“To offer or not to offer?” - if Hamlet would live in a modern world and own an online store, he would most probably ask this question regarding the e-commerce returns. No doubt that free returns are a huge part of any e-commerce business that wants to be successful relative to its competitors. However, generous return policies can dramatically impact any business's bottom line due to additional costs it generates. So it’s a difficult balance to maintain.
There are a lot of debates regarding this topic. While some harsh critiques are stating the negative sides of e-commerce returns, they are still trending in online retail. Keep on reading to learn the main pros and cons of free returns. We also provide an authentic study on e-commerce leaders' thoughts about the returns in the end.
Table of contents
- People tend to abuse returns policy
- Free returns are not so “free”
- E-commerce returns are not environmentally friendly
Pros of e-commerce returns
Your customer expects it
For starters, here is a good one: your shoppers simply want it. Research made by acquireconvert revealed that 8 out of 10 people expect online retailers to offer e-commerce returns. Even more, the same study states that 71% of respondents said that they are most likely not to buy if they have to pay themselves for returning the goods.
While there may be some proportion of shoppers who abuse your returns policy, sometimes customers aren’t the ones to put the guilt on. It’s not a secret that people often want to return goods because the product received doesn’t meet their expectations - size/fit is wrong, the color doesn’t match the picture, or received damaged goods. Thus, you as a shop owner are responsible for providing shoppers with relevant and accurate information and pictures.
One more thing to consider here is that your competitors are most probably offering it. Thus, by not offering them, you may be losing superiority over your rivals. And if they are wise, they will pinpoint that they have this advantage. Worst-case scenario, you lose a customer due to the fact that the competition offers free returns.
Optimized conversion & sales
When it comes to a decision on where to spend hard-earned money, customers want safety and reassurance. Hence, e-commerce returns can serve as a conversion optimization technique. By offering it, you are saying, “don’t worry if you make a mistake; you will be able to fix it without spending a dime”. And this can really incentivize clicking that purchase button.
In fact, the research from Washington and Lee University revealed that not charging customers for returns increased purchases by 58%-357% over the next two years. To compare, for those retailers, who did not offer it for free, subsequent purchases dropped by 74-100%. However, the results may be different for your business specifically, as it depends on the products you sell, the vertical you are in, and your target audience.
Complimentary returns eliminate the drawbacks of online shopping vs. brick-and-mortar stores. The customers tend to be more confident about their purchase, as they know that they can assess the visual look & feel of the product at their home, just like at the physical store, and have a hassle-free return they don’t like the item.
Increased customer loyalty
The equation is pretty simple: happy customers = better retention rates = more purchases = more revenues. And e-commerce returns are one of the drivers of increased customer retention. In fact, 78% of shoppers will make a repeat purchase if the online store offers returns without charge. Besides, 37% of retailers claim that implementing it led to increased customer satisfaction.
However, it's not enough to simply have a returns policy. 84% of customers said that they wouldn't return if the return experience was poor. Thus, the experience itself has to be effortless to have better retention rates.
To sum up, returns on the house can serve as a statement of your brand that the customer can be confident about. It's sending a message that you can ensure your products' quality, resulting in happier customers. By reducing friction during the return process, you can expect to turn a single customer into a repeat buyer more easily.
Cons of e-commerce returns
People tend to abuse returns policy
“I usually wear size 36, but sometimes 38 suits me better, and I also like this dress in red best, but yellow is trending and matches my eyes nicely. So I will buy four options of this dress and return three of them. And I will do the same with another five clothing pieces that I am buying. Returns are free after all!”. Oh yes, the usual mindflow of a bracketer.
Bracketing is a form of abusing the returns policy when buying different product variations, clearly realizing that you will return most of them. There are also some people who buy an outfit, wear it once or share it on social media and return it without being additionally charged. They may not be the majority of your customers, but there could be some. NRF found out that in 2018 the sum of abused returns topped up to $24 billion!
However, it may not be wise to punish all of your customers just because few people are taking advantage of your e-commerce returns policy. Here, the intelligent thing to do is to look at your own data and decide if reducing or removing returns is something worth doing for your business.
