What is Free Returns Shipping
The first condition a customer looks for in returns is free shipping. Over the years, this option has become extremely popular. Most eCommerce stores now think it’s necessary to offer free return shipping to retain their customer base.
eCommerce store owners cover the return postage and any arising shipping cost in free returns shipping. In this way, your customers are exempt from bearing the returns cost. However, free shipping is more complicated than paying for postage or shipping return labels in the original order package.
It poses a fundamental dilemma- balancing store profit with customer satisfaction. So, a pertinent question is how to offer free shipping for your eCommerce store products without incurring massive losses?
Why Free Returns Shipping is Exceptionally Popular
With giant eCommerce enterprises like Amazon, and Walmart giving free returns shipping, it has become the norm for customers to expect it. Almost nine out of ten customers consider free shipping as the prime incentive for shopping online more than once.
Free returns is a big assurance to customers. They can swiftly return the product and get a refund without spending any extra buck on shipping if they do not like the product.
Free returns shipping has become an ideal marketing strategy for enlarging customer base. Also, at least 49% of eCommerce stores worldwide have increased sales with free shipping.
Reasons why eCommerce Stores Consider Free Returns Shipping
With a good business strategy, free shipping has major advantages for many eCommerce stores.
i) Good Marketing Strategy
eCommerce returns are not a frictionless process. But adding a return postage charge makes it all the more terrible for many customers. Offering free returns in such a scenario is a brilliant marketing strategy that removes customer frustration from the returns process.
It is likely that a customer will complete a purchase if they read the return policy with free shipping as its highlight. In most cases, free returns and shipping reduce cart abandonment too.
ii) Growth in Sales
Did you know that a quarter of all eCommerce customers seeking refunds will likely to make a repeat purchase? Add to it free shipping, and sales are more likely to increase in tandem with returns.
Studies have found that customers who pay for their returns reduce spending by 75% for that eCommerce store compared to those offering free shipping. In the latter case, customers gradually increase their spending fourfold within two years. Examples here would include Amazon and Zappos.
iii) Customer Expectation
Services like Amazon Prime and Walmart + have amplified customer expectation for free returns. Businesses have become more proactive in offering free returns or free return shipping, to avoid customers seeking other stores.
Later in the article, we discuss some strategies that you can use to offset the cost of free returns without hampering customer expectations.
iv) Increase in Conversion Rate
Free return is a tactic for increasing customer conversion. It gives customers an assurance of incurring minimal loss. They won’t lose any spendings on a product even if it doesn’t satisfy them. This makes them more confident to go through a purchase.
It pays more when they are satisfied with the product and comes back again for another purchase. The same assurance remain that free shipping is available if anything goes wrong.
The Hidden Cost of Free Shipping for eCommerce Brands
i) Impact on the bottom line
While free return shipping is free for consumers, the same cannot be said for businesses, especially for clothes, electronics and shoes.
eCommerce stores face a real threat to their profit margin by covering the increasing shipping costs with free returns. If not handled properly, shipping costs can exceed the revenue earned by businesses.
ii) Raise Product Price
To absorb the cost of free shipping, many eCommerce stores opt to increase their product price. With this tactic, businesses can offer free shipping without incurring extra costs.
However, the rise in product price can, in turn, deter customers. This is especially so if they find similar products from other stores at reduced prices. So, fixing the product price can be a tricky task.
iii) Increase in Return Rate
Unfortunately, free returns increase the chances of higher return rates. While customers have the confidence to swap their products for a refund, the eCommerce store faces the real possibility of bulk returns.
Added to shipping fees, businesses suffer costs for quality assurance, storing, refurbishing, and restocking returned items.
iv) Environmental Impact
The environment sustains a massive negative impact with rising carbon emissions when products are shipped back and forth. When free shipping encourages dishonest returns practices like bracketing, it adds a drastic amount of greenhouse gas emissions to the atmosphere. Free returns, therefore, come at the heavy price of environmental degradation.
How to Offer Free Shipping While Maintaining Business Growth
Free shipping in modulation can bring many benefits to eCommerce stores. This is why you need to know the six best strategies for a cost-effective free returns shipping experience.
i) Be Selective in Offering Free Shipping
Offering free shipping for all eCommerce store products throughout the year would hit your bottom line. Therefore, being selective is the best solution. There are several scenarios you can consider when offering free shipping.
