Should I offer free returns? And other mysteries of the modern return policy.
Retailers — we hear you. Managing online returns is like walking a tightrope.
You want to provide the best returns experience because you know your customers love and expect easy, free returns. You see how simple the big retailers make returns. You read the reports and articles quoting the high percentage of customers who factor your return policy into their decision-making.
Shoppers return e-commerce purchases 2–3x more than in-store purchases. During the pandemic, online returns grew +100%. Shoppers, accustomed to fast and free delivery, expect free returns despite the added cost of shipping a product back.
On the other hand, you have a business to run, mouths to feed, and employees to pay. Returns are lost revenue, and incur shipping and restocking expenses to the tune of ~$12 per item returned.
We’re currently experiencing an e-commerce boom, hugely accelerated by the COVID-19 pandemic, increasing consumer demand for easy, seamless return services. Savvy retailers such as yourself will need to craft a returns experience that optimizes your and your customers’ needs.
How do you make returns “easy”?
Consumers will love the optionality and ease of the above returns process. What does this mean for you?
Benefits
First, you can think of your return experience as a marketing expense. Over 90% of customers make repeat purchases based on return policy alone. This number is even higher among power shoppers (those making 11 or more purchases every three months).
A good return policy boosts both customer acquisition and retention rates. 81% of customers are more loyal to retailers with a generous return policy, while 73% say they are less likely to buy from a store with a restrictive one.
The importance of a customer-friendly returns experience is apparent when looking at the leading retailers. All of the Fortune 50 retailers offer free returns, and many offer multiple ways to make a return (in-store, at the carrier, with partner retailers, etc.)
Example retailers offering free returns:
The newest convenience in the market is at-home returns pickup.
At-home delivery service has taken off over the past two years, and this trend has expanded to e-commerce returns. Retailers have taken notice of this trend, with a few, including Apple and Walmart, offering free returns pickup.
Costs
Creating a returns platform yourself is time-consuming and expensive. Developing your own online returns portal requires significant tech experience, or investment.
As we mentioned above, it costs about $12 for returns shipping and processing. However, customer acquisition cost can range from $10 (for all retail goods) to $129 (for smaller apparel shops) and rising. Let’s assume the average cost for an apparel retailer likely lies somewhere in the middle. If the average cost to process a return is $12, it would take over 5 returns a year to exceed traditional marketing acquisition spend. Losing the shopper likely outweighs the loss of a few returns.
Lastly, and most simply, you don’t want to lose a sale, and enabling easy returns will increase return rates.
What is the optimal easy returns strategy?
There is no one-size-fits-all strategy for returns. You will need to determine the right strategy for your business.
Experimenting with your policy to find the right balance is a good first step. Test each tenet of the easy return policy against sales and customer loyalty metrics. Iterate until you find the profitable balance. No matter what your policy ends up including, make sure that it is clearly visible on your store page. Make sure the language is easy to understand and clearly articulates your policies.
Over half of shoppers look at the return policy before shopping, so it is important that your policy provides a good first impression.
An online returns platform will enable you to easily implement and iterate your returns policy. The platform should make it easy for a customer to start their return (ideally just by entering their email address.) It should also give your customers the option to exchange for a new size or different item online.
Once the user decides what they want to return or exchange, the platform should offer multiple return options including drop off (with nearby drop-off points listed) and, to keep up with consumer trends, the option to schedule a pickup. You can offer this as a free customer service (and foot the bill yourself), but we’ve seen that consumers are willing to pay $5–8 for this (awesome) convenience.
At the end of the process the user should see a summary of the return, and complete the process knowing that their refund will be processed automatically. Overall, the platform should be easy for the customer to navigate.
If you’d like to learn more about optimizing your returns experience, reach out to us at Boomerang. We have over 35 years of experience in retail and supply chain and are eager to perfect your returns strategy.
