Are free returns a good way to drive online sales?
Through a special arrangement, presented here for discussion is a summary of a current article from Return Logic’s blog.
They didn’t invent it, but Zappos is widely credited with using a free product return policy to drive online sales. The idea: customers are more confident making purchases if they know they’re not locked in.
Yet retailers are as wary about free returns as consumers are enthusiastic. There are both pros and cons to how free returns impact retailers:
Pro: Academic research finds free returns pay. A study at Washington and Lee University found that after a free-return shipping policy was instituted at two retailers, average spending per customer increased by $620 over two years for one and $2,500 for the other. When customers had to pay for shipping, their purchases fell between 74 and 100 percent.
Con: Results may vary. These are big ranges and retailers differ in their value propositions.
Pro: Customers love it. A JDA Software survey found 62 percent of consumers are frustrated when asked to pay for return postage and packaging.
Con: Free returns cost a lot. Retailers switching from fee-based to free returns will take a short-term hit to the bottom line. Those that fail to project these costs correctly or know how they are going to cover them could run into trouble quickly.
Pro: Your competitors are doing it. A National Retail Federation study found that about 59 percent of retailers currently offer free return shipping. Those numbers grow during the holiday shopping season.
Con: Consumers will take advantage. Free returns can encourage unwanted consumer behavior, such as wearing an item once and returning it, ordering many options and keeping only one, or ordering on a whim without serious intent to keep the item.
Pro: It’s not an either-or. Retailers can create limited-time free return events, restrict free returns to certain categories, offer it only to loyalty club members, or a combination of these and other limitations.
- The Pros and Cons of Free Product Returns – Return Logic
- Offering Free Returns Can Boost Online Purchases 357% – CNBC
- Uncommon Service: The Zappos Case Study – INC
- JDA study looks at impact of consumer patterns on holiday-related retail supply chain activity – Logistics Management
- 2015 Consumer Returns in the Retail Industry – National Retail Federation
DISCUSSION QUESTIONS: Are you generally for or against free return shipping policies? Would you add any safeguards or steps to help mitigate downside risks?