First, if your products have a high shipping cost and with low-profit margins, they are not good choices for free shipping.
Second, free shipping is lucrative during peak seasonal sales like Christmas or Black Friday. eCommerce stores have higher chances of recovering the shipping fee as revenue, especially when offered for last unit items.
Third, selecting a price threshold to offer free shipping would entice customers to buy more and reduce your shipping costs.
Fourth, consider your product's size and DIM weight for free return shipping. Lightweight items incur lower shipping costs with flar rate shipping.
ii) Set an Optimal Product Price
Setting an optimal product price that absorbs the free shipping fee is the best way an eCommerce store can extend free return shipping. However, it is essential to be mindful of your shipping threshold to optimize your return shipping without compromising on outbound shipping costs.
iii) Free Shipping for Exchanged Items
Did you know that your store’s exchange rate can tell how you perform on customer retention? This is why it is vital to differentiate your returns from your exchanges. The latter is an option for customers who loyally stay with your brand and keep the revenue in-house. So, a good tactic is offering free return shipping to your customers when they exchange the product.
iv) Free Shipping for Special Customers
Rewarding your high spending and regular customers with free return shipping is the right way to promote your business and build brand loyalty. Research shows that it is costlier to gain new customers than to service your current customer base.
Loyalty programs, including free returns shipping like Amazon’s Prime program, is an excellent example. Here, you don’t overspend on return shipping but satisfy your regular customers.
v) Outsourcing Returns
Offering free return shipping becomes sustainable when companies don’t have to incur the burden of enormous shipping and handling costs. While it may be difficult for individual store owners to decrease shipping costs, 3PLs specializing in returns are best equipped to lower shipping rates.
Outsourcing returns to 3PLs effectively reserves revenue that store owners can for bargaining better carrier rates, optimizing packaging, and saving operational costs.
vi) Avail Discounts and Offers
Many carriers offer discounts on shipping rates, and seasonal surcharge offers for returns labels and returns packaging. They also provide flat rate returns shipping, and prepaid return shipping are options.
These measures decrease the cost of return shipping for eCommerce stores. Keeping an eye out for these offers to lessen the weight of high shipping costs.
Things to Consider Before Saying Yes to Free Shipping
As we looked at the best practices for free shipping, let’s now understand the factors you must consider while preparing your free return shipping strategy.
i) Your revenue growth
The foremost thing to consider when deciding whether or not to provide free shipping is your monthly and annual average revenue. As astonishing as it may sound, there are eCommerce stores that end up paying more than their annual revenue in free shipping.
An analysis of your revenue will reflect important data like sales growth due to free shipping. You can also analyze if you have paid more on average in shipping cost, or the labor cost for handling returns, and your monthly return numbers.
After considering all of these factors, if your revenue champions over your costs, you are on the right track to sustainable returns. You should reconsider offering free shipping if it is not or optimize the process.
ii) Outbound Shipping Costs
Return shipping is a load if you are already making your outbound shipping accessible. Offering free shipping when a customer purchases a product and giving free returns shipping when the product is returned will negatively impact your bottom line.
While this strategy may work for big eCommerce companies like Amazon, it adds strain on resources for many small and medium-sized businesses.
iii) Product Type and Value
Not all products are suitable for free shipping, especially when they are bulky, heavy weight, and have a high shipping cost associated with returns. Examples include gym machines like treadmills, medical devices like wheelchairs, or kitchen appliances like refrigerators.
In cases where you have to refund the amount for these high-value products, it is unsustainable to extend free return shipping.
iv) eCommerce Returns Policy
Free shipping can be a bonus to your returns policy if you consider refunding or exchanging items for damage or sizing differences. Having a good refund policy that prioritizes hassle-free refunds and free shipping can mend customer relations and goodwill.
v) Split Shipments
Split shipments represent cases where inventory is stored in different locations, and the customer’s order has different segments and shipped each item separately. If your inventory is split in multiple locations, it is perhaps best to carefully consider shipping costs before offering free shipping to customers.
Free shipping was already firmly established in the eCommerce industry. Returns have now become the new sector where free shipping is offered to garner more customers and boost sales.
However, an eCommerce store cannot blindly follow the herd in giving free return shipping when it poses a real threat to business profits. This is why eCommerce stores need to exercise caution and follow the best tactics we have listed before, including free shipping in their returns policy.