Are free online returns on their way out?
Try-and-buy versus buy-and-try
We’ve all heard the statistics: free returns is key to customer conversion. Most shoppers will be sure to read the returns policy before they decide to make a purchase. If free returns aren’t on offer this will deter them from making the purchase. While offline shopping enables try-and-buy, online shopping must provide buy-and-try. It makes sense, right? E-commerce cannot model itself directly after the brick-and-mortar store, but they can come pretty darn close.
The massive spoke in the wheel is e-commerce returns.
By enabling buy-and-try retailers are remaining competitive, they are ensuring the initial purchase, and they are establishing a relationship of trust and loyalty with the shopper. Essentially retailers provide a contract of goodwill between themselves and the shoppers. We trust you. We trust you to keep what you want. We trust you to buy responsibly. We trust you to not abuse our trust.
The flooding of the online returns
But let’s be honest, some retailers have reached their breaking point as the returns come flooding in. According to recent BBC news articles: “Boohoo’s profits have taken a hit after online shoppers returned clothes at a faster rate than before the pandemic” and similarly Asos has announced that the “higher rate of returns was adding to warehouse and delivery costs. It said profit would be impacted if it had to cut prices to shift goods.”
More questions than answers
How likely is it that the free returns paradigm will shift? What is the point to make the sale if your returns kill you in the process? Step into the spotlight Zara. This popular omni-channel brand, has stepped up to the plate in the UK and boldly stated “no more free returns”. They have now begun to charge a nominal fee when someone triggers a return, which they reduce from the refund (but hey, money is money). The official reason for this move is “environmental”, which while true, is not less significant than the crazy costs associated with the reverse logistics. By the way, this nominal fee does not cover the reverse logistics costs. So, it can be either seen as a barrier to return, causing the returner to second guess their shopping cart at the point of purchase or their return decision at a later stage.
There are more questions than answers at this point. Is the timing right for the change? Is this “environmental” levy a legitimate attempt to increase consumer awareness around the plight of the returns. Are climate-aware consumers paving the way to pay the extra to make the journey greener? Is it possible that the environmental reasoning, while legitimate, is just a smoke screen for the real issue? Is Zara simply putting their foot down, and refusing to compete on the same playing field as laid out by Amazon? Will Zara customer loyalty wane? Or will they forgive the brand for the service charge that they are expected to pay?
The inherent advantage of omni-channel retailers
Of course, because customers can return their items for free in any physical Zara store, this will likely drive-up engagement for customers who object to paying the extra service charge. For Zara this is a win-win scenario, in which the returns last mile is reduced, and they have an up sale and cross-sale opportunity with shoppers bringing in their returns. For an omnichannel retailer like Zara, it’s “six of one and half a dozen of another” — the reduction of the return from the supply chain, is to the benefit of the local store.
And isn’t this just what the BORIS — ”Buy Online Return In Store” paradigm is about? In Forbes magazine, speaking about the opportunity afforded to retailers with BORIS built into their business model, BrainTrust member David Mascitto, in connection with Zara’s free in-store returns, says: “If the retailer has an alternative option for accepting returns like BORIS (buy online, return in-store) which is free, I can see the charge for shipping returns back to the retailer becoming more commonplace. It would deter shoppers from over-buying (knowing they will return anyway) and reduce margin erosion by making the returners foot part of the bill. It also makes good use of the store network.”
There are likely to be more retailers who take this bold step forward, particularly those with a built in omni-channel experience. Wherein shoppers can be placated and explained that they have a free returns option and a paid returns option. Essentially the route that they choose is their decision.
But for retailers who don’t have this option, they can continue to:
- Drive sales for their books and hope that the returns don’t drown them in the process, or
- Boldly join the likes of Zara to take back some of the control and reduce some of their losses, or
- Find innovative technology (like that offered by OtailO), that enables retailers to leverage their eco-system to manage returns locally
At this point it is too early to tell what will happen next in terms of pay for return. What it is not too early for, is for retailers to planify and optimize their returns. This is more critical than ever before. If the online buy-and-try model is in place, shoppers are going to expect that retailers afford them trust and enable them to legitimately regret their purchase.