Free Returns: An Obstacle for e-Commerce
Studies indicate that online shoppers abandon websites that do not offer free returns shipping. This only makes sense, as the allure of e-commerce is convenience, a broad selection of merchandise, and competitive prices. Free shipping — from delivery through return — keeps the total purchase price similar to in-store shopping.
But there are two sides to free returns.
1. Free Returns Increase Sales
For retailers with brick and mortar stores, receiving returns from e-commerce purchases at a store is the easiest solution. The option is convenient for the consumer, eliminates the cost of shipping, drives additional sales for the retailer, and — if implemented properly reduces the cost of returns processing.
Pure-play Internet retailers without stores to accept returns are at a disadvantage. Assume a consumer is in the market for a new pair of athletic shoes. Online shoppers enjoy the ability to compare styles and prices on-line until they find the best deal. When they find the brand, style and size they are looking for at the right price, they are ready to buy.
Smart shoppers calculate total cost to purchase. Is shipping free? Yes. If the shoes don’t fit, what is the shipping cost to return them to the retailer? The consumer is able to determine the total cost to purchase and will abandon the shopping cart if the total costs exceed a competing website or purchasing the product in a store.
Additionally, advertised free returns will attract shoppers who may not actually do the calculations but assume it is a better deal than a site that does not offer free return shipping.
2. Free Returns Dilute Profits
While transparent to the consumer, offering free returns can be a complicated and costly proposition for the retailer. There is the shipping cost, multiple touches required to move goods back into inventory or disposition to return-to-vendor, liquidate, donate or destroy. This requires labor, facility space, systems integration, and process management.
Without a competitive returns program, retailers are at risk to lose sales, and experience rapid devaluation of returned merchandise. Merchandise returned to store, could be available for sale the same day. If shipped to a fulfillment center, a process is required to ensure the goods go back into inventory as quickly as possible.
Mitigate the Cost of Returns
The most convenient and lowest cost solution to offer “free returns” for on-line purchases is to encourage shoppers to return the goods to a nearby store. The option facilitates exchanges, provides immediate refunds, prompts additional purchases and increases customer loyalty. Over the past year, many retailers with brick-and-mortar networks have adopted this solution.
Yet, for the retailer, returning on-line purchases to a store cost effectively is complicated. The retailer must have congruent SKU assortments and visibility to purchase price. The ability to include returned merchandise in the open-to-buy process reduces the risk of overstocking at the store. Visibility to returned goods, by location, enhances efforts to fill online orders from multiple points for shipment or in-store pick-up.
For pure play e-commerce retailers, without physical stores, free returns become a costly proposition. But when orchestrated through a logistics partner, goods can move efficiently through the reverse cycle, to the point of demand for open-to-buy, or to the returns centers for quick disposition to vendor, liquidation or recycle:
• Parcel carriers offer customer facing, shipping labels and service levels to improve customer experience and reduce transportation costs.
• Reverse logistics providers offer software solutions, consolidated returns centers, labor training and management, and are better able to respond quickly to changes in business strategy, such as market contractions or business expansion.
• Third-party liquidators enable fast cycle to cash for returns and unsold product. An established buyer base, channels for bulk B2B purchases or B2C websites, expedites the process for optimized asset recovery.
Including a pre-paid return-shipping label with every order will help to control shipping costs, standardize processing, and enable data-driven routing to the next location — regardless of whether the next location is a store, fulfillment center or returns facility. The e-commerce retailer can obtain equal footing with its brick-and-mortar competitors for convenience — allowing options for drop-off at the parcel retail location or have the carrier pick-up at the consumer’s home.
Requiring the consumer to register on-line for a returns authorization and to print a “free return” shipping label adds another layer of efficiency and reduce costs in the reverse process.
Verified information helps to eliminate fraud and expedites refund credit, product exchange, and routing to the correct destination through a designated carrier. Connectivity to the stores’ returns policy by product, length of time for eligible free returns, and seasonal promotions enhances the process.
Further considerations
For a financially sound free returns program and an improved customer experience, retailers should consider innovative alternatives to reduce the cost of transportation and processing returns. These include:
1. Develop polices to deter returns. Shorten the number of days returns are eligible for free shipping. Include free returns shipping as a benefit of your loyalty program. Offer free returns, with exceptions to reduce your costs. Offer a limited number of free returns per year.
2. Collaborate with non-competing brick-and-mortar retailers to process your returns. Leverage their national network for a physical location for your customers’ e-commerce transactions. The consumer benefits from convenience, the e-commerce retailer benefits from economies of scale in shipping and processing costs, and the partner retailer gains store traffic for increased sales.
3. Collaborate with competing brick-and-mortar retailers to share inventory. For common brand offerings, the store can accept your returns into their inventory in exchange for your fulfillment center completing the stores on-line orders from your inventory.
