Should retailers be looking to leverage free return shipping?

Discussion
Source: J.Crew/Narvar
Oct 08, 2021

Narvar’s “2021 Return Benchmarks Report” finds some retailers leveraging free online returns in a variety of ways, including to incentivize faster returns, turn online exchanges into store credit and to support their loyalty efforts.

Among the strategies:

  • Free online returns for a limited time: Saks Fifth Avenue provides free returns for the first 14 days post-purchase and thereafter subtracts $9.95 from the refund amount as a return fee. Lulus, the women’s apparel e-tailer, offers free return shipping for 10 days and charges a $7 fee afterwards. Enticing early returns gives retailers the chance to restock merchandise for another sale while also limiting shipping expenses.
  • Free online returns for store credit: ThredUP, the online consignment retailer, and Dollskill, the apparel e-tailer, both offer free shipments on returns but offers merchandise credit instead of a refund. Under this method, retailers still cover shipping costs but don’t lose the sale.
  • Free online returns as a loyalty perk: Several retailers offer tiered policies around free shipping to provide special conveniences to VIP customers. For example, Home Depot loyalty members gain 365 days of free shipping for returns versus 90 days for non-members. In the same way, Target offers 120 days of free online returns for members versus 90 days for non-members; Best Buy, 30 days versus 15 days; and DSW, 365 days versus 90 days.

Narvar’s analysis of the return policies of 197 retailers found only 36 percent offering free shipping on returns. The perk was much more common at larger than smaller stores. Among the findings:

  • Of the 11 Fortune 50 retailers analyzed, all covered shipping costs on returns.
  • Of the 82 omnichannel retailers analyzed, 45 percent covered shipping costs on returns.
  • Of the 104 D2C retailers analyzed, only 22 percent covered shipping costs on returns.

DISCUSSION QUESTIONS: What do you think of using free shipping on returns to incentivize shopper behavior and/or create stronger customer loyalty? Are there particular uses of free returns of online orders that you favor over others?

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"Free online returns for paid subscription loyalty members (a la Prime) should be a standard part of the deal. "

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20 Comments on "Should retailers be looking to leverage free return shipping?"


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David Naumann
BrainTrust

Free shipping on returns is table stakes for retailers. Personally, I will rarely purchase anything online unless there is free shipping on returns. Free return shipping is especially important for apparel, as it is hard to know if items will fit until you try them on, unless it is an item that is a repeat purchase. Amazon has gone one step further by not requiring you to even box the item back up if you drop it off at one of their collection points. Making returns easy and free is essential to maximize sales and curate brand loyalty.

Dave Bruno
BrainTrust

Free returns are a slippery slope. Once we give them away, it is extremely difficult to take them back, as we well know. While I think free returns are highly valued by consumers, they are in fact high-value perks, and should be treated as such. At a minimum, I believe they should be tied to loyalty, and even then think carefully about what status is required in order to earn the free return shipping.

Ken Morris
BrainTrust

I think free shipping has become table stakes for many retailers. The price of the product should determine whether or not shipping is free. If I’m buying something for let’s say $100, I don’t want to have to pay $10 ship back something that is damaged, doesn’t fit right, etc. This would create a permanent branding error that may last a lifetime. Loyalty equals free shipping at a certain price-point.

Of course the free-shipping option works best for loyalty and engagement if the customer has to go to a store to drop the item off, not to a UPS store.

The free returns game will continue to generate more and more options for retailers and customers. It will be interesting to see how retailers can work fraudulent returns into the mix. In other words, can they use the revised return policies to their advantage to cut down on “fake” returns? Authenticating returns with RFID’s serialized inventory capability would make this work.

Melissa Minkow
BrainTrust

Returns are the pain point for consumers when buying online because of how uncertain sizing can be. Amazon caused consumers to expect free returns and loathe any added expense to the process. Retailers who charge for returns definitely leave a bad taste with consumers, and any way to make them free is appreciated. Chewy has a fantastic returns policy wherein consumers are simply asked to donate the unwanted item to an animal shelter or pet in need while still receiving a full refund. Returns present a key opportunity to differentiate and build an emotional connection with consumers, but incentivizing shoppers to return in a way that reduces waste creation and aids with demand planning is strategic and respectable.

Katie Thomas
BrainTrust

I completely agree – we need consumer-friendly ways to improve the returns process for some of the exact things you call out, like uncertain sizing within a brand and across the board.

Bob Amster
BrainTrust

I favor all three of the alternatives listed in the article. Returns are not free, therefore, there needs to be a quid pro quo in offering “free” returns. Those are the three mentioned above, plus one not favored by many: increased mark-up, which hurts all customers that do not return merchandise. I have never favored free returns unless the cost of returns is covered by hidden, higher gross margins.

Neil Saunders
BrainTrust

Consumers often expect online returns to be free, especially in apparel. However returns cost retailers a huge amount of money. This should be built into the business model, but anything that can be done to incentivize better behavior – especially in terms of timely returns – is welcome. Like anything in retail, more power lies with those who offer very differentiated products that people want. That’s perhaps why DTC firms, which often have unique, compelling items, are less likely to offer free returns – they don’t need to as they know consumers can’t go elsewhere to get their products and they can build loyalty in other ways.

