In the world of ecommerce, returns are a normal part of doing business. Unfortunately, not all ecommerce businesses know how to handle returns in a manner that reduces cost on their side. While many businesses focus on insuring packages going to customers, few consider insurance on return shipping. However, return shipping insurance can play a huge role in improving how the business handles returns. InsureReturn covers for the cost of return shipping, allowing e-commerce to offer free returning shipping to their customers with less hassle. If you are still thinking whether return shipping insurance is important to your ecommerce business, consider the following points.
1. Buyers Are Looking for Businesses with Friendly Return Policies
Buyers are usually concerned about the quality and nature of the products they purchase online. This tends to have an impact on their choice of products and businesses they purchase from. While a shipping insurance is usually provided to cover the product until it reaches the customer, many businesses do not provide coverage for the customers to return the item. To address this issue, return shipping insurance is a policy developed for buyers to cover their returning shipping costs.
Among the major reasons why buyers in the US choose to shop at popular brick and mortar retailers like Walmart, Costco and Best Buy is their generous return policies. Customers want to shop with retailers who make it easy to return products if they are not satisfactory. This means that the customer does not incur any cost if they decide to return a product. When it comes to online shopping, that's the major reason why customers are willing to pay $119 annually for Amazon Prime's Program not only because products shipped from the nearest fulfillment center and delivered within 2 days but also because product returns are free. By focusing on this area, Amazon continues to win over repeat customers and saves on resources needed to acquire new customers. Given the high cost on the side of ecommerce businesses that comes with offering generous return policies, the need for return shipping insurance coverage can no longer be overlooked.
2. Customers Love Free and Straightforward Return Policies
Product returns is among the major roadblocks to satisfying customers' needs and experience for any ecommerce. This means asking the customers to pay for return postage creates more hassle and friction to the process. A recent consumer study indicated some interesting shopping behaviors every ecommerce business owner should pay close attention to:
62% of the consumers are frustrated by having to pay for return postage and packaging.
58% of the consumers look for businesses with a hassle-free return policy before purchasing from a store.
67% of the consumers check the return policy before making a decision on the order.
92% of the consumers are willing to become repeat customers if the product return process is easy.
47% of the consumers expect free shipping labels when they return the products purchased online.
Return shipping insurance enables ecommerce businesses to offset customer frustration by covering these costs. By offering free return shipping and exchanges, ecommerce businesses can provide a smoother shopping experience. On the bigger picture, businesses are more likely to re-engage customers and convert them to repeat buyers by covering the cost of restocking.
3. Offering Free Shipping Can Be an Expensive Affair for a Business
Although free shipping is a feature that customers look for when deciding to shop in a particular online store, offering this service can be expensive for any small ecommerce business. If you think about the amount of money you need to spend to offer free shipping for every item return, it is most likely to cut into your margins. A return shipping insurance covers the cost of returns ensuring that your margins remain intact. It also gives you the confidence to offer this service to your customers, knowing that you are not responsible for the potential cost.
Apart from having the confidence that you are covered for the cost of returns, you also give your customers peace of mind when purchasing from your business. When you offer free return shipping, you are more likely to create a huge number of loyal customers. Customers will be more confident to shop in your online store, and recommend it to their friends and family . Over time, customers start becoming less hesitant towards checkout, knowing that they can always return the item if they do not like it. It is even more satisfying for the customers to know that they can return the item without the penalties of shipping costs.
4. The Demand for Return Shipping Insurance Is on the Rise
The demand for return shipping is growing at a fast rate . Unlike the ecommerce market in China which is made of only few players (like Alibaba and JD.com), the United States comprises of the biggest Amazon and many other independent players. In terms of worth, the US ecommerce market was valued at $517 billion in 2018, of which $258 billion was owned by Amazon. More than 250 thousand independent ecommerce businesses, including other big players like eBay, own the remaining market share. However, most sellers on the major platforms like eBay are independent store owners too. With such a high number of players in the market, competition for customers has become stiffer. This has prompted sellers and companies to come up with newer and more attractive features .
While a few years ago free shipping was a major selling point for ecommerce businesses, customers are now interested in what more a business can offer. In this new wake, free returns are becoming a must for ecommerce businesses to remain competitive. However, deciding on whom the cost of returns should fall is still a concern for many businesses. Businesses normally operate on cost minimization basis. When adding a new feature, they must decide how it would fit perfectly in their business model. While some Amazon may not have any problem losing up to $1 billion yearly to cover free shipping cost for their Prime members, smaller ecommerces struggle offering such services. As offering free shipping return means more financial struggle for the businesses, this is where InsureReturn comes in: a service that covers the business from such huge financial implications to ensure it remains afloat.
5. Return Shipping Insurance Covers the Cost of Return Shipping
With the demand for free returns expected to continue rising, the need for return shipping insurance is becoming more imminent. In line with the changing the shipping industry, Instantship introduced InsureReturn, a return shipping insurance that helps ecommerce businesses boost their sales and acquire more repeat customers. The insurance policy covers the cost of shipping for returns, with the ecommerce business paying nothing at all! How so Let us explain: InsureReturn is the feature that allows the consumers to voluntary purchase return shipping insurance togther with the product they added to the shopping cart. Furthermore, the insurance rate is only a fraction of the full price the customer will need to pay for the return shipping. With 67% of online customers reading the business's return policy before buying a product, offering a friendly return policy is more likely to increase your conversion rates. What better policy to offer your customers than a free and generous return policy where the customers knows they will not incur any cost if they need to return the product?
