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Free Shipping Minimums, Added Returns Costs Still Haunt Most Department Stores

Free shipping has become table stakes in the Amazon Prime era, and as more retailers get on board, laggards face growing pressure to follow. However, many of the merchants that offer free shipping still do so with a catch.

More than half (62 percent) of retailers only provide free shipping with a minimum order value of $35, while an additional 30 percent do not offer free shipping at all and charge at least an additional $4.25 on average for shipping, according to analysis from ParcelLab. Only 8 percent—four retailers in total—offered free shipping in its entirety, without any extra fees, the shipping operations software provider added.

While most retailers absorb the shipping or pass delivery costs to customers—either by incorporating this into the minimum order value or adding a separate fee—this could be a deciding factor when consumers consider purchasing.

For the analysis, ParcelLab conducted trial orders from July to October 2020 to evaluate the order, shipping, delivery and returns processes of 52 U.S. e-commerce retailers. To ensure the orders were comparable, the company bought products that cost less than $80 that were delivered by a parcel carrier. The shopping cart order was above any applicable minimum order value for free shipping.

Two-thirds (67 percent) of surveyed department stores, which includes Macy’s, Kohl’s, Nordstrom, JCPenney, Dillards, Saks 5th Ave, Neiman Marcus, Belk and Sears, have a free shipping minimum, creating an additional hurdle for customers before checkout. All five health and beauty stores surveyed, including Walgreens, Rite Aid, Sephora, Ulta, Bath and Body Works and CVS, had the free shipping minimum.

Returns processes remain complicated

In comparison with their mass market and health and beauty counterparts, department stores make the returns process more cumbersome by adding costs. While Amazon, Costco, Walmart and Target all enable free product returns (or in some cases, let the shopper keep the item and get a refund), 67 percent of department stores have some added return cost. Only 17 percent of the health and beauty retailers surveyed have these costs attached.

The department stores have the steepest costs, averaging $8.12 per return, whereas health and beauty retailers average $4.70 per return. Of the 52 retailers studied, 43 percent charge for a return, with 59 percent of those that charge asking for more than $10 per return. This approach could increase the chances of a customer opting not to shop with the retailer in the future due to these additional, inadvertent costs.

Thirty-five retailers, or 66 percent of the merchants analyzed by ParcelLabs, needed to be contacted directly to request a returns label and start the returns process, putting the onus on the customer to complete the transaction. And while 79 percent of the retailers offered in-store returns, only 17 percent offered drop offs at a brick-and-mortar location, which might be a more convenient alternative option for many customers.

With 17 percent of retailers requiring customers to create their own label and only 11 percent providing a shipping label upfront, many returns aren’t a consumer-friendly process.

Once an item has been returned, 54 percent of the evaluated retailers did not send a notification when a package was received and 64 percent did not communicate when the customers could expect their refund. This yet again creates another friction point between the retailer and the customer, who now remains unaware of the status of the package or the money involved.

For the majority of retailers (57 percent), customers have to wait more than six days for their return to be shipped and processed, and their money to be refunded, the study said. The number that gave a refund the day the package was returned (5 percent) was the same as the number that took more than 15 days to give a refund.

Post-purchase optimization must include shipment tracking and notifications

Aside from returns, the post-purchase process can be improved across the board—56 percent of retailers don’t communicate a successful delivery to shoppers through any notification, whether email or text. Of the 25 retailers that do send a delivery notification, nine retailers opt to let the carrier communicate it to the customer instead, which could generate a less personal response and impede customer retention.

Retailers don’t just rely on third parties in this instance, as only 27 percent of retailers host a shipment tracking page on their website. Twenty-three percent opt for the carrier to convey delivery information, while another 42 percent rely on other third-party vendors. Most worryingly, 8 percent of retailers do not provide a link to view order status updates.

Additionally, 68 percent of retailers are missing an opportunity to further engage with the customer through personalized order confirmation emails. These retailers strictly send order confirmation emails with no other context included such as similar product recommendations based on the order, which can generate higher open and click-through rates.

While 8 percent of retailers do provide some generic ads, less than one in four retailers (24 percent) attempt to customize recommendations based on the customer’s purchase.

Despite the U.S. offering a number of package carrier options including DHL, FedEx, UPS and the U.S. Postal Service, online retailers still decide which provider delivered the product ordered. None of the 52 retailers included in the ParcelLab analysis gave shoppers the option to choose a carrier. In other markets analyzed, such as the U.K. and Germany, ParcelLab says customers are able to view the list of available carriers and choose which carrier they would like to deliver their package.

In fact, only 4 percent of U.S. online retailers show the carrier they use on their website, the company found.

To very little surprise, the biggest names in the study were highlighted among the top experiences that the remainder of retailers should follow. Walmart was named “Best Overall Retailer” by ParcelLabs for fast delivery, detailed and clear email updates (with a tracking link and a delivery notification email) and a seamless returns process. Target was given “Best Checkout Experience” for same-day delivery, flexible in-store and curbside fulfillment options, clear information, effective communications and fast reimbursement.

“Best Delivery Experience” went to Wayfair for free shipping (with a $35 minimum order), convenient notifications with an option for preferred communication, easy tracking with an efficient refund process and a timely feedback request. Costco had the “Best Returns Experience,” thanks to clear email updates and a fast overall returns and refund process, ParcelLab said. And while the package was delayed by one day, Best Buy garnered “Best Shipping Experience” and stood out from others by providing updates at every step of the process and notifying the company immediately of the delay with a new estimated delivery date and an accurate tracking page.

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