PayPal Canada has become the latest player to offer free returns, now providing up to 10 refunds a year—or up to $300 annually—on online shipping costs. The company plans to offset the extra cost of doing so with increased e-commerce business.
This comes as a response to the growing number of cybermerchants attempting to keep pace with industry powerhouse Amazon.com Inc., which does offer free returns. While relaxing return policies could come with higher expenses, online retailers are becoming more and more willing to due so in order to compete.
PayPal Canada notes that its choice to offer free returns is a bid to make customers even more comfortable with e-commerce transactions.
“People are generally worried about shopping online because they don’t quite feel comfortable with the return process,” says Kerry Reynolds, head of consumer marketing at PayPal Canada. “For us, [free] return shipping is a competitive differentiator… It’s one of those things that’s in line with our strategy of removing those barriers for people to buy online.”
According PayPal’s 2015 research, high return shipping costs discourage more than half of online shoppers globally from making repeat purchases. Reynolds notes that because of this, PayPal has introduced free return shipping in 40 countries over the past year, resulting in a “steep incline” in the number of people subscribing to the service.
“Shipping costs, in general, have always been a pain point for Canadians,” she concludes. “It’s adding that extra level of confidence to people who are shopping online.”
However, while free returns offer consumers comfort, they can hurt retailers’ ability to resell product—returned items can’t always be resold at full price, depending on their condition and timing of the return. As such, Antony Karabus, CEO of retail consultancy HRC Advisory, notes that to avoid these issues, retailers can tighten policies on when—and in what condition—products can be returned for full refunds. Moreover, he suggests that retailers consider creating a subscription charge or high purchase threshold for shoppers to qualify for free shipping.
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