Sellers increasingly offer free shipping but see more returns
Sellers are increasingly offering free shipping in a bid to up their delivery offering but see shoppers returning more, says new research by DynamicAction.
This reverse effect puts a question mark on whether free shipping facilitates the emerging trend of serial-returners and whether delivery costs somewhat cap returns due to its additional investment which makes shoppers think twice about sending back a product?
The study analysed about €11 billion of online consumer transactions from the start of this year until the 15th of April, as reported earlier by the Ecommerce News Europe. It aimed to highlight the link between the free shipping options and the growing number of returns across European markets.
‘Consumers buy multiple products with intent to return some’
According to the study, the number of returns in Europe has soared up by 8% in comparison to last year’s findings. At the same time, free shipping is on the rise, with a 3% growth on the year-on-year (YoY) basis. This means that sellers are actively honing their delivery offering in an ongoing bid to attract shoppers.
The report interprets the phenomenon as the rise of serial-returning – “a growing trend from consumers to buy multiple products online with the intent of returning some items”.
Meanwhile, products purchased using a short-term promotion have risen by 29% on the YoY rate. Sellers are progressively using short-lived strategies such as one-day sales as an added incentive to convert more shoppers to spend.
Balance customer lifetime initiatives over immediate sales
The short-term promotions coupled with free delivery creates an imbalance between convenience and impact on the margins. It’s understandable that sellers aim to outmanoeuvre the competition by staying in-tact with the latest customer service trends.
However, the report says that this often opens leeway to the influx of returns. The added convenience of free delivery can entice shoppers to buy more but return more at the same time. On the other hand, the delivery cost can make it less likely that shoppers buy products they might not necessarily want.
While some merchants can afford free delivery as a customer convenience luxury, others can find this unsustainable for their bottom line. Merchants need to focus on prioritising customer lifetime value over immediate sales so that their efforts justify the investment into customer demands.
A good business knows its return rates and adapts the cost in its margin to cope with this common online growing pattern.
True, but where as the larger companies get ultra cheap rates due to volume and so can still keeps retail prices down, the smaller companies cannot and so their prices go up, making them less competitive and less profitable.
All this talk of seelling everything on customer service is based on old shopping habits, now days the driving force is price. Just look at ebay and look at those sellers with low feedback… masses of negs etc yet people still buy from them in droves as the price is so low, then complain when it is rubbish or no c.s.
So long as you can click a button and have the prices of say 50 suppliers in front of you in a second, price will always catch people first. ( look at Yodel…. everyone knows they are a nightmare, yet so many still happy to use them as cheap!)
The price is the number one incentive. eBay cannot see that their outdated system of feedback lays absolutely no part in decision making of buyers.
Just a look at prices across an item you sell where you have an excellent relationship with your supplier and know everyone is 100% paying the same for the product.
We have an item which we sell at a price to compete. With £2.26 outward shipping costs. We make £1.84 profit. We have a returns rate of around 24% because people cannot measure correctly and want to exchange for another size.
We did some sums and need to sell another 1 just to be 16% down after refunding the customer their full amount.
So we dis a study and realised that 69p per item needed adding. So we added it to the price and sales of 42 per week average dropped to 3. So we dropped the price back down and added 69p postage and sales climbed buck to their normal sales figures. Proving they look at the price then secondly they check P&P and are happy to pay a proper or small amount as we all know nothing is free. But we are at the same price as other sellers now offering free post on it.
Our feedback is 100% and yet the others are at 92.4 even one at 87% buyers are not bothered. The day eBay stop fiddling and treat buyers and sellers as adults only stepping in when stuff goes badly wrong the better.
They say the buyers don’t come back yet as long as the percentage of negs is low they don’t care if its hundreds per month for a seller. Well that’s like have a doorman refusing hundreds entry every month you would soon tell him to stop but these sellers are allowed to continually stop these buyers returning (ebays own words/findings) no wonder sales are falling like a stone.
If ebay are right these combine together to stop many thousands using ebay
It might seem like that, but price is not always the number one incentive for buyers.
I’ve seen situations where they will pay over the odds for sponsored listings of generic products that come top in best match, rather than buy an exact equivalent 10% cheaper, as they placed too far down the search results for them to scroll to and find.
If price was the number one incentive, they’d hit sort by lowest price. The low prices would win and the overpriced sponsored listings wouldn’t get the sales.