Katie Thomas
BrainTrust

While returns do cost retailers a lot of money, I’d argue it’s also a cost of doing business. Consumers of a product should have the right to return something if it doesn’t fit/suit their needs/the quality is lower than expected.

I’d argue that even the above treats the symptom, not the cause. Enabling retailers to get the product back on the floor quickly/in season is great but ultimately there needs to be a larger fix to the overall returns value chain.

Craig Sundstrom
Guest

Hard to disagree: a company that has a persistent problem of returns due to “quality is lower than expected” has a lot more to worry about than how the returns are handled.

Ben Ball
Guest

Free online returns for paid subscription loyalty members (a la Prime) should be a standard part of the deal. Beyond that, the highest return and highest leverage on free return shipping for retailers would seem to be store credit. Shoppers who might balk at store credit for returns will likely view it as a good tradeoff if it unlocks free shipping on returns. This is natural for holiday shopping of course, but retailers in categories like apparel should consider it year-round. The number one shopper in our house won’t order apparel online unless she can get multiple sizes or colors and then have free returns on the no-go items.

Dr. Stephen Needel
BrainTrust

I hate saying this (and I agree with David Naumann) but this is table stakes, especially with apparel. That said, it seems to me you can a.) limit the time – who needs a month to decide whether something fits or looks good? or b.) limit the number of returns per person relative to amount spent over time. I know people who buy everything online and return half – I’ve got to be paying for some of that free shipping and some of those free returns.

Jeff Sward
BrainTrust

I like the way this article portrays the costs of returns as “covered” rather than “free.” That one word acknowledges that there actually is a cost involved, and that the retailer is being somewhere between generous and magnanimous in covering that expense — up to a point. “Free” returns have to be one of the most expensive customer acquisition/retention expenses in the business. So yes, they need to be used surgically and strategically. And customers with abusive return rates can be left at the curb, picking up or dropping off their online purchase.

David Spear
BrainTrust

Free returns is a big perk for shoppers and it does figure into the buying mindset. That said, I’m not surprised by the 55 percent of omni-retailers who do not offer free returns. The growing cost to serve the online shopper is significant. Offering a time lapsed window for free returns is smart as well, primarily because the return/markdown process is cumbersome and quite messy for many retailers and, for some, a real Achilles’ heel that degrades profitability.

Shep Hyken
BrainTrust

Free shipping and easy returns are part of the guarantee that you’ll be happy with your purchase. It’s often an incentive to buy without risk. This creates confidence and can lead to making the sale. The retailer that fights this customer benefit is going to lose out to competition.

Venky Ramesh
BrainTrust

In light of the wider supply chain disruption which is coming in the way of timely availability of products during the holiday season, I think retailers need to consolidate returns by way of a fourth model (by employing the services of firms like Happy Returns). That will hopefully ease some pain around forward shipments.

Rich Kizer
BrainTrust

I certainly agree with David Naumann that free returns are table stakes today. But there is a rat in this discussion. So I buy an item and get delayed when returning it — and then I have to pay an additional penalty fee? If I were king of retail and had a store today, that penalty policy would never happen until at least 60 percent of my competitors did the same. If you must have a purchase penalty clause, please train the associates on how to explain it so the store doesn’t lose customers with bad press. Let there be no surprises!

Brandon Rael
BrainTrust

One of the most friction-filled customer experiences is the reverse logistics/returns process, especially with the omnipresence of e-commerce. Just as retailers and DTC brands offer free shipping for orders over a certain threshold, free return shipping should be considered table stakes in the battle for consumer loyalty. Every customer experience and journey touchpoint is an opportunity for retailers to build loyalty, including product returns.

Narvar’s study is very revealing, especially given the fact that the return policies of 197 retailers found only 36 percent offering free shipping on returns. The return rates on e-commerce orders are proportionally higher than those bought in-store. Why not provide a more seamless and frictionless experience? Amazon has taken this further by enabling their Whole Foods locations to accept unpackaged items and leverage QR return codes.

Craig Sundstrom
Guest

Hmm … thought it was pretty universally agreed that returns were a horror story that should be minimized as much as possible, not “leveraged.” So here’s a radical idea: free returns should be available as a last resort (wrong item, damaged, etc)…let’s stop giving stuff away (especially expensive stuff).

Kai Clarke
BrainTrust

No. Free is free. Leveraging free returns is trying to confuse the consumer and is inherently unethical and misleading. Any post-purchase charges should be broadly stated on all order pages, product descriptions, and agreed to prior to any purchase decisions are made. Anything less than this is misleading, unethical and borders on theft (promising free when it is not). I wouldn’t do business with any retailer who states “free” but in reality their return policy has fine print that includes return charges of any kind, regardless of the reason.

Karen Wong
BrainTrust

Free returns attract shoppers that bracket, and they incentivize costly behavior. It’s increasingly built into the fashion/apparel business model today but, as stated above, DTC brands are able to get away with the vast majority of customers paying for the cost of returns. So it is not quite table stakes if you’re offering unique, differentiated products or experiences. Even if you can’t quit free returns, incentivize shoppers to return in store. It’s cheaper and often leads to an exchange instead of a lost sale.

wpDiscuz
Braintrust
"Free online returns for paid subscription loyalty members (a la Prime) should be a standard part of the deal. "

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