How Retail Returns Influence Customer Retention

Online shopping is arguably the most convenient purchasing experience. A person can be anywhere at any time, search your online shop, press a button, and magically a shipment arrives at their door. It’s meant to be quite simple for a shopper, but as an ecommerce retailer, you know it’s not that easy — especially if the customer changes their mind and wants to return said magical shipment back to your shop. What happens next, by way of return experience, most certainly impacts whether they will purchase from your business again.

There are hefty fees for merchants when it comes to returns — shipping is costly and restocking takes time and money, which can take a toll on any business. However, not providing a frictionless customer experience has long-term growth implications that you need to consider if you hope to maintain a successful e-commerce business.

Oh, ship…

Inflation has been increasing, which likely means you’re being mindful of the economy. You might even be proactively testing out new cost-saving strategies. Recently, some well-known retailers have gone so far as to change their return policies and have started to charge for online returns. Something that was once free is now an added cost — and customers are taking notice.

So why are retailers making the switch? Lower than expected quarterly earnings, along with the rising costs of materials and shipping, to start. In fact, shipping and receiving costs have increased significantly since the pandemic. As manufacturing slowed and retailers ground to a halt during that time, it became more vital to get your goods out the door. Now, however, the concern is that as capacity is available again, goods are being shipped at an increasing rate while the costs associated with shipping products to consumers — and then shipping them back to you if they want to make a return — are also increasing.


And while this appears to be a step back into normalcy, it is unlikely that shipping rates will return to pre-pandemic levels in the near term — and it is taking a toll on your business, and potentially your bottom line.

Freight Frustration

Customers are also feeling the shift in the economy. According to a recent survey, 45% of high-income consumers are living paycheck to paycheck, citing inflation as a contributing factor.

In light of the increase in costs in just about everything, consumers are being more considerate than ever about what and how they spend their money: 96% of buyers admit to reviewing the return policy before making a purchase, and over 50% of those are unlikely to purchase from companies that don’t provide free returns. Why? Because the cost of a return might actually be even more expensive than the product itself. They’ve also become accustomed to making purchases knowing they are protected to make free returns if necessary.

Consumers — especially first-time buyers — are less likely to pull the trigger if they don’t feel protected in their purchase. Even a single poor customer experience can deter buyers from, well, buying and influencing others to do the same. Is it possible for you to retain happy customers while not losing a fortune?

The short answer is, yes.

Embedded Protection

You can reduce the pain points of the online shopping experience with some forward-thinking technology that just so happens to make it easier for your customers to get what they want. One way is to provide your buyers with the option of return shipping protection embedded directly into your customer-facing online shopping experience.

Embedded protection offered at the point of sale is not a radically new concept, and you may already have personal experience with it. Think of things like rental car collision protection at the rental car counter. The objective is to bring customers the service they need at the most opportune time, ultimately providing a seamless experience while building trust with customers.

Return shipping protection adds an optional layer of protection for the customer to alleviate the stress and concerns that your buyers might feel as they are spending their precious dollars. And it signals that you, too, are concerned about the needs of your customers. Even the most fickle shoppers can feel secure knowing that they can change their mind.

But How Does it Work?

Using technology, you can implement one-click return shipping protection for your customers. A technology partner can calculate the optimal return rate based on your average number of returns, and they can also manage the backend APIs for your website to offer return shipping protection as part of the purchase flow.

For Colorado-based Beflax Linen, a luxury natural bedding company, customers can opt to add a nominal fee at checkout for the cost of return shipping. Kat Rothman, Owner of Beflax Linen, considers the quality of her linen as one priority, but ensuring that customers are happy with the overall experience is equally important. “Price is a factor for many. That is why I want to provide a flexible return policy,” she says.

Rothman spent the first few years of her ecommerce business testing various methods of shipping strategies — from free return shipping to customer paid. She eventually found Retrace, an embedded insurance and protection solution that offers a suite of APIs that enables online merchants to offer various forms of insurance and protection products for customers — including return shipping protection. “Retrace helps me as an owner deliver better customer service,” Rothman says. “Customers can purchase our products with ease and return them with ease.”

For Beflax Linen, it can expand its customer base by meeting the preferences of customers and creating a more enhanced shopping experience. “I am able to provide the best customer service without dipping into profits,” Rothman shares.

Making it convenient for customers to make purchases and returns keeps them loyal to a brand. Adding the option of return shipping protection during the purchase process not only motivates customers to proceed to checkout; it also alleviates the stress of managing how you’ll be able to afford the dreaded return. Frictionless for the consumer, and painless for the merchant.

Wayne Slavin is Co-founder and CEO of Sure, the insurance technology leader that unlocks the potential of digital insurance.

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