Turn Your Free Returns Policy From a Headache to a Moneymaker

August 15, 2019

By Greg Zakowicz(opens in new tab), commerce marketing analyst at Grow Wire
5-minute read

In short:

  • Retail customers have come to expect free returns. But for retailers themselves, providing this service is costly.
  • Retailers must offer free returns to stay competitive. The trick is transforming a free return policy into a revenue driver instead of an aggravating operational cost.
  • Ways to do this include extending your return window and publicizing your free return policy, among other potentially counterintuitive tactics.

Returns are a costly headache for retailers. Last year, an estimated 10% of total retail sales(opens in new tab), or $369 billion, were returned. These returns shrink margins, cause restocking challenges and add to labor costs. So, why do so many retailers offer the service if it’s so costly?

It’s simple — people want and expect the ability to make free returns. But instead of thinking of it as a liability, you can turn a free return policy into a brand differentiator(opens in new tab). Read on to learn how you can use a free return policy to build the customer loyalty(opens in new tab) that drives revenue for your business.

Free returns are a new normal

Ninety percent of consumers(opens in new tab) “highly-value” free returns, and 51% of consumers(opens in new tab) outright avoid purchasing from online retailers that don’t offer it. Offering free returns can mean the difference between a first-time customer and a lost sale.

Beyond securing an initial sale, it’s just as important to turn those one-time customers into loyal customers. Ninety-six percent of consumers(opens in new tab) said they would give a retailer repeat business based on a good returns experience. Offering a free, easy-to-use return policy can help provide such an experience.

The challenges of free returns 

Free returns can be a double-edged sword. While they can help drive sales, free return policies have led to the practice of “bracketing.” This is when a customer purchases multiple items with the intent of returning most of them. Forty-one percent of shoppers(opens in new tab) say they bracket at least some online purchases.

Turn your free returns policy into a sales asset

The balancing act retailers must walk is how to meet customer demands and build loyalty while minimizing returns. There are a few ways to use your policy as a sales asset:

  • Extend your return window to build confidence.

Since we know free returns are important for customers, consider what extending the return policy might do for generating additional sales.

Extending your return policy from 30 days to 45, 60 or even 90 days can be a major differentiator for your brand — especially during the holidays or other gift-giving seasons(opens in new tab). A longer return policy conveys confidence in your products and demonstrates your commitment to customer satisfaction.

I have spoken with retailers who have done just this, and they’ve noted that very few returns happen during that extended period. And when consumers do take advantage of the extended period, there’s usually a valid reason for needing to make the return then.

I have spoken with retailers who have noted that very few returns happen during that extended period.  

Being able to assist and resolve customers’ needs(opens in new tab) at this critical point in their purchase experience can make or break your long-term relationship with them.

If you want to explore how extending your return policy might impact return volume, talk to your customer service team. Assess how many requests they’re receiving for returns after the current cutoff. If it’s relatively few, it might indicate that extending the policy will be a competitive differentiator(opens in new tab).

  • Make your returns policy easy to find.

If you offer free returns, make it clear that you do — and make your policy easy to understand. No one wants to read a return policy that looks like a terms of service document. If they’re hard to read, customers will assume the policy is not customer-friendly and leave. I know I would.

Just as important, make the policy easy to find through direct links on your website in the header or footer, on product pages or any other place that mentions your free return policy.

Make the policy easy to find through links on your website in the header or footer, on product pages or any other place that mentions it. 

Women’s fashion brand Lulu’s and menswear brand Bonobos do this well, calling out their free return (and free shipping) policies in black header bars on their homepages. Shoe and accessory retailer Toms mentions free returns in its homepage header too, though not as boldly. And Seven for All Mankind, the denim designer, mentions it right next to the “add to bag” button(opens in new tab) on product pages.

Menswear retailer Bonobos mentions its free returns policy in its homepage header.
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  • Make the process as effortless as possible.

Allowing customers to initiate a return instead of going through customer service may seem like a simple thing, but doing so lowers the amount of effort required — and effort matters to most consumers.

Ninety-six percent of consumers(opens in new tab) who had an “easy” or “very easy” return process would shop with the retailer again, while 96% of customers(opens in new tab) with high-effort service interactions (e.g. repetition of information, channel switching) become more disloyal.

  • While you're at it, streamline your exchange process.

Think about whether other aspects of your return policy are customer-friendly. Can customers easily exchange a product for a new size or color without having to pay for shipping? Can they exchange the product for a different one altogether?

Some retailers make customers return an item and place a completely new order to complete the exchange. If a company has a minimum threshold for free shipping and purchasing that one standalone item will not meet it, it can lead to even more bracketing — not loyalty.

  • Offer in-store returns if you can.

If you are an omnichannel(opens in new tab) retailer, do you allow in-store returns? Allowing consumers to buy online and return in-store (BORIS) provides convenience and flexibility and can also drive sales.

Bracketing may be on the rise, but the majority of people purchase items without intending to return them. Fifty-seven percent of returners(opens in new tab) say they exchanged or replaced the last item they returned. Driving customers in-store can encourage this.

Fifty-seven percent of returners say they exchanged or replaced the last item they returned. Driving them in-store can encourage this.

Pointing to buy-online pick-up in-store(opens in new tab) (BOPIS) as an example, 37% of online shoppers make an additional, unplanned purchase(opens in new tab) while picking up their BOPIS order. We can see that driving people in-store has the potential for real, increased revenue.

  • Spread the news on multiple channels.

Your generous return policy can be a differentiator, so make sure you publicize it as much as possible. Mention free returns on your other promotional channels, such as social media(opens in new tab) and paid search or in your email marketing campaigns.

For email, highlighting free returns can be an extremely effective tactic, especially in high-consideration messages such as abandoned cart and new subscriber welcome messages.

 The overall return

Half of all consumers(opens in new tab) say an easy or reasonable return policy helps define a positive brand experience, while 57% say(opens in new tab) easy and free returns would encourage them to make more online purchases.

Whether you like it or not, free returns do matter to consumers. The trick for retailers is transforming their return policy from a “policy” into a “benefit” that helps drive brand loyalty. Give them what they want, and they’ll come back time and time again.

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