The Problem With Free Shipping & Free Returns

The global fashion e-commerce market is projected to exceed one trillion dollars in the next few years. But getting there will be anything but a smooth sail. 

Consumer demand, as well as expectations, have risen.

Customers expect to be able to order styles of the latest trends at the best price and receive them at their doorstep after just a single day or two. Retailers are now fighting for loyalty and wallet share in a market that grow more and more competitive and saturated day by day. The battle rages on as several significant challenges harden the fashion industry. 

From Warehouse to House

What began a few years ago for many as a coping mechanism is now the preferred way to go about one particular part of the modern routine.

It hasn’t always been safe or easy to shop in-store. Since shoppers couldn’t get to the shops, many retailers began to offer free shipping. From the retailer’s warehouse to the customers’ house, this segment is known as the “last mile” of delivery, where final goods are shipped to their final destinations. 

Residential deliveries are logistically different from commercial deliveries. Last mile truck insurance protects businesses from the inherent risk of neighborhoods being harder to navigate and routes being difficult to optimize. Without coverage, delivery companies are at risk of being liable for bodily injury, property damage, cargo loss, and more.

California, known for its old and new money, loves fashion—as well as entrepreneurship. Several entrepreneurs are starting new transport businesses or expanding existing businesses to include the last mile service, consulting with San Diego trucking insurance company SWAN Insurance. Last mile deliveries now represent a higher percentage of operating costs for fashion retailers, as consumer expectations are unlikely to budge.

“Free” Does Not Mean “Costless”

Free shipping and free returns allow customers to browse, research, purchase, try on, and return clothing—all without stepping foot into a brick and mortar store. 

With the bedroom at home replacing the changeroom at the mall, customers often intentionally order more than they intend to keep. Multiple sizes or multiple colors of the same item or multiple options of a style are added to carts with the customer having peace of mind that anything and everything in the order can be shipped back to the retailer for a refund.

“Free” means hassle-free and stress-free for the customer, but online returns are expensive to retailers. Some companies have done the math and realized that discarding the items and accounting for the losses are more profitable than reselling them. 

Returns mean that the items need to be re-tagged, re-labeled, re-organized, and re-entered into the inventory system. It’s a headache for the inventory and accounting department, especially while returned inventory takes up capacity while new items are being manufactured and launched.

Merchandise returns are a significant cost to retailers, with returns now “46 percent higher than the average from the years 2016 through to 2020.” 

When ZARA announced the end of it offering free returns, many wondered if other major retailers would follow.

Only time will tell how fashion e-commerce evolves.

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