Are free returns right for your customers?
By Adil Wali , 26th Feb 2016

It’s one of the big questions that every online retailer faces – should we be offering free returns?

Whether or not free returns are even viable for your business is, of course, specific to your business model, but I can guarantee that they’re something you should investigate.

Why? Because customers care.

According to the 2015 UPS Pulse of the Online Shopper survey, 57% of shoppers consider paying for return shipping an issue, making it easily the number one issue encountered. 62% of shoppers consider return policy an important aspect of selecting whether and where to buy products at all.

In an earlier ShopRunner/Harris Interactive survey, 81 percent of survey respondents stated that they were less likely to make more purchases from sites that charge for return shipping. This tallies with the findings of a study published in the Journal of Marketing (emphasis mine):

“customers who paid for their own return decreased their postreturn spending at that retailer 75%–100% by the end of two years. In contrast, returns that were free to the consumer resulted in postreturn customer spending that was 158%–457% of prereturn spending.”

This insight arms us with a conclusion that is not inherently obvious: a free return policy is so appealing to consumers that the process of going through it actually encourages repeat business.

This makes sense – a consumer friendly return policy (especially once successfully used) creates a bond of trust between a retailer and customer. The customer now believes that the risk associated with making purchases from the retailer is inherently lower. So they have the emotional leeway to order more, feeling secure in their ability to easily return products they’re unhappy with.

Why not offer free returns, then?

Despite all the data pointing towards the benefits of free returns, only 22% of the online retailer’s assessed by the UPS study offer free returns.  There are a number of reasons for this.  First, certain retailers simply aren’t capable of offering these benefit, including low margin sellers who are competing on price alone or companies selling especially heavy or difficult-to-ship items.

Another reason is that many online retailers continue to internally stigmatize consumers making returns as attempting to game the system.  Making returns too easy could open the door to borrowing activity.  Imagine buying clothes or a videogame for a one-time-use and attempting to return them once you’re done. While this may be the case for a minority of your customers, the insight from the above study suggests that offering free returns actually increases the amount of spending that takes place, making up for losses incurred from serial returners.

The case for free returns in your business is ultimately predicated on the product you sell. Apparel, for instance, can see significant gains via a free return policy as consumers feel free to try out new styles or fits. Asos, for instance, goes so far as to ship their clothing in re-sealable packaging, encouraging returns, while Zappos was perhaps the original pioneer of the free online returns trend, offering shoppers an entire calendar year to change their minds.

When it comes down to it, deciding whether or not to offer free returns is an investment in your customers. You shouldn’t do it simply to “keep up with the Jones’s.”  You should do it because it makes sense for your business and your customers.  Dive into your own data and keep an open mind.  My guess is that you’ll find some kind of friction-reducing tactic around orders and/or returns to be worthwhile.

About the Author

Hi, I’m Adil Wali. I became a Microsoft certified professional at age 14 and started my first web development company. That led to a career as a serial entrepreneur, advisor, and startup investor. I got my first “real job” at 33, and I’m now a FinTech executive with a passion for the markets.