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The Cost of Free (Shipping & Returns)


Along with “Clearance” and “75% off”, this is one of online shoppers’ favorite phrases; and who doesn’t love getting something for free? Who hasn’t added a $5 trinket to an order to make sure they got free shipping or tried a product because the promise of free returns acted as a safety net? 

The world of Amazon Prime and services like it have trained consumers to expect free shipping and free returns, and consumers will regularly choose brands that offer these conveniences over the ones that charge for them. 

But while shipping these items around the world is “free” for buyers, there is a cost associated with it, and it isn’t small. This is especially true when considering returns. Let’s look at the cost journey for brands offering free shipping and returns.

It’s easy to see, brands have a lot to lose when sales don’t stick, and with online returns averaging 25-30%, the costs add up quickly. With the astronomical growth in eCommerce in 2020, the associated rate of returns grew 70% year over year according to a study by Navar. 

When you look closer, the numbers don’t seem to get better. It is estimated that $70.8 billion in returns will be processed from the holiday season alone, and 1.8 million returns were initiated per day though UPS in the first week of 2021. 

Products are priced to cover not only the cost of the product itself, but the cost of overhead and processes that a company must execute to be able to deliver to consumers. For eCommerce; that will generally include shipping. As products are returned, not only is there an additional cost of return shipping cutting into profit, but the overhead incurred from managing the returned inventory. 

The escalation of these costs has driven several major retailers to abandon their traditional returns process, opting to refund the customer and leave the product with them in lieu of paying to have the items returned. 

According to the Wall Street Journal, companies such as Amazon, Target, and Walmart are using artificial intelligence to determine whether an item is worth having returned, or if it is in their best interest to offer the refund and allow the customer to keep the item. The type of item plays heavily on determining this cost, though a Walmart spokesperson also indicated that a customer’s purchase history may come into play on a case by case basis. If the company does not plan to resell the item, due to damage for instance, there is also a higher likelihood of a non return.  

Particularly for larger products, such as furniture, exercise equipment, and outdoor equipment, the cost to retrieve and process a return is significant, and may even require specialized delivery services. While brands such as Walmart, Target, and Amazon have the resources to meet those demands, high numbers of returns can place undue stress on companies functioning in these industries. One solution would be to not offer free shipping and returns, but in a competitive landscape, the lack of this convenience could mean the difference between a sale and a competitor’s sale.

To compete in the market while decreasing the likelihood of a return, many brands have shifted their focus to creating a product experience that increases consumer confidence in the products they are shopping for and the selections they are making. A key element in these improved experiences are website product configurators, which provide the shopper with a high quality view of the product along with its features and options. Accurately representing dimensions, colors, and textures sets specific expectations for the consumer, and decreases the number of surprises received at delivery. Further, with the ability to view and interact with a product in 3D using a visual configurator, shoppers have a clearer picture of how the features they select impacts, enhances, or works with the product they are purchasing.  

Escalating sales in eCommerce offer outstanding opportunities for brands of all sizes, but with this growth comes the threat of growing problems. Brands who are able to address these threats and successfully deliver both on customer satisfaction and sustainable business processes stand to gain considerably as more commerce moves online. 

ATLATL Visual  provides brands with the tools to create an exceptional shopper experience that decreases the likelihood of an unsatisfied customer looking for a return. See more about the benefits of visual configuration software and get in touch to bring your products to life online.

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