What are the pros and cons of offering free shipping and returns? (2024)

FAQs

What are the pros and cons of offering free shipping and returns? ›

Offering free shipping and returns can boost customer satisfaction and loyalty. It simplifies the buying process and reduces cart abandonment. However, it can also increase costs and attract return fraud.

Free Return Shipping Increases Customer Loyalty

Free return shipping helps increase customer loyalty and encourage repeat purchases, making it an effective way to boost sales and provide customers with a positive shopping experience.

The disadvantage that sticks out the most for brands that choose to offer free returns is the high costs. They have to shoulder the costs of the transportation and operational costs of returning items, including the need to recondition and repackage items that did not come back in their original condition.

It increases sales

Shoppers believe they're getting a better deal when they don't have to pay for shipping costs. Customers will buy more to get it and will take their business elsewhere if they can't. Plus, offering free shipping can help create a sense of trust and loyalty between the customer and the business.

For one thing, offering free shipping leads to a reduction in cart abandonment – it helps push potential customers over the edge to close the sale. It can also set your company apart from the competition and increase perceived value.

Free Shipping and Competitive Advantage

Consumers have come to expect free shipping, and businesses that don't offer it risk being left behind their competition. Research has shown that offering free shipping can also increase the average order value by enticing customers to add more items to their carts.

By encouraging customers to return products in-store for free, you're reducing the need for packaging and shipping. This means customers save money, and you can reduce the environmental impact of returns. In fact, many customers prefer returning products in-store as it's easier and more convenient.

❌ The transportation of returned products requires additional energy and fuel, which increases carbon emissions. Meaning, that making a return causes unnecessary transportation, which damages our environment and can even cause rising temperatures, extreme weather, rising sea levels, and spreading diseases.

Americans have grown accustomed to free returns, but a growing number of retailers are charging fees as returns squeeze retailers' bottom lines. Macy's, Abercrombie, J. Crew, H&M and other companies have all added shipping fees for mail-in returns. And it's not just the big mall brands, either.

Return Shipping Costs More Than Outbound Shipping.

According to ReturnMagic, 80% of shoppers expect to be able to return items for free, but only 25% of retailers offer free returns. Additionally, 69% of shoppers in a survey said having to pay for return shipping would keep them from buying from a retailer.

How do companies make money with free shipping? ›

By providing numerous shipping options, an online retailer can capitalize on the booming ecommerce experience to generate revenue streams through increased sales. Free shipping entices customers to purchase by wrapping all costs into the price of each item.

By offering free shipping, you increase the likelihood of customers completing their purchases. Encourages higher conversion and sales rates. Free shipping can act as a powerful incentive, motivating customers to make a purchase they might have otherwise hesitated on.

Does the Customer Pay? Let's say an item's retail price is $20, and it costs $5 to ship. If the retailer charges $25 and announces, “free shipping”, then the customer is paying. This approach is still common among many third-party sellers on sites like Amazon and eBay.

But while most people may use them interchangeably, the terms don't actually mean the same thing. Shipping describes a package leaving your warehouse and making its way to the customer. Delivery, on the other hand, describes the actual date a package is dropped off at the customer's address.

The practice of shipping products for free has become standard in e-commerce. The Digital Commerce 360 Top 1000 Database shows that 74.4% of retailers offer some sort of free shipping: 20.4% unconditional for all orders, 45.1% with a value threshold, and 14.5% requiring membership in a loyalty program.

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.

You pay for return postage if you're returning the item because you changed your mind, and the seller's return policy states that buyers are responsible for return postage.

If the business confirms that the product does have a problem, it must reimburse the consumer for any reasonable return costs they have already paid. Consumers should keep receipts for postage or transport costs so that they can be repaid by the business.

USPS Return to Sender Packages

You Won't Pay for Most USPS Returns: In nearly all cases for USPS, you won't be forced to pay for packages returned to you. However, you will in the case of some USPS Ground Advantage packages under a certain weight.