Counting the cost of free returns

Giftbox ready to be shipped with Free Returns tag
29 Aug 2017

Counting the cost of free returns

In today’s hyper-competitive online retail environment, the issue of the return policy is one of the toughest nuts to crack for ecommerce directors. By charging as opposed to offering free returns, traditional bricks-and-mortar retailers risk exposing themselves to the wrath of consumers who expect –having been conditioned by pure-plays like ASOS – this to be a free service. But do the benefits of free returns outweigh the significant impact on margin?

We investigate.

The stats

According to industry experts Clear Returns, the cost of processing returns from web purchases in the UK currently stands at an unsustainable £20bn per year. The majority of this is down to the growing tendency for consumers to purchase multiple sizes and colours – around 20% of all purchases in the UK include these duplications.

Aside from the cost of shipping, cleaning, reprocessing and restocking returned items, retailers’ bottom lines are also hit by the sheer length of time this entire process takes. According to a recent Forbes piece, it takes an average of six weeks to get a product that has been returned by a customer back into stock – at which point, the product is typically out of season or “shop-worn” and re-sold at a discount.

The situation is exacerbated further by internationalisation. The UK’s return habits are still relatively modest compared to Germany, for example, where an eye-watering 70% of online purchases contain duplicate items with size and colour variations. Were the UK to reach similar levels, the impact could potentially be ruinous.

Turning the tide

Despite the gloom, there is light at the end of the tunnel. Innovative new technologies are increasingly popping up on retailer sites – the likes of TrueFit and Fit Analytics are offering innovative ways to reduce the need for consumers to add multiple sizes to their baskets.

New startups are also inserting themselves into the supply chain to help reduce the operation costs of processing returns, and protect the margin – Happy Returns in the US and Doddle in the UK are making it faster for retailers to receive and process, thereby easing some of the pain.

But these solutions carry an ongoing cost, and still have a detrimental effect on the profitability of an ecommerce site.

Long-term solutions

According to our own analysis at Quill, one of the biggest pitfalls that more traditional retailers make on their ecommerce offerings is to fail to offer accurate details around the true fit and feel of products.

Ensuring product copy is both detailed and accurate when it comes to fit has the potential to change the game – our performance data shows that it can reduce a retailer’s return rates by as much as 20%, which according to Clear Returns is akin to boosting sales by more than 35%.

Some retailers have already embraced this approach – T.M. Lewin is a fantastic example, offering both clear product descriptions and detailed buying guides to help consumers to judge the true fit of a product.

To survive in a digital world that demands increasing convenience, other retailers need to follow suit.

If you’re interested in finding out whether your ecommerce content is properly optimised to reduce product return rates, and thus minimise the negative effect of free returns, please fill out the form below to request a free Quill Quality Score audit of your website.

Dan Taylor @ Quill ContentSenior Sales Manager at Quill.

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