The Expectation of Free Returns

The average American consumer spends $1,804 a year shopping online. Alongside this immense amount of spending comes increased consumer demands. Retailers have already seen an influx of requests for same-day delivery, which has forced them to innovate their supply chains in order to accommodate this “on-demand” generation of buyers. Another online shopper demand is free returns for their purchases. With companies like Zappos, Nordstrom, and Amazon offering free returns on purchases, it makes customers expect that every online retailer should offer free returns. This consumer demand has led to about 49% of online retailers are now offering free returns on shipping, according to a study done by the National Retail Federation.

Studies have shown that not offering free returns can be a deal-breaker when it comes to customer conversion. “A recent CNBC report that followed several online retailers found that when product returns are convenient and free, customer confidence and spending dramatically improve over just six months. In this particular study, retailers saw gains in online sales by as much as 25% or more.” These results have led to unexpected technology companies taking notice of the immense demand for free returns by online shoppers. In fact, PayPal has decided to reimburse customers up to $30 during the holiday season for return shipping costs. Much like free shipping, free returns are a way to remain not only competitive in the etail space but also gives you a competitive advantage with brick-and-mortar stores.

Of course we know that “free returns” aren’t really free, especially for the online retailers offering them. There is always a cost associated with shipping and with both FedEx and UPS instituting new policies regarding dimensional size pricing this year, it has made shipping even more costly for retailers. Most online retailers are willing to absorb these costs and look at it as a marketing expense that improves the customer’s buying experience and leads to higher conversion rates, however at the end of the day, retailers are paying for these “free returns” and need to figure out a way to offer this shipping service without harming their margins.