Charging for Returns Pays Off

The e-commerce market has taken off in recent years. However, the growth in sales has also led to a significant increase in the number of returns. While online stores previously enticed consumers with free returns, major brands like H&M and Zara have recently started charging fees. 

They are doing this to curb the costs of these rising returns. Many online stores want to follow this example but are afraid of the consequences. Is that fear justified? Returnista has dived into the data, and the results are surprising.

The increase in the number of returns

E-commerce is expected to continue growing strongly. Various reports indicate that the market will grow to 1.2 trillion euros by 2025. With this growth, e-commerce experts also expect the number of return shipments to increase from 1.5 billion in 2021 to 2.5 billion in 2025. 

The increase in returns doesn't have to be a commercial headache, as long as revenue grows faster. But that is exactly where the problem lies. No less than 91% of retailers indicate that their return rates (number of returns : number of orders) are currently rising faster than their revenue growth.

Major brands start charging fees

Now that return rates are rising faster than revenue growth, major brands like H&M, Zara, and Boohoo have announced they are moving away from free returns. Consumers will now be responsible for the costs of return shipments.

The question many online stores are now asking themselves is whether they should follow this example. Returnista has analyzed 300,000 orders and has some advice.

Free returns vs. charging fees

Our data shows that the return rate for paid returns is 24% lower than for free returns. When you look at the total value of those returns, an online store saves 41% in costs. 

This result is not very surprising. But what is striking is that online stores that charge fees show better financial figures when you weigh the lower conversion (due to paid returns) against the cost coverage.

Olivier Muller, CEO at Returnista, explains: “What we see is that online stores only see a slight decrease in sales when they start charging fees. But when you weigh that against the costs you save by passing return fees on to the consumer, you end up with more on the bottom line.”

When asked if he would advise all online stores to switch to paid returns, his answer is: “It is, of course, up to the online stores themselves to decide. But based on the numbers, you certainly don't have to stick to free returns.” 

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