The Cost of Free Shipping and Returns — a business perspective
Shopping from the comfort of home is a type of dopamine rush that hits different. Add free shipping and free returns to the mix, and it’s a consumer convenience dream.
But, convenience has a cost, and nothing is ever free. So what’s the actual cost of free shipping and free returns for a business?
Most businesses go through a similar process when it comes to shipping:
- A lot of research
- Weighing out the best options
- Finding the right packaging materials
- Paying attention to margins
- Finding the balance of product price increase to offset shipping costs
- And going back to the drawing board when it’s not quite working
Even shipping a product isn’t one size fits all. It’s all about figuring out capacity and finding that sweet spot as a business. Free shipping is undeniably attractive from a consumer perspective. But it’s not always attainable or sustainable from a business perspective. Free shipping means that the cost of shipping is baked into the product. This is not always possible, especially when the price of goods is already high.
On average, shipping prices increase 2–3% each year and are often one of the largest costs for any business. Small businesses end up absorbing that increase, hurting their profit margins. Offering free shipping means a higher price for the business and for the product; not offering free shipping means that some customers may overlook the product all together. There’s a balance that each business has to find. That’s why you’ll see “Free Shipping over _____.” That price point is the business’ sweet spot. (It also incentivizes the consumer to spend a little more in a single purchase . . . And it works.)
Now to look at free returns . . .
An estimated one third of all online purchases are returned. Although free returns offer reassurance to the consumer, they cause a lot of headaches. First off, they’re not free — it’s a large cost for the business. Not only does it cause a larger carbon footprint, it creates excessive waste if the item is damaged in the process.
Throughout our business journey, we found that offering free returns is too costly as a small business. It also unintentionally incentivizes buying more, knowing we can always return the product without paying. This concept is very similar to the fast fashion model: the people who make the clothes are the ones paying. When it comes to free returns, the company and the environment pay. Frankly, it’s not worth it.
We can let the actual cost of shipping and returns shape us into being more intentional shoppers. When we have to pay for shipping and returns, the majority of us will think twice. In the spirit of intentional consumerism, some questions we can ask ourselves: Do I really need this? Am I bored and loving the dopamine hit that comes from online shopping? (No shame. We’ve all been there.)
It’s time to start looking at the true cost of convenience. Sometimes the best move is to go without. Being intentional makes ethical and sustainable purchases all the more satisfying.
If you have any questions about sizing and our clothes, please reach out. Perhaps we can help ease any concerns you may have. We’d love to talk with you. :)
Jade is a writer, potter, and gardener living in a sleepy town in Northern Ontario. They love growing food, creating functional stoneware, and hermiting with a book as much as possible.