Among a selection of the country’s top retailers, 43% do not offer free returns for online orders, according to a study of 52 merchants conducted by shipping and post-purchase services vendor parcelLab GmbH.
Of the retailers not offering free returns, 59% charged consumers more than $10, including the cost of return shipping—making returns a potentially expensive option for consumers.
“For most retailers, in the long term, we believe that it is very beneficial to have free returns, simply to feed that customer over the long term,” says Julian Krenge, co-founder and chief technology officer at parcelLab. But whatever retailers decide about free returns, their executives should think hard about the kind of message they want to send to consumers—and how charging for returns might affect the customer relationship, Krenge says.
Among the other friction points, the study finds are opaque procedures retailers use when processing returns and issuing refunds. 54% of the retailers evaluated did not send a notification upon receipt of the returned parcel and 64% did not communicate when the customers could expect a refund.
Retailers also can be slow to give customers their money back. 57% of retailers parcelLab evaluated make customers wait more than six days for their return to be shipped and processed before issuing a refund. That includes 5% of retailers that take 15 days or more to issue refunds, the study finds.
In its study, parcelLab made and returned orders from major ecommerce retailers to evaluate each merchant’s order, shipping, delivery and returns processes. The study, which took place from July to October 2020, included retailers selected from the National Retail Federation’s Top 100 Retailers list. Researchers removed the retailers that do not ship parcels to customers, such as grocery stores and fast food chains, leaving 52 retailers in the study. ParcelLab then ranked the checkout, delivery and return experience for the group and divided them into general merchandise, department stores, and health and beauty retailers.
The parcelLab researchers bought products that cost less than $80, delivered by a parcel carrier. In cases where retailers set minimum order values for free shipping, test orders met that threshold.
The study finds retailers are missing out on chances to maximize their customer relationships, Krenge says. Besides charging for returns, retailers’ failings include making customers contact them to request a return label and process a return. Among the retailers in the study, 66% require customers to reach out in that way, the study found. In two cases, retailers offered no online return option, requiring customers to travel to a store to make a return.
Among the three online retailer categories ParcelLab compares, 100% of general merchandise retailers and 83% of health and beauty retailers offer free returns for products ordered online, but only 33% of department stores do the same. Among health and beauty retailers that don’t offer free returns, the average cost to send back an order is $4.70. If department stores don’t offer free returns, the average send-back cost is $8.12.
In a few cases, it makes sense to charge for returns, Krenge says. He cites eco-conscious brand Patagonia (No. 165 in the 2020 Digital Commerce 360 Top 1000). Patagonia—which was not part of the study—does not offer free return shipping. Customers with an order number can download a $5 shipping label. Others must handle return shipping themselves. In that case, Krenge says, the policy probably sends a message Patagonia shoppers appreciate.
The important thing, he says, is to make the returns process convenient and transparent, so customers continue to feel good about the brand. In too many cases, the study concludes, the returns process is lackluster for consumers and does not function in ways that could deepen the retailers’ relationship with customers. To make the experience better, Krenge says, retailers should be more transparent about how long it might take to process a return, when the customers will receive a refund and how much money they will get back.
More retailers are adopting or studying free returns, Krenge says, in large part as a way to compete with ecommerce behemoth Amazon.com Inc. (N0. 1).
“The Amazon effect on returns definitely plays a significant role toward getting customers used to the fact that returns are free… so, at some point, this will become the customer expectation, with very few exceptions,” he says.
Communications about shipments
In addition to improving the way they process returns, retailers could leverage their communications to customers about shipments. For example, researchers found shipping confirmation emails typically lack personalized product recommendations. Among retailers studied, just 24% include customized product recommendations in such emails, while 8% had generic ads and 68% offered no suggestions. That’s a missed opportunity, the report says, because shipping confirmation emails generate higher open and click-through rates than any other kinds of email consumers receive from retailers.
The report also says 4% of the 52 online retailers studied show customers the carrier they use for shipments and none allow customers to choose their shipping carriers. In other markets around the world, the report says, customers can view and select from a list of available carriers, giving them greater transparency and control over deliveries.
The parcelLab researchers found 27% of retailers studied host a parcel tracking page on their websites. 23% of retailers rely on shipping carriers to convey delivery information, 42% depend on other third-party vendors and 8% of retailers do not provide a link to view order status updates. The report says that another missed opportunity is that hosting a tracking page can result in up to 85% of customers returning to the retailer’s site.
When retailers ponder whether to offer free returns, they should look beyond the issue of increased costs of providing it versus the possibility of losing sales to retailers that have it, Krenge says. Even if they don’t want to offer free returns, retailers should evaluate the whole online shopping experience, he says. They should then work to remove friction points, make the process as transparent as possible and maximize customer “touchpoints” in ways that deepen the relationship between the retailer and its customers.
“The question should be… ‘what is the customer experience and how can I really engage meaningfully with my customer during that stage of their lifetime?'” he says.