioritizing a seamless, hassle-free post-purchase experience. By making your returns process as convenient as possible, you’ll be able to ensure that your shoppers have a great experience with your brand, promoting customer loyalty and high retention rates.
Want to see how Loop can help you build a best-in-class returns process? Book a demo.
In this article
Stay in the loop
Subscribe for product updates and Loop's biweekly newsletter.
Retain more revenue with Loop today
With Loop, your brand can offer everything from refunds to direct exchanges to shopper incentives and more. Even better? These exchanges build your business.