More than ever, online retailers are offering free shipping on returns for their customers. In fact, about 49% of retailers offer free return shipping. But how can this be achieved when companies are struggling with tightening margins?
Another metric to point out is the rising rate of returns. The return rate for online orders last year was up 15% according to many large retailers. In this ever-changing online marketplace, free or discounted returns are seemingly becoming an expected service online retailers are being forced to offer to their customers. According to a 2016 study for UPS, 60% of online shoppers prefer free return shipping, 51% prefer a hassle-free returns policy, and 40% like to see a return label in the package.
So how can small to mid-sized retailers stay competitive while offering free shipping for returns?
First, you must begin to look at free return shipping as a marketing tool instead of an added expense. You will still get sales without offering it, however, when a customer needs to return an item and finds that you do not offer free return shipping, chances are they will not purchase from your store again.
A study by Amanda Bower, Professor of Business Administration/Marketing & Advertising at Washington and Lee University showed that customers who paid for their own return decreased their post-return spending at that retailer 75%–100% by the end of two years. In contrast, returns that were free to the customer resulted in post-return spending that was 158%–457% of pre-return spending.
So in today’s age offering free or discounted return shipping is a must because of customer expectations. However this doesn’t mean you have to accept lower margins, there are things you can do to reduce your return rate, reduce your shipping expenses, and shift the costs back to the customer while still offering an attractive returns policy.
Common Reasons For Returns
When customers request returns through your website, by email, or by phone, make sure to keep track of the reasons the items are being returned. You will want to record and analyze this data in order to recognize trends and fix potential issues with your products or online listings.
Items that didn’t fit- this is a common reason for returns as sizing information can be inconsistent. Instead of just saying “small, medium, large, etc” in your postings, provide specific measurements for each size offering.
Items purchased with the intent to send some back- unfortunately, this is a reality we’re forced to face. Many shoppers purchase multiple items with the intent to send some of them back. In these cases, online retailers should not have to foot the bill. On your website when you ask the reason for return if the customer selects “other” as the reason they could be offered discounted return shipping or regular price return shipping.
Defective merchandise and poor quality- In cases where the product is defective customers expect to get free return shipping and if they do not, not only will they never shop from your store again, they will likely leave negative reviews. Offering to replace defective products is a way to establish trust with your customers and you should do whatever you can to either replace those items at no cost or cover the return shipping.
What You Can Do To Reduce Returns
A common reason for returns is a misunderstanding of what the product really is, whether that be the size, color, quality, or intended purpose. You can reduce the returns for these reasons by making your product listings as detailed as possible.
Keep track of return rates for each item and share info with vendors
In order to reduce your returns, you’ll want to keep detailed information of each return organized by item and item category. Whenever you experience a higher than average return rate on a specific item, look at the reasons and share the information with your vendors. You may find that the sizing information was incorrect, and in which case, your vendor may provide replacement inventory for free or at a large discount.
Offer to answer customer questions
Make it easy for customers to ask questions before purchasing. Take a look at what Amazon and eBay does with their Q&A sections toward the bottom of their product listings. You will prevent many returns simply by answering questions from your customers.
Set clear limits on what can be returned
You may have items that do not qualify for returns, such as customized or personalized items. Make sure to be very clear about items that cannot be returned and list that information prominently in the product listing and on your store policy page.
Establish a Return Deadline
Returns should only be accepted within a certain timeframe, such as 30 or 60 days. While you may want to keep that time frame as short as possible, the fact is that the longer a customer has the product the less likely they are to return it. They may become attached to the product, or they will simply procrastinate and forget to return the item.
Develop an Effective Returns Strategy
Aside from reducing your return rate, there are other things you can do to create an effective returns strategy that reduces your expenses.
Offer equivalent value credit towards future purchase
Many online retailers give the option of either cash back minus the discounted return shipping rate or full value back in store credit. By offering your customers the full value back in credit the money will stay with your store.
Charge a re-stocking fee
Because of the changing expectations of customers, you should be careful when charging a re-stocking fee, however, it can be done successfully without causing you to lose customers. The restocking fee should not be higher than 25%, and in many cases lower- depending on your average ticket size. Also, you should not charge a restocking fee for damaged merchandise returns.
Offer a flat or discounted rate to ship the return
Most shoppers feel that retailers should offer a lower cost returns shipping rate. If you cannot offer free return shipping, try to offer discounted return shipping for your customers. And most importantly, make sure they know they are getting discounted rates as this can be an effective marketing strategy.
Accept returns to the store
If you have a brick and motor store offer free returns or exchanges in-store to reduce your shipping costs.
Only offer free return shipping around the holidays or strategic times
Many online retailers
are strategic with their store policies and they change them around key shopping times, such as only offering free return shipping within a 1-month window of the holiday shopping season.
Reduce your shipping expenses
In order to offer free or discounted return shipping to your customers, you will need to improve your margins in other areas. We recommend reducing your initial shipping costs to increase your margins, therefore when you do get returns you will have more room to work with.
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