In 2023, $247 billion—17.6% of U.S. online sales revenue—was lost to returns, versus the 14.5% return loss for items bought in stores.
Once seen as an enticing benefit to attract customers (and keep pace with Amazon), free shipping and returns quickly became the norm for ecommerce. There was a cost to keeping these free, of course—a cost that businesses would incur themselves to keep customers happy. For some time, that cost has been worth the reward. Recently, though, that sentiment has begun to shift.
With this shift, many retailers have turned their focus toward improving shipping and logistics costs, leading to stricter policies and new restrictions for consumers. And while this approach often yields the short-term results retailers are looking for, the long-term impact on loyalty could present an even bigger challenge down the road.
Sweeping changes
New shipping and return policies have been rolling out across major retailers for some time now. Some, like Macy’s and Abercrombie & Fitch, have set higher thresholds for free shipping. Others have begun to charge for returns, made return policies stricter or even banned serial returners entirely.
These strategies could very well work. After years of free shipping and unrestricted returns, stricter policies will undoubtedly force customers to reconsider their return habits. On the other hand, it could also keep them from buying altogether.
One survey found that 58% of consumers want a hassle-free, no-questions-asked return policy. Will customers abandon a brand that doesn’t offer that? It’s a question worth considering for retailers that introduced free returns to win those customers in the first place.
Middle ground
Retailers tend to focus on shipping and logistics costs when it comes to tackling returns. Doing so generally results in widespread changes that impact every customer, even the loyal ones making infrequent returns. Yet there’s plenty of middle ground for retailers to explore if they also incorporate profitability optimization into their return strategies.