Return shipping can be costly, but returns are a vital part of any growing ecommerce business. Deciding whether to pass return shipping costs onto your shoppers or pay for it yourself is an important part of developing your brand’s return strategy.
About 30% of D2C ecommerce transactions end in a return, and many of your competitors offer free return shipping and a generous return window. That might have you wondering, should I be offering free return shipping too? There are pros and cons to charging for return shipping, and the question is really nuanced.
Learn how your return policy and how you handle return shipping fees impacts your brand’s overall growth in The Future of Merchant Growth.
We’ll discuss all you need to know about charging for return shipping in this blog, specifically covering:
- When you should offer free return shipping
- When you should charge for return shipping
- Loop helps you take a hybrid approach to return shipping
When you should offer free return shipping
Companies who offer free return shipping see it as an investment in the customer relationship. They view the returns process as an extension of the shopping experience and use free returns to reduce perceived risk at purchase. A JDA study found that 62% of shoppers are frustrated when they’re asked to pay for return postage and packing, so offering free returns is a way to get more initial sales that may otherwise fall through due to return shipping costs.
Related: 4 tips to fight the rising costs of returns
It’s especially important to offer free return shipping on exchanges. That’s because trust is the foundation of strong customer relationships. Can the shopper trust that their experience with your brand will be consistent? That your products will be of high quality? And, if problems arise, can they trust your brand to make it right?
When a shopper requests to exchange, they still want your product—just a different version of it. But by charging for shipping on exchanges, you’re sending the following messages:
- The burden of this problem falls on the shopper
- You don’t value their loyalty to your brand
- Saving a few dollars matters more than your shopper’s needs
If you charge the shopper to get the right product, you’ll erode trust. Fast.
An easy and free exchange process signals that you value your shoppers and will take care of them the next time they shop with you, which is likely given that 62% of shoppers would shop again from a brand offering free returns or exchanges.
When you should charge for return shipping
Brands who charge return shipping see returns as a cost center, looking to minimize expenses. When your shopper is looking for a refund, we recommend that you charge return shipping. A request for a refund likely signals the end of a customer relationship.
At this point, you can use return shipping charges to encourage customers to exchange. You don’t want the shipping charge to damage the amazing customer experience you have built to this point, so make sure that you don’t surprise them. Your return policies should be clearly listed and outlined to customers before they make a purchase, so that they understand the process to make a return or exchange.
What’s more, people hate fees, especially if they are not able to easily understand what the fee is for. If you make it clear that this fee is only applied to a refund, your customers become much more accepting of it. They can easily avoid the fee by accepting store credit for a future purchase or by using the value of the return to shop for something new.
In summary, when charging for return shipping, be sure to:
- Position the fee properly
- Provide clear alternatives that allow for free return shipping
Loop helps you take a hybrid approach to return shipping
There is actually a hybrid way of handling returns that we have seen be incredibly effective: charge return shipping only for refunds to encourage more exchanges and continued customer relationships.
We recommend paying return shipping for all return types where revenue is being retained and the customer relationship is kept alive. We call this your revenue retention rate. The shipping cost is a small additional investment to encourage a customer to remain a customer. Especially when you consider that just a 5% increase in your customer retention rate can lead to a 95% increase in profitability.
For any return that is either too costly for you to process or no longer valuable to you from a customer retention standpoint, we recommend charging for return shipping.
With a hybrid approach, you can use Loop’s special features to help incentivize your shoppers to choose options which allow for free return shipping. With Loop, you can offer a bonus credit to shoppers who are willing to exchange a product. This bonus credit gives the customer additional purchasing power above the value of what they’re returning.
No matter who pays for return shipping, make sure that you deliver exceptional customer service through every step of the experience so that you can delight your shoppers and ensure that they purchase from your brand again.
We would love to show you how much value this strategy can create in your returns flow.