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Retailers Know Returns Are Critical – So Why Are They Charging Fees and Not Updating Consumers?

The returns market has become a critical piece of the consumer retail experience as e-commerce has exploded, but retailers are still figuring out how to succeed. With shoppers growing more discerning – and more demanding – of the shipping and returns process, new data reveals that retailers are consistently failing at this opportunity to impress their customers.

In an analysis of over 10,000 returns data points, retail tech platform ParcelLab found that free shipping is not nearly as commonplace as consumers might think. ParcelLab reported that over half of retailers (52%) only provided free shipping after shoppers spent a minimum of $35, while an additional 30% never offered free shipping at any price point. The average cost of shipping amounted to $4.25.

“While various studies prove that shipping costs or free shipping order minimums are a significant conversion killer, the largest online retailers rarely do without them completely, with free shipping only offered occasionally for promotional campaigns,” said the ParcelLab report. “While most retailers absorb the shipping and delivery costs to customers – either by incorporating this into the minimum order value or adding a separate fee – this could be a deciding factor for customers when making a purchase.”

While shipping prices might not seem directly relevant to reverse logistics, there are knock-on effects. Many consumer rely on free shipping for spontaneous purchases, which are more likely to lead to returns than a well-considered purchase. Minimum spend requirements may also result in increased returns; shoppers are more likely to purchase additional items that they are not sure of, in order to reach the minimum, and then eventually return those products.

Retailers who are able to absorb the cost of shipping are more likely to see higher conversion rates, with consumers regularly selecting “free shipping” as a key reason to shop with a particular retailer. But the risk of increased returns means that they also need to make sure that their returns policies are equally consumer-friendly. Some shoppers will review the policy in advance of purchasing, in anticipation of future returns.

Woman using credit card and laptop computer for shopping online at home
Flexible returns policies can improve the customer experience, but these can be abused if retailers aren’t careful.
CREDIT: Natee Meepian - Adobe Stock

While free returns are commonly discussed in retail, ParcelLab data shows that actually almost half (43%) of retailers charge for their returns; of those, 59% charge $10 or more. U.S shoppers are saved from the “restocking fee” that many other markets pass onto the consumer, but these fees can still cause consumers to reject a retailer in the future.

“Not offering free returns for online shopping, and even charging as much as $8.12 on average, could increase customer churn and lower satisfaction,” said the report. “As free returns are an increasingly common offer, department stores are missing out on an opportunity to attract and retain loyal customers for their online store.”

Not all retailers can afford to absorb all the associated fees, in which case there are several other ways that they can still provide a positive consumer experience. ParcelLab identified that customer communications were underutilized during both the ordering and reverse logistics process. Of the retailers who sent order confirmation emails, 68% included no additional product information or recommendations. Over half (56%) do not alert their customers of successful package delivery.

Returns communications are equally poor: 54% of retailers do not send a confirmation of receipt when a returned package arrives, which can potentially cause additional strain on customer support when shoppers call to track the return. Refunds are even more poorly communicated, with 64% of retailers not sharing any timeline of payment with the consumer.

“Since a seamless and positive returns experience determines whether a customer will shop with the brand again, there is certainly room for improvement to accelerate the process and make it easier for customers to send items back and receive important updates along the way,” said the report.

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