Who should pay for return shipping, you or your shoppers?
Tasha Reasor
·December 23, 2021
Return shipping can be costly, but returns are a vital part of any growing ecommerce business. Deciding whether to pass return shipping costs onto your shoppers or pay for it yourself is an important part of developing your brand’s return strategy.
About 30% of D2C ecommerce transactions end in a return, and some of your competitors are offering free return shipping. That might have you wondering, should I be offering free return shipping too? There are pros and cons to charging for return shipping, and the question is really nuanced.
Why a good return policy is important
Most brands provide customers with the option to return products that fail to meet their expectations, typically within specified time limits and subject to conditions regarding the item’s condition. Your return policy can be as strict or as generous as you’d like it to be. Some brands encourage customers to wear their products out in the wild and then return them for a full refund if they don’t work out, while others specify that items must have the price tags on to be eligible for a return.
Customers can also return products under your brand’s warranty rules if the item is defective or flawed. In this case, you may give the customer a much longer time frame to return the product: The cookware company Le Creuset, for instance, offers a lifetime limited warranty on most of its products, enabling customers to return products with defects for a repair or replacement even years after making a purchase.
As a brand, offering generous return and warranty policies is a solid marketing strategy. It demonstrates that you stand behind your products’ quality and prioritize customer satisfaction. In fact, 91% of online shoppers review a return policy before deciding to make a purchase, so you’re highly likely to lose out on sales if your policy isn’t up to par.
An industry shift in return shipping
Over the last few years, we’ve seen a growing shift in ecommerce brands introducing return fees on their products, driven by economic pressure and the increased incidence of bracketing.
Don’t be afraid to shift your stance on free returns. Over 63% of Loop merchants charge return fees today, with no negative impact to repeat purchase rates. That’s an increase of 47% since the start of 2020. And 70% of shoppers agree that they’re willing to pay for a more convenient, premium return experience.
Rather than providing free returns in all situations, consider offering them in certain circumstances, such as:
Product exchanges
When a shopper requests to exchange, they still want your product—just a different version of it. An easy and free exchange process signals that you value your shoppers and will take care of them the next time they shop with you, which is likely given that 62% of shoppers would shop again from a brand offering free returns or exchanges.
Loyalty program members
If you offer a loyalty program or a paid VIP program, you can offer free return shipping as one of the perks of membership. In a free loyalty program, you might extend the offer of free returns to members who spend above a certain dollar threshold. In a paid program, you can offer a range of benefits to your VIP members, including free samples of new products, unlimited one- or two-day shipping, and free returns. By segmenting your audience, you can extend the perk of free returns to your most committed customers, demonstrating that you value them.
Considering when to charge
However, if the customer is requesting a refund, there’s more to consider when deciding whether to offer free return shipping. Customer experience, the potential for return abuse, and logistics costs are all factors to weigh up when evaluating your policy.
Deliver a premium experience
If you’d like to provide a similar brand experience to ecommerce giants like Amazon and Target, consider charging customers a membership fee, like Amazon Prime, which will provide benefits including unlimited free returns. These brands offer their members free return shipping on nearly all products purchased directly from them, regardless of the purchase price. They offer multiple avenues for returning items, including mailing the items back with pre-paid shipping labels or dropping the unboxed item off at a nearby drop-off location: For Amazon, that includes UPS Stores, Whole Foods, and other in-network locations; for Target, that includes all Target stores.
Facilitating hassle-free returns, either by mail or at a nearby drop-off center, shows your customers that you value them and are dedicated to serving their needs. As such, they’re far more likely to become repeat shoppers: A survey from Retail Dive found that 97% of customers say they would make another purchase from a brand where they’d had a great returns experience.
Reduce return abuse with return fees
On the other hand, there’s a downside to making it too easy to return products: Customers may abuse your returns policy by purchasing multiple products, knowing that they plan to send most of them back. They may do so because they’re not confident which size is correct, or simply because they want to explore different options and use their own virtual fitting room.
This practice is known as bracketing, and many customers take part on a regular basis. In fact, our Consumer Fraud Report found that 39% of respondents had engaged in return abuse or knew someone that had. Of these respondents, 25% of those who bracketed items said they did so at least once a week.
Bracketing and other forms of return abuse can cut into your bottom line and make it harder to manage your inventory. Often, returned products aren’t returned in resellable condition, so you’ll be forced to write off the losses—on top of footing the bill for return shipping and restocking. Preventing return fraud and abuse is crucial to operating a sustainable business.
In this case, mandating a set return fee (i.e., $6) is a manageable cost for your customer, but will encourage them to think twice about repeatedly sending back products they don’t intend to keep. It’s likely to significantly reduce return abuse: Our report found that 37% of customers said that having to pay a fee to make a return would deter them from abusing return policies.
If you do this, consider offering free return shipping as a VIP perk for customers who’ve signed up for your program and demonstrated loyalty to your brand. In this case, you’ll be able to offer free returns as a differentiator that helps you acknowledge and reward your most loyal customers.
Cover your costs on bulky items
Another scenario where return fees often make sense is if you’re shipping furniture or other large, bulky items.
Even if customers aren’t abusing your policy through bracketing, every return has a significant expense associated with it in terms of repackaging, shipping, and restocking. Getting items back to your warehouse can be costly, and if the customer has improperly packaged the item, it could suffer damage that may make it ineligible for resale.
To mitigate your risk, consider mandating that items must be shipped back in their original packaging, or you’ll add a supplemental packing fee. You can also include a fee for return shipping in this case, though you may want to waive it in case of an exchange.
The furniture and homeware brand Article, for instance, offers free return shipping on your first product exchange, but a $49 fee for returns without exchange. If you can’t return the item in its original packaging, Article charges a $50 repackaging fee. Implementing a policy like this encourages customers to choose an exchange if they don’t like their initial purchase, but also protects your brand with a financial buffer to ensure your return policy isn’t costing you.
Automate your returns policy
As we’ve seen, whether to implement return shipping fees can vary on a case by case basis.
To make the process easier, look to a returns management solution like Loop, which can help you set conditional rules around different types of returns. Whether you want to offer free exchanges and paid returns, or offer free returns for all items weighing less than 50 pounds, but charge a fee for heavy items, you’re covered. You’ll be able to set up workflows to create and manage the policies that are right for your brand and your customers, ensuring that everyone’s needs are met.
Want to see how Loop can help you automate your returns policy?
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