E-commerce has changed the consumer purchase dynamic. With so many places to shop, it’s now easier than ever to find great deals on practically every product under the sun. However, price is no longer the sole (or even, in some cases, primary) factor in online purchase decisions; shipping costs, delivery times, warranties, supplementary offers and other issues also come into play.
Internet purchases also require a bit of blind trust on the part of consumers. They’re essentially buying merchandise sight unseen — they can’t test it out or try it on beforehand. It’s therefore not surprising that they’ve added retailers’ returns policies to their online shopping calculations.
The growing demand for free return shipping is also unsurprising. Returning an in-store purchase has traditionally been free of charge, and consumers don’t quite understand why that should change simply because the sales channel has shifted from a physical location to a virtual one. In particular, they see no reason why they should be forced to pay to return defective items.
To be sure, most retailers cover return shipping when their customers receive substandard merchandise or a product they didn’t order. More generous returns policies can be problematic, though, at least from a financial perspective. Beyond the cost of absorbing shipping fees, such policies can encourage more returns, further reducing the retailer’s revenue (depending on its refund policy, of course). They can also result in an increase in all sorts of return fraud, from “wardrobing” to fraudulent receipts, organized retail crime and more. Beyond that, free returns can be cost-prohibitive for online sellers of big-screen TVs, home appliances, car tires and other bulky products.
All the same, a customer-centric approach to returns can pay off in the long run, because it proves that a retailer stands behind the products it sells and is intent on satisfying its customers. It also gives customers greater license to shop, knowing that if an item doesn’t meet their expectations, the retailer will help make them whole again.
Research consistently shows that consumers respond positively to easy, affordable returns policies. In ComScore’s 2013 and 2014 “UPS Pulse of the Online Shopper” surveys, 66 percent of online shoppers said they checked a retailer’s returns policies before making a purchase, and 82 percent said they’d complete a purchase if they could return the item in a store or ship it back at no charge. Just as critically, 67 percent of shoppers said they’d shop more at a retailer that offers hassle-free returns, and 64 percent said they’d recommend that retailer to a friend.
Data also show that consumers don’t respond well to retailers that ignore their desire for easy returns. In a December 2012 survey by Harris Interactive, 81 percent of respondents said they’d be unlikely to keep shopping at retail websites that made them pay to ship items back. A September 2012 study out of Washington & Lee University found that online shoppers who didn’t receive free return shipping at two retail websites decreased their spending at those sites by 70 to 100 percent, while customers who did get free returns spent between 58 and 357 percent more with those retailers.
It’s important to remember that customer relations don't end when a transaction is finalized. To build loyalty, retailers need to keep catering to shoppers long after their purchases ship. E-commerce offers inexpensive communications channels (e.g., email and text alerts) that can keep conversations going with customers long after the sales are closed, but they’re unlikely to read such messages unless and until the retailer in question has built up a reservoir of trust.
Establishing the requisite level of trust takes time, and it can be undone almost in one stroke, sometimes by something as simple and readily fixable as a misplaced order. A customer-focused returns policy can help build consumer confidence in a retailer — and maintain that confidence if a mistake is made. Better yet, the online shopping platform offers comprehensive testing capabilities. Retailers can experiment with their returns policies — including different approaches to refunds — to determine the best way to achieve both greater loyalty and more revenue.
Viewed in the short term, a hassle- and cost-free returns policy will almost always be seen only as a money-losing proposition. Retailers that have achieved long-term success, though, have always found a way to give customers what they want — and what online shoppers want these days is free return shipping.
Tom Caporaso is CEO of Clarus Marketing Group, a Middletown, Conn.-based provider of free-shipping and subscription-commerce solutions for businesses.