Free returns remain a challenge

Most customers want to be able to return goods free of charge, but only about 25 percent of retailers provide this option. Is this an opportunity to get ahead of the competition?

Opportunities and challenges

When it comes to returns, e-commerce in Switzerland paints the same picture everywhere you look. If customers want to return their purchases, they generally have to cover the costs themselves. Only 25 percent of online retailers surveyed bear the costs of returns (Source: Swiss online retail 2018). Returns always cost the retailer money; in the fashion business, returned goods can often no longer be used. It is no wonder, then, that retailers want to avoid free returns.

Customers, however, see the issue in a completely different light. Some 77% of customers would like to be able to return parcels free of charge (Source: Swiss online retail 2018). Retailers satisfying this wish can increase their turnover by 15% or more. This growth is achieved not only through existing customers but also through new customers.

Most online retailers would be pleased with such a prospect. However, it is not that simple, because logistics costs are increasing at the same rate while the average basket size is falling; market and customer knowledge, ideas and experiments are the order of the day.

Which questions must online retailers ask themselves before introducing free returns?

Customer acquisition

The customer journey has changed considerably in recent years. Online shops often assume the task of attracting new customers. And in this strategy, free returns can play a key role. It is also important to harmonize and control new customer data (on this matter, see: Data are the single point of truth). Retailers need to ask themselves how much money a new customer is worth. In this respect, retailers need to ask themselves what they can achieve with the data they acquire.

Financing

The increase in turnover achieved through new customers won over by free returns benefits both online and in-store retailing. It would thus be a mistake to attribute the financing of returns solely to the online shop. How are the costs incurred budgeted? It should be checked whether a proportion can be covered by marketing costs.

Optimization

One of the key levers in avoiding returns is data analysis. Active optimization of the shopping basket contributes disproportionately to reducing logistics costs. Analysing reasons for returns and defining projects can reduce the rate of returns by up to 10% (Source: Profitable reduction in returns with behavioural economics). Retailers should explore which measures they can use to reduce the number of return shipments.

Trial and error

The search for solutions by “trial and error” continues until the desired results are achieved. Some attempts will fail and must willingly be accepted. Retailers must therefore ask themselves whether they are willing to conduct the experiment despite the prospect of initial failures.