Evaluating if Free Returns Makes Sense for Your Business

[justin_collection]

Here's a thought experiment on how you could evaluate free returns. I'm not saying you should or shouldn't do free returns - this is a way to evaluate for yourself.

Just for time let's use nice easy numbers. Let's say your final value fees are 10%. With top rated plus you get a 10% discount on your fees. 10% of 10 is 1 so you are saving 1% of the sale price of your item for each item you sell.

This means for every 100 items you sell, you will save enough money to pay for one return.

If you only had a 1% return rate, your discount would pay for all of your returns.

You don't need to cover your entire return rate though. You only need to cover the *increase* in returns from before the free return policy to after the free return policy.

Now some returns you are going to get regardless of what policy you offer. And some returns you are only going to get if you offer free returns. If you have a 1.5% return rate before free returns and it jumps to 2.5% with free returns, you had a 1 point increase. Your discount covers that cost. If however it jumped from 1.5% to 4% you are not covering your increased returns.

However, there is now the factor of increased sales. It is possible (but not confirmed) that you could increase sales if you offer free returns. I don't know if it will help as much now, but if many people drop out of top rated plus leaving only a few with that badge to choose from, it could help. Even if your Top Rated Plus doesn't cover your returns, you may still be in the green if you make more profit due to increased sales.

What are your thoughts?

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