With free returns proving too costly for many retailers, is it time to start charging customers for the privilege?
Online shoppers have come to expect a free service as part of their e-commerce experience, but today the tide is turning. Fewer than half of retailers – 49% – offer free return shipping1. Brands are seeking to reduce returns, but also to introduce palatable payment models, to ease pressure on their bottom lines.
In Europe we’ve seen Zara2, move from free online returns to charging consumers to send back items. In 2022 fast-fashion favourite Asos.com3 said its revenues were being hit by rising costs, and rising returns. Subscription or ‘membership’ models such as Next Unlimited4 and Zalando Plus5 are coming into play. When customers pay an annual fee for shipping and other perks, costs of returns management are more likely to be covered, and there’s also scope for ongoing loyalty activities with signed-up members.
Will shoppers pay? Our Shopping and Returns Report has found that about half of global shoppers are willing to purchase products even if there is a nominal charge to make a return, with Gen Z (58%) most happy to pay, and Baby Boomers (34%) the least happy to fork out.
The pros and cons
For retailers struggling with the high cost of doing business today, charging for returns can provide an additional revenue stream. Fees and subscription payments will help offset expenses associated with returns management – the shipping, processing and restocking of returned items.
Also on the positive side, implementing a return fee can act as a deterrent for frivolous returns, encouraging customers to make more thoughtful purchasing decisions. This can contribute to reducing overall return rates and, in turn, help businesses maintain profitability.
However, this strategy comes with its share of drawbacks. A return fee may deter potential customers from making a purchase in the first place, as they fear the financial repercussions of returning an item.
With customer experience being a pivotal factor in online retail success, the imposition of return charges can lead to negative perceptions and damage brand loyalty. In an era where consumers value hassle-free transactions, a lenient return policy can serve as a competitive advantage, attracting and retaining customers who crave convenience.
Gradually, consumers are learning to accept that returns can’t always be free. However, our research reveals that attitudes to returns fees differ country by country. Our Shipping and Returns Report found that online shoppers in South Korea, Switzerland, the UAE and India were most willing to accept return charges. Shoppers in India were the most accepting, with 76% saying they would make a purchase even if a nominal cost was charged to return it.
If brands with cross-border audiences understand who is willing to pay for returns, they can successfully implement strategies that maintain customer satisfaction and build loyalty, aligned to local sentiment.
As businesses grapple with the decision, finding a compromise becomes paramount. Offering free returns during promotional periods or on certain products can be a compromise that addresses customer expectations while mitigating financial risks for retailers. Additionally, investing in technology to optimise sizing recommendations and enhance product descriptions can help reduce return rates organically.
Increasingly retailers are working with their supply chain partners to access a wider network of drop-off points, and state-of-the-art technology for returns handling. For example, retailers using Asendia’s e-PAQ Returns solutions benefit from efficient consolidation of returned stock. As part of our bespoke solution for each retailer, we offer comprehensive inspections to ensure returned items meet quality standards, verifying they are free from wear or damage. In some cases we donate or dispose of items not fit for resale, or send lower grade items back more slowly, thereby optimising the cost-benefit to the retailer. And by bulk-shipping returned items, we can reduce the costs and carbon footprint of cross-border reverse logistics.
It boils down to juggling customer joy with financial sustainability. Getting the balance right will be the key to success for online retailers in this challenging business environment.
1 https://ecommercefastlane.com/7-ecommerce-returns-statistics-that-will-blow-your-mind/
2 https://www.bbc.co.uk/news/business-61423753
3 https://news.sky.com/story/cost-of-living-shares-in-asos-and-boohoo-plunge-as-crisis-drives-surge-in-returns-126348174
4 https://www.next.co.uk/unlimited
5 https://en.zalando.de/membership/sign-up
