Is Free Return Shipping for Online Orders Next?

Discussion
Mar 08, 2011
Tom Ryan

According to a recent survey, 88 percent of respondents rated free
return shipping as important, or very important when making a purchasing decision.

The
high results aren’t so surprising since the survey came from freeshipping.com,
a subscription based shopping program specializing in free shipping offers. Even
further skewing the findings, the respondents were 314 of freeshipping.com’s
members that had only joined the group since, presumably, they want free shipping.

Tom Caporaso,
president and chief operating officer of FreeShipping.com, nonetheless, told Multichannel
Merchant
that brick & mortar stores clearly have
a competitive advantage by being able to offer in-store returns for online purchases.
E-tailers offering free returns are likely to retain customers "since an
unexpected complication with their order becomes far less complicated, and fosters
goodwill when the merchant picks up the cost of getting it right."

He did
agree that site-wide free shipping can be challenging to "justify
economically." But by offering free shipping to a select group of consumers, "companies
can strike a balance between fostering goodwill with their best customers and
ensuring repeat purchases," said Mr. Caporaso.

A scant few online retailers
offer free returns. Zappos has a well-known free-return policy, believing it
provides an impetus for online browsers to try items. Competitors Piperlime
and shoebuy.com also offer free returns. But most e-commerce sites only appear
to offer free returns if the return was their fault.

Here are a few return policies
found by RetailWire:


  • Amazon.com’s return policy states, "If you return an item using the
    return label provided in the Online Returns Center and the reason for return
    is not a result of our error, the cost of return shipping will be deducted
    from your refund." Free returns are also not covered under its Amazon
    Prime program.
  • Overstock.com likewise offers a refund covering the full cost of the merchandise
    and shipping charges if the return is "a result of our error or defective
    product." If the item is returned unopened within 30 days of delivery,
    Overstock refunds the full cost of the merchandise minus the original shipping
    charge and actual return shipping fees.
  • Walmart’s return policy states, "If there is an error on our part
    related to your order, we will issue a credit for your order and any applicable
    shipping and gift-wrapping charges." It also emphasized that any online
    purchases can be returned to any store for free within 90 days.
  • Best Buy encourages consumers to "avoid shipping charges and receive
    a refund more quickly by returning online orders to any Best Buy store within
    the United States." It advises returnees forced to mail to use UPS ground
    or insured USPS to ensure proof of delivery.
  • Nordstrom takes $6.00 off the refund for online buyers returning using
    its prepaid label while encouraging consumers to bring the packing slip and
    credit card to any of its stores to avoid shipping charges.
  • Macy’s Elite & Platinum cardholders get free returns by mail on macys.com
    purchases.

 

Discussion Questions: Will free returns for online purchases become a competitive necessity for leading retailers? Do brick & click retailers have an advantage over pure play e-tailers in the area of returns?

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17 Comments on "Is Free Return Shipping for Online Orders Next?"


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Dick Seesel
Guest
10 years 2 months ago

Free-shipping offers have become a commonplace competitive tool for e-commerce sites, so it’s probably inevitable that free return shipping is the next frontier. For web-only sites in particular, it’s tough to compete against bricks-and-clicks retailers unless the transaction is risk-free to the consumer in both directions. However, there is a clear economic cost to two-way transportation (especially in light of rising gas prices) and the sheer expense of merchandise handling. Not all retailers will be able to build these costs into their economic model without raising retail prices. As soon as the consumer recognizes that prices are going up, the competitive edge of “free two-way shipping” may go out the window.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
10 years 2 months ago

The option to return items in store that were purchased online is a huge benefit. Almost as good as Zappos’ free return policy. Giving the consumer the chance to try something on especially with clothing and shoes is important. Toys and electronics are less important.

An idea for online only stores to consider – Offer 1 free return each quarter or a free return credit for every 3 purchases you make. This gives the shopper a sense of security without overburdening the online retailer. Again, I think this type of offer should only apply to garments and shoes.

Brick & Click like Nordstrom should be able to maintain this advantage, but time will tell.

Mark Burr
Guest
10 years 2 months ago

I always smile when I see ‘free shipping’ or ‘free returns’. Nothing is free. Nothing. It’s costing someone.

