Get a FREE copy of Delivery and Returns Pricing Strategy Report 2024
Is your retail brand shifting the focus from top-line growth to business profitability? If so, pricing strategies for your e-commerce delivery and returns must be one of the biggest questions your team wants to answer before 2025.
Delivery strategy: more than price and speed
It was previously believed that price and speed were the primary factors influencing delivery choices for online shoppers. Recent data, however, suggests that it's only part of the story.
While 32% of shoppers choose the cheapest delivery option and 17% are ready to spend more for the fastest delivery, 35% of customers do not have a clear preference for either speed or price. For the remaining 15%, delivery decisions are driven by specific factors like trusted carriers, pick-up availability, named day delivery, sustainable choices, etc. We have also found that 34% of customers are likely to change their delivery preference on repeat purchases.
Research shows that offering and visualizing 3 to 5 delivery options is optimal, providing flexibility without overwhelming customers and improving checkout conversions — brands that offer multiple delivery options see a 27% checkout conversion rate increase.
Delivery pricing: the end of free shipping?
Statistics reveal that UK consumers prioritize delivery cost before availability and speed. While free delivery options seem essential for competitiveness, they can be financially challenging for retailers.
About 59% of UK shoppers expect retailers to offer free delivery at checkout, but 38% say it depends on the type of product, and 30% of customers are willing to pay for delivery even when there's a free option, meaning they are ready to splurge on added value.
A/B testing is crucial for refining e-commerce delivery strategies. Defining what to test is essential, as balancing conversion rate, average order value (AOV), and shipping revenue is tricky — positive outcomes in all areas are rare. Understanding the competitive landscape and how shipping price tweaks affect revenue is key.
Introducing a free shipping threshold, with careful calibration to avoid a significant drop in conversions, helps retailers avoid loss-making transactions, especially with low-margin items — 60% of customers say they will add items to cart to avoid delivery fees.
Some brands, like NET-A-PORTER, offer free delivery as a perk for customers who reach higher tiers in their loyalty programmes, encouraging frequent shoppers to maintain their tier status.
Returns strategy: customer experience is key
Convenience drives customer preferences in returns, just as it does in delivery. Offering varied methods — such as paperless returns, in-store returns, drop-off points, and home collection — adapts to evolving customer expectations. Easy returns keep customers coming back, with 68% preferring pre-paid labels over digital platforms.
Similarly, instead of a one-size-fits-all policy for returns, offering multiple return pricing options can be more effective. Providing free basic return options while charging for premium services like home collection allows customers to choose based on their preferences and willingness to pay, balancing satisfaction with cost control.
Returns pricing: free returns are going away
In the past decade, free returns became the standard in e-commerce, leading customers to expect them, which often squeezes brand margins. The total cost of returns ranges from £14.40 to £37.10 per item, with discounting and liquidation costs alone accounting for £4.70 to £26.40. Other expenses include shipping and transportation (£3.75 - £5.80), warehouse processing (£2.10 - £3.00), and customer care (around £1.85).
Research from 15 UK retailers who implemented return fees shows no decrease in return rates, suggesting fees alone don’t deter returns, although charging for returns helps cover the costs associated with processing them and enhances e-commerce profitability.
Some retailers are now using dynamic returns pricing by identifying profitable and non-profitable customers. ASOS, for instance, has introduced a £3.95 fee for customers with a high return rate unless they keep at least £40 worth of goods from their order. This strategy aims to manage costs associated with frequent returners while still providing free returns to the majority of customers.
Similarly, Percival Menswear integrates return fees into its loyalty program, adjusting benefits based on return behaviour. These approaches reflect a shift towards personalised return policies that encourage mindful shopping and balance profitability with customer satisfaction.
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Effective strategies for reducing the burden and impact of returns
Get a free copy of Delivery and Returns Pricing Strategy Report 2024 by Harper and Ingrid to keep reading about the use of exchange platforms, product feedback analytics, engaging with serial returners, dynamic return windows, wardrobing prevention, and much more.
- 100 top UK retailers;
- Over 130 million deliveries;
- Data, insights, analysis;
No fluff, just facts to get your brand's team ready for 2025.
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