There is no turning back from consumer expectations for a consistent experience across all channels. Turn free returns from an obstacle to an advantage.
But there are two sides to free returns.
1. Free Returns Increase Sales
For retailers with brick and mortar stores, receiving returns from e-commerce purchases at a store is the easiest solution. The option is convenient for the consumer, eliminates the cost of shipping, drives additional sales for the retailer, and — if implemented properly reduces the cost of returns processing.
Pure-play Internet retailers without stores to accept returns are at a disadvantage. Assume a consumer is in the market for a new pair of athletic shoes. Online shoppers enjoy the ability to compare styles and prices on-line until they find the best deal. When they find the brand, style and size they are looking for at the right price, they are ready to buy.
Smart shoppers calculate total cost to purchase. Is shipping free? Yes. If the shoes don’t fit, what is the shipping cost to return them to the retailer? The consumer is able to determine the total cost to purchase and will abandon the shopping cart if the total costs exceed a competing website or purchasing the product in a store.
Additionally, advertised free returns will attract shoppers who may not actually do the calculations but assume it is a better deal than a site that does not offer free return shipping.
2. Free Returns Dilute Profits
While transparent to the consumer, offering free returns can be a complicated and costly proposition for the retailer. There is the shipping cost, multiple touches required to move goods back into inventory or disposition to return-to-vendor, liquidate, donate or destroy. This requires labor, facility space, systems integration, and process management.
Without a competitive returns program, retailers are at risk to lose sales, and experience rapid devaluation of returned merchandise. Merchandise returned to store, could be available for sale the same day. If shipped to a fulfillment center, a process is required to ensure the goods go back into inventory as quickly as possible.
Mitigate the Cost of Returns
The most convenient and lowest cost solution to offer “free returns” for on-line purchases is to encourage shoppers to return the goods to a nearby store. The option facilitates exchanges, provides immediate refunds, prompts additional purchases and increases customer loyalty. Over the past year, many retailers with brick-and-mortar networks have adopted this solution.
Yet, for the retailer, returning on-line purchases to a store cost effectively is complicated. The retailer must have congruent SKU assortments and visibility to purchase price. The ability to include returned merchandise in the open-to-buy process reduces the risk of overstocking at the store. Visibility to returned goods, by location, enhances efforts to fill online orders from multiple points for shipment or in-store pick-up.
For pure play e-commerce retailers, without physical stores, free returns become a costly proposition. But when orchestrated through a logistics partner, goods can move efficiently through the reverse cycle, to the point of demand for open-to-buy, or to the returns centers for quick disposition to vendor, liquidation or recycle:
• Parcel carriers offer customer facing, shipping labels and service levels to improve customer experience and reduce transportation costs.
• Reverse logistics providers offer software solutions, consolidated returns centers, labor training and management, and are better able to respond quickly to changes in business strategy, such as market contractions or business expansion.
• Third-party liquidators enable fast cycle to cash for returns and unsold product. An established buyer base, channels for bulk B2B purchases or B2C websites, expedites the process for optimized asset recovery.
Including a pre-paid return-shipping label with every order will help to control shipping costs, standardize processing, and enable data-driven routing to the next location — regardless of whether the next location is a store, fulfillment center or returns facility. The e-commerce retailer can obtain equal footing with its brick-and-mortar competitors for convenience — allowing options for drop-off at the parcel retail location or have the carrier pick-up at the consumer’s home.
Requiring the consumer to register on-line for a returns authorization and to print a “free return” shipping label adds another layer of efficiency and reduce costs in the reverse process.
Verified information helps to eliminate fraud and expedites refund credit, product exchange, and routing to the correct destination through a designated carrier. Connectivity to the stores’ returns policy by product, length of time for eligible free returns, and seasonal promotions enhances the process.
Further considerations
For a financially sound free returns program and an improved customer experience, retailers should consider innovative alternatives to reduce the cost of transportation and processing returns. These include:
1. Develop polices to deter returns. Shorten the number of days returns are eligible for free shipping. Include free returns shipping as a benefit of your loyalty program. Offer free returns, with exceptions to reduce your costs. Offer a limited number of free returns per year.
2. Collaborate with non-competing brick-and-mortar retailers to process your returns. Leverage their national network for a physical location for your customers’ e-commerce transactions. The consumer benefits from convenience, the e-commerce retailer benefits from economies of scale in shipping and processing costs, and the partner retailer gains store traffic for increased sales.
3. Collaborate with competing brick-and-mortar retailers to share inventory. For common brand offerings, the store can accept your returns into their inventory in exchange for your fulfillment center completing the stores on-line orders from your inventory.
There is no turning back from consumer expectations for a consistent experience across all channels. Turn free returns from an obstacle to an advantage.
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