Free returns are not so “free”
Offering returns means that you pay for it, and it can hurt your bottom line. KPMG reported that e-commerce returns cost two times more than delivering them. In just the US, return deliveries will cost $550 billion in 2020, which is up 75.2% from the previous four years, which means that it costs REAL money for retailers.
The actual cost of it doesn't end up with the shipping costs covered by you. There are also other expenses in terms of resources and workforce to process a return. Moreover, there is always the risk that the returned item will be hard to sell again.
Once again, the critical thing to consider here is the niche of your e-commerce store. Returning a pair of jeans will cost you less than returning a coffee table. Moreover, you can think of other intelligent strategies to deal with issues raised by items being returned, such as offering it only for specific categories, during special promotions, or only to loyalty program members.
Balancing the inevitable cost of returns against the possibility of more significant consumer traffic is something that every e-commerce retail site must consider for the future.
E-commerce returns are not environmentally friendly
Here is the ugly side of all this - returns are not sustainable at all, so mother earth won't shake hands with you. According to Optoro, in the US, returns create 15 million tonnes of carbon emissions and 5 billion pounds of landfill waste every year!
The process of returning the goods creates additional carbon waste, as the product needs to travel the same route again. And the impact gets even worse if retailers use nearly impossible to recycle materials in their packaging, such as plastic. Moreover, in many cases, each item needs to be manually checked, cleaned, rewrapped, etc. Of course, some goods are donated, and they live another life by helping people in need, but some part of it ends up in the garbage bin.
Most customers do not realize the impact their actions have on the environment when choosing to return 4/5 items. They may think about the carbon footprint they create by doing this, but they rarely comprehend other involved costs. And the ones who are aware of this have to choose between their well-being and society. So as it naturally happens human beings tend to prioritize their own happiness.
The responsibility for the vast impact of returns on the environment falls in both - customer and retailer hands. Retailers should ensure that they've done everything to help customers order the correct item in the first place. Moreover, they should educate their customers about the impact their choices have on the climate. Such things as supply-chain transparency may be the first step of the journey. And the customers themselves need to change their mindset and stop putting their needs above society.
E-commerce leaders thought on returns
We covered many points of view in this article, but let’s look at how the reality looks like - what real retailers are thinking about e-commerce returns. E-commerce search solution provider SearchNode conducted an e-commerce leaders survey on e-commerce Trends 2021, which attracted more than 100 decision-makers from the most prominent e-commerce companies in the world. The complete survey includes 34 survey questions covering new e-commerce trends, businesses’ thoughts, future technology plans, and more. One of the questions was about free returns. Thus this is a great benchmark to see what will be the future of this topic.
As many customers expect retailers to offer returns for free, it's not surprising that SearchNode survey revealed 59% of e-commerce leaders will either continue to provide it or begin to offer it in 2021.
On the other hand, many companies are trying to stop offering returns without charge entirely. The survey revealed that 1 out of 4 online retailers will not offer it in 2021. This may indicate that the potential savings brought by paid returns can be enough to compensate for potentially lost sales.
Final word on e-commerce returns
While there are many benefits of free returns for online retailers, the hidden costs may be higher. After all, it depends on your business and its customers entirely. It is not all black and white; thus, you shouldn't think about the returns policy just from a "to offer/not to offer" perspective. Many retailers find tailored e-commerce returns strategies very effective. Thus, analyze your sales data and finances to identify potentially profitable opportunities. Our advice would be to survey your customers and do a lot of testing before deciding to change your policy. After all, all e-commerce businesses are different, so the results may vary for you and other online stores.
It is exciting to see that some companies already limit the number of returns or eliminate the service entirely. They are doing all of us a favor, as they contribute to the reduction of pollution. But there is still a lot of work to do for the retailer and customers, who should be educated to help them realize the actual costs behind blindly abusing the free return policy. Let's hope it's the right direction for the future, but for now, at least, free returns will continue to be a largely negative force for e-commerce companies.