Nordstrom’s policy seems the most reasonable, realistic and acceptable.

Consumers are always attracted to the word ‘Free’. Just ask Mrs. Scanner and take a look at my shelves in the basement stocked with ‘Free’ product from Walgreens. I can assure you it wasn’t free even though Mrs. Scanner smiles and insists it was free. Of course, I smile too. Really, I smile.

Nothing is free. Nothing. Shipping or anything else.

Susan Rider
Guest
Susan Rider
10 years 2 months ago

Brick and Click retailers do have an advantage on returns to stores. The consumer sees this as an inexpensive, easy-return method and it doesn’t cost the retailer. As more online sales occur, consumers will be looking for the easy return or low-cost return methods. For a retailer that doesn’t have a store return option, finding a way to get past the hesitancy to buy because of a return will increase sales. It doesn’t have to be paying for shipping; it possibly could be twenty percent off the next purchase.

James Tenser
Guest
10 years 2 months ago
As some of us observed in a prior discussion about shipping charges, “free” is not really free in the end. It must show up somewhere in the net cost of goods. However, liberal policies for returns make sense on items that require try-ons or try-outs–Zappos is a great example, since shoe sizes and lasts are not uniform across brands and makes. I agree that its policy encourages certain shoppers to buy. The Amazon-type policy on returns can be slightly annoying when you are trying to return the third copy of a $10 paperback you got for Christmas and it deducts $3.50. But this policy makes sense too, upon examination–it’s not the company’s fault Aunt Minnie ordered you the wrong book. If you don’t like this arrangement, order from Borders or B&N and return to the store. Here’s where “buy-here-return-anywhere” multi-channel retailers have long enjoyed an advantage, I think. Buy the extra-tall jeans from Eddie Bauer that are seldom carried in the store, but return the pair that doesn’t fit with no shipping charges in the… Read more »
Christopher P. Ramey
Guest
10 years 2 months ago

Returns are an opportunity for Brick and Mortar stores to sell them something else.

The next evolution for loyal customers is to receive an additional product(s) with their promise that they will return it to the local store if they choose not to buy it. Not much different from the Nordstrom salesperson who comes out from the back room with three additional pairs of shoes for you to try.

Traffic begets sales.

Mel Kleiman
Guest
10 years 2 months ago

This is going to be one of the few advantages that brick and mortar stores are going to have when it comes to competing against online merchants.

That said, if the price of gas keeps going up, the cost of returning goods will be cheaper using a service then driving to the store.

Bill Hanifin
Guest
10 years 2 months ago

Online retailers are turning their attention to customer retention and to developing relationships.

Previously the sole focus seemed to be on acquisition and as the industry online has matured, so has the marketing approach.

I am an advocate of offering services such as free return shipping on a tiered basis. Why not make it available for free or at reduced rates to regular customers with established value while offering something valuable but less costly to the casual shopper?

The danger is that the industry capitulates and makes free return shipping a freebie for everyone. By adopting this approach, the retailers take a tool out of their own hands to develop longer term customer relationships with their better customers.

Ed Rosenbaum
Guest
10 years 2 months ago

I am in agreement with many of the responses I have read. Brick & mortar will retain the advantage when it comes to liberal return policies. I also agree the survey quoted results have to be a bit skewed at best since the site conducting it professes free shipping. What would they or we expect the numbers to be other than what we are told?

Larry Negrich
Guest
10 years 2 months ago

Returning purchases from online to store for free is already widely practiced and expected. This is an advantage for retailers with both online and stores. I don’t think consumers are completely averse to paying return fees/shipping in certain circumstances. What consumers (at least me) don’t like are unclear return policies. As a consumer I am willing to share some responsibility/risk in the return with the retailer when making a deep discount product purchase. For instance, I recently purchased a variety of types of memory for a few different computers I wanted to soup up. None of this memory was certified for my PCs (a danger of building from parts) so there was a chance they would not work. But the price offered by the retailer was so appealing (even with return costs) that I could not pass it up. I think many consumers are willing to weigh the benefits/risks and purchase accordingly.

