Is Your Shipping Policy and Return Policy Losing You Business?

Establishing the fair cost of your product offerings is important to successfully convert viewers into customers. But what most ecommerce businesses don’t realize is that a fairly priced product, coupled with unfairly priced shipping, can lead to lost business, lost revenue and missed opportunity. Shipping plays a key role in purchasing decisions in our online economy. Ineffective shipping policies can result in reduced sales conversion, loss of repeat business and failure to meet customer expectations.

How Shipping Affects Conversion

In the world of online retail, it’s a buyer’s market. A myriad of shops selling a variety of wares, combined with the ease of receiving a shipment in the mail, has made the shopping process easier and has led customers to be more discerning.

Because of the lack of a physical location and the accompanying ability to immediately take an item home, shipping has become the one of the most important pain points for purchasing decisions. Companies that fail to recognize the importance of a strong shipping policy and what it means to customers will experience lower conversion rates, lower customer satisfaction and lower revenues.

According to a comScore study in 2012, shipping concerns can influence a purchase decision. Fifty-five percent of respondents said they had abandoned a purchasing decision because the resulting additional cost put the total over their pre-determined budget. Forty percent abandoned a shopping cart because the shipping costs were not made clear prior to checkout. Another 73 percent said that free shipping was important to them, ranking even higher than a variety of payment options and speed of delivery.

What this means for businesses is that shipping matters, including the presentation of shipping costs, the amount of shipping costs, the availability of different delivery options and the letter of return policies. If you find that your business is charging more than your competitors for shipping or that it’s not making the returns process easy and understandable, then you may be losing sales you would have otherwise converted.

Leading Causes of Failed Sales

Looking at the specific causes of failed conversion is important to understanding where your business should make changes. The aforementioned shopping cart abandonment rate arises from the fear and uncertainty that, if overcome, ultimately leads to a purchase. Presenting shipping costs near the end of the checkout process introduces a new level of fear and uncertainty that raises abandonment rates, so these prices should be made clear prior to checkout.

Cart abandonment is of particular interest due to the missed opportunity of seeing a sale come so close to conversion, only to fall through. But issues that prevent transactions or repeat business from occurring at all also deserve consideration. When asked what factors are likely to breed repeat business, a combined 54 percent said availability of flat-rate or free shipping deals, edging out coupons and discounts by a wide margin. Businesses considering whether the additional investment will be rewarded with additional revenue need look no further than this statistic.

A clear, convenient returns policy should also receive attention when evaluating your shipping services. Sixty-three percent of customers check the returns policy of an online retailer prior to making a decision. Poorly worded policies can result in added uncertainty that can dissuade customers from completing transactions. In addition, inconvenient returns processes can keep visitors from purchasing an item to return in the first place.

The Importance of Economic Options

But the specifics of policy and presentation are not the only areas that affect revenue. When making a decision regarding which shipping option to choose, 78 percent of respondents expected the economy ground option, and 67 percent selected it. Even if your company offers premium shipping, your options should include an affordable alternative to encourage purchases.

Free shipping is also an area of great expectation. According to the technology experts at Wharton University, many retailers list free shipping as their most effective marketing tool. Part of the reason behind this effect lies in the convenience of assuming no additional cost when making a purchase. But a greater factor involved in its attractiveness lies in the fact that, once shipping is no longer a concern, product price becomes less of a concern. The added benefit of this for your business is that it leads to higher conversion rates and a greater quantity of items purchased out of desire to hit the free shipping threshold.

When factoring in the importance of the myriad elements that comprise your business, shipping should receive special attention. Your policies, prices and options all fuel sales conversion, and failing to meet lofty customer expectations could be costing your business this very moment. Adjust your shipping practices to meet customer demands, and your sales numbers can see surprising improvement.