Free returns – a good or bad deal for retailers?
As free returns have become a consumer expectation rather than an extra service, the number of returns is exploding. How to cover the massive costs coming from increasing returns is turning out to become a real headache for retailers, but is the cost higher by not offering free returns?
German clothing seller Zalando reports a whopping 50% of the products they sell get returned. While the average number for apparel returns in general is lower ranging from 15–30%, the numbers are undoubtedly increasing in line with more retailers offering free returns. The no-commitment and often easy-to-use service, that free returns is, has even led to fraudulent returns practices such as “wardrobing”, where consumers buy clothes, wear it once and return it, together with ”snap and send back”, where Instagrammers buy clothes, wear it once for an #ootd picture (Outfit Of The Day) and return it.
This returns development is causing massive costs in returns handling for retailers, which they have a hard time covering. Retailers feel they have to offer free returns in order not to lose customers to competitors, as it is a fact that most customers check out an online shop’s delivery and return terms before making a purchase. This could indicate that the price of not offering free returns is even higher.
How to cover the costs from free returns
According to a study by consulting firm KPMG, the average returned purchase passes through seven pairs of hands before it is listed for resale. To pick and deliver an order costs between £3 and £10 in the UK. It can cost double or treble that to be processed on the way back through the supply chain.
Together with finding ways to reduce the number of returns, retailers should also focus on how to cover these return cost in the most sustainable way.
Reduce the number of returns
- Provide better product descriptions on your website
- Show high-quality product pictures
- Offer virtual fitting rooms
By keeping an eye on return data, retailers can also identity “wardrobing” customers. These should be handled with caution, as the majority of wardrobers still keep more than they return. However, contacting the wardrober and thank them for being a loyal customer and ask, if there is something that can be improved in the online shop to reduce returns, could potentially make the person aware of their own shopping behavior.
Ways to cover free return
- Digitize and simplify returns handling at the warehouse releasing resources to cover free return
- Free return built into the price – return is included in the price of the product
- Free return through subscription – offer free shipping and return for customers with membership
Research shows that 43% of UK retailers believe their returns strategy needs improvement, where only 20% see investing in the returns experience as one of their top priorities.
No matter how retailers choose to cover the increased returns costs, the most important thing is that retailers act, as ignoring the growing returns problem is unsustainable.
Text by: Consignor, firstname.lastname@example.org