Lee Peterson
Guest
10 years 2 months ago

It’ll be the mainstay within a couple of years, just like “free” shipping. The key for retailers is to figure out how to build that into margin the same way shipping is built in now. Stay away from commodities and it makes it all that much easier.

Ted Hurlbut
Guest
Ted Hurlbut
10 years 2 months ago

Free returns of online orders is the next shoe to drop. This would seem to favor brick & mortar retailers, but who it will impact the most is smaller, specialty online businesses. The Amazons of the world will find a way to absorb the incremental expense.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
10 years 2 months ago
My name is Doc and I’m a shoe addict. My daughter calls me a “shoe whore,” and I buy exclusively from Amazon’s Zappos website (mentioned in the opening remarks and in several comments). Not only are their prices and selection unmatched online, but they pay for shipping both ways and accept returns within 365 days. Unbelievable, right? Shipping is nearly overnight, so it’s a great way to try on shoes. Beats going to a shoe store. But category-wise, Zappos’s inventory is fairly limited compared to Amazon, Overstock, Walmart, Best Buy, Nordies, and Macy’s. These other retailers very often ship from their suppliers’ warehouses, making the control of returns problematic. Contrarily, my Zappos orders always arrive in a Zappos box from the Zappos shipping center. Much easier to control returns that way. I have also used Walmart’s free-return-in-the-store option and found it cumbersome. I drove ten miles to my nearly-new Walmart, walked about a mile and a half through the parking lot from my car to the store door, and then another mile and a half… Read more »
Matthew Keylock
Guest
Matthew Keylock
10 years 2 months ago
While nothing is free, and while bricks and mortar retailers have a current advantage for a blanket or mass market returns solution, online retailers have an increasing edge. Through the customer level data they gather, they have the ability to customize their service offering and even product offerings at an individual level. Some of this is already in evidence in things like delivery charges being waived. I see this only increasing and being applied across a broader spectrum of the retail mix. This can help them better serve their Loyal customers through rewarding the behaviors they seek, while ensuring the equivalent of “cherry pickers” are not similarly incentivized. Bricks and Mortar retailers can’t easily do this without great customer data and the ability to identify and communicate with customers directly. As a family, we probably split clothes shopping nearly 50:50 now between online and bricks and mortar and I know which direction it is going in. It’s not a “push” from bricks and mortar as I had great service and a great experience in my… Read more »
Billy May
Guest
10 years 2 months ago

I love the copy lead, “Survey: Consumers Want Free Return Shipping–Multichannel Merchant”

Here’s another consumer insight–consumer’s love free. Free shipping, free returns, free gift with purchase, free, free, free…oh, and the Earth is round.

Other contributors are correct–nothing is free. Shipping has traditionally been an operating cost. Amazon basically accounted for it as a marketing expense. Zappos went further and classified both shipping and returns as marketing expenses–doing so drives repeat purchases and more loyal customers. It also drives a 35% return rate, making a $1B gross sales suddenly shrink to $650 and a $6m operating income–that’s <1% for you math majors. So, while pure plays have a seemingly better operating model, offering free shipping and returns is a competitive and market share play. Multichannel brands are going to have to follow-suit, but better leverage their store base to maintain some semblance of convenience.

Online only retailers have a better economic model.

Kai Clarke
Guest
10 years 2 months ago

Yes. This is about enhanced customer service, rather than just free return shipping. Online retailers do not have much to distinguish themselves from their online competitors, once you get past price. So enhanced customer service is a key differentiator, including “free” shipping, “free” returns, faster processing, etc. The better the service at no perceived additional cost to the consumer and the more differentiated the retailer becomes.

Phil Rubin
Guest
10 years 2 months ago

There are reasons for and against free shipping but regardless of the brand or whether a retailer is multi-channel, very few can or should offer the same free return policy as Zappos does to ALL customers.

As free shipping for certain spend thresholds becomes table-stakes, it’s natural that free returns might follow. And while universal offers, free shipping/returns or otherwise, are commonplace, the smart approach is to discriminate based on customer and order value.

There is a challenge in setting standards and dealing with gray areas such as a large sale where a small part of the total “basket” is returned. Do you measure based on the net sale or the return?

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