6. Return Shipping Insurance Streamlines the Product Return Process
When an ecommerce business adds the InsureReturn feature to their online store, the process of product returns becomes streamlined. At checkout, the customer might be asked to add return shipping isurance to their order. The purpose of the insurance is to ensure that the customer is covered in case they want to return the product. If within a specified period, such as 14 day the customer needs to ship the item back, the insurance will cover the shipping cost 100%. The good thing is that InsureReturn can be combined with other Instantship's features such as prepaid shipping labels to ease the process. This is in line with the fact that 47% of online customer expect to have a return shipping label to facilitate the process. At InstantShip, the shipping labels can be sent electronically to the customer at no extra cost to expediate the return process, no mention that the customers can easily print out the shipping lables using their own home printers .
7. Return Shipping Insurance Boosts Sales and Encourages Conversions
The success of ecommerce businesses highly depends on conversion rates. This is the main reason for spending huge amounts of money on SEO, influencer marketing, and paid ads. However, such strategies still yield low number of purchases made by website visitors for most of the ecommerce sites. Other features such as free shipping and generous return policies tend to have higher conversion rates and lower cart abandonment rates . The reason behind this is purely psychological as human naturally look for reassurance in their decisions, especially where cash is involved.
Ecommerce businesses that offer free return shipping send a reassuring signal to their customers. They let their customers know that even if they make a wrong decision when buying a product, they will have a chance to correct it. While there is a possibility of an increase in the number of returns, the rate may be diluted by having more sales. During periods of high sales, the rate of returns will be lower compared to periods of average or lower sales. As a marketing strategy, covering the cost of restocking is more likely to attract more customers and complement other marketing strategies, not mention that the return shipping cost is fully covered by a third party return shipping insurer like InsureReturn.
8. Return Shipping Insurance Helps Small Businesses Remain Competitive in the Market
Most people ask whether return shipping insurance is necessary when they have already paid for the regular shipping insurance. Well, return shipping insurance is way more important as it gives the customer the option of returning the item at no extra cost. For any small business to survive in the current ecommerce space, it needs to compete with Amazon. This means being innovative and providing services that can compete with those of Amazon. Currently, Amazon offers free returns and 2-day fast shipping to their Prime members. With such attractive offers, small businesses have a better chance of competing with Amazon by offering free returns as well. However, the cost of offering free returns can be high, especially for businesses with constrained sources of funds. That's where returning shipping insurance comes in.
The regular insurance included in the shipping cost only covers the item against damage that may occur during the shipping period when the product is being delivered from your warehouse to your customer. It does not cover for any expenses that may incur after the item has been delivered. The return shipping insurance covers for the expenses incurred if the need to return the item after delivery.
Smart merchant gives their customers the assurance that the cost of return is covered if they opt to return the item. Return shipping insurance gives the customer the option to return the item if needed, without any extra cost. If something went wrong or the customer received the wrong item, they can ship the item back to the seller without incurring any extra cost.
9. Return Shipping Insurance Presents a Great Market Opportunity
As of 2019, Amazon now has 100 million Prime members in the US and presents 63% of its US customers. This then means Amazon has 158 million customers (100 million ÷ 63%). Based on the fact that Amazon holds 50% of the US ecommerce industry, it then means that there are 158 million customers (of course many of whom shop at Amazon too) shop at the other 250 thousand independent ecommerce businesses in the US. In 2018, Amazon generated a revenue of $114 billion, out of its total $258 billion revenue, solely on Amazon.com, excluding Prime, AWS, Alexa and other cloud services. This would then mean that 70 million (114/258 x 158 million) customers shop for physical products that need shipping at Amazon.com. It would also mean that an equal number of 70 million customers shop for physical products that need shipping at the other 250 thousand independent ecommerce businesses. If each customer only shops once per year, it would then mean that 70 million shipments are sent by independent ecommerce businesses in the US every year.
As the huge number of yearly shipments is seen, the volume of the returns shouldn't be too surprising. With an estimated return rate of 20%, average shipping cost of $10 and return shipping insurance rate of $3; the shipping rate insurance presents a great potential for market growth. Given that 70 million shipments are made annually, the annual return shipping insurance market potential is $70 million (70 million shipments x $3/shipment - 20% x 70 million shipments x $10/shipment). Keep in mind that this estimation is based on the assumption that each customer only shops once every year. Although this number could include eBooks and other digital products customers, it still paints a clear mental image of the huge market potential for return shipping insurance.
10. Return Shipping Insurance Attracts Potential Investors
Ecommerce software companies play a critical role in ecommerce by building platforms that enable transaction to take place and be executed. With the entry of return shipping insurance, it means that they will add another profitable feature into their business model. InsureReturn has a great potential for growing profitable revenue for software companies. Inclusion of this feature in their platforms will attract more businesses in the US seeking to be more competitive in the market. The three most popular platforms used by businesses in the US, WooCommerce, Shopify, and BigCommerce ought to benefit from a rising demand as businesses choose platforms with readily-built features. In addition, customers will be more attracted to shopping on platforms that allow them to return items for free if they are not satisfactory.
For insurance companies, this can mean an expansion to their businesses and increase their profitability. Since insurance companies are constantly looking for the opportunities to invest their capitals in other types of insurance than auto, home or life insurance, collaborating with InsureReturn can spark a potential growth trajectory. With the right partners, this product can be improved to meet with the changing customer demands in the market.
The future of ecommerce will include the use of innovative features to grab customers' attention. Free return shipping is becoming a sought-after feature among online customers. For businesses, providing free return shipping requires having a plan and way for covering the cost. InsureReturn is a revolutionary product that covers the return shipping cost, allowing businesses to offer return shipping literally FOR FREE.