Free returns vs. free shipping
Online retailers are always trying to offer deals and discounts to draw in customers, and two of the most popular are free shipping and free returns. Adding one or the other without considering how it affects your business from all angles can quickly gobble up your revenue and profits.
So what exactly should you do?
Offer both free returns and free shipping! Blog over.
Just kidding, while that would be the perfect approach from a customer’s point of view, most of the time it’s impossible to have both free shipping and free returns without having your profits take a big hit. This is why today we will look at both options and see which one is more important for customers.
1) Which one benefits your customers?
Well, one of the first dilemmas you’ll encounter as a new seller is how to make your customers happy, but also make some good profits at the same time. Free returns typically only help a small portion of your audience, so the cost can make sense if they’re your best shoppers. Nearly every shopper will benefit from free shipping, but it can increase expenses dramatically. That means not every ecommerce shop will benefit from offering free shipping. This is a decision about your business first and customers second.
We think that free returns perform especially well for luxury goods. It’s also a big draw in for customers who need a specific fit, such as clothes and shoes. However, if people don’t return your products often, then free shipping may be your best bet.
From a customer standpoint, free shipping is often a winner, but that leads to the next dilemma.
2) Can you, as a seller, afford it?
There’s no way around it, free shipping and free returns always come with increased product and labor costs.
The most straightforward option is determining how much it costs to ship an average order of different values and increase prices to cover shipping. Say your average £30 order of three products ships for £9. That’s an additional £3 you’ll need to increase each product’s sales price. That sounds (and it is) quite a lot. It might turn off quite a few buyers, but it might attract even more buyers seeing that the shipping is free, and it doesn’t cost £9.
3) Anything else to keep in mind?
If you decide to offer free returns, remember that you’re going to need to scale up your workforce to handle these returns.
Free shipping creates a different shift to consider. From what we can tell, in some cases, it can encourage people to buy more often, but in smaller orders. Along with increased labor for picking and packing orders, your overall shipping costs may also rise as your volume grows. If you see a spike but don’t get big enough to negotiate for volume-based discounts from carriers, shipping will eat into more of your revenue.
4) Will I lose customers if I don’t offer free shipping or returns?
The short answer is – more than likely, yes. The best option would be to obviously offer both free shipping and free returns, but we know that it’s almost impossible to accomplish without killing your profits.
Offering free shipping but paid returns is the most balanced way in our opinion. Most of your customers will take advantage of it, as everything they buy will have free shipping. And sure, you can increase the cost of your products to cover some of the shipping fees.
We can assure you that £20+ FREE shipping sounds much better than £15+ £5 shipping. That’s just the way customers perceive value.
Offering free returns, but no free shipping can also be good, especially if you’re selling clothing items. Sometimes the clothes/shoes simply won’t fit and your customers will be delighted when they’ll see that you offer free returns. This doesn’t impact your bottom line as much as straight up free shipping, because usually the percentage of people that return their items is quite low.
And last, but not least, the option to have paid shipping, and paid returns. There are still many ecommerce websites that chose this option, and while you won’t necessarily lose customers by going this route, we wouldn’t recommend it. It just doesn’t look nice when you buy £300 worth of products and you are still charged for shipping and/or returns.
The bottom line
It’s important to take all factors into consideration and make a balanced choice. One that won’t destroy your bottom line, but also won’t drive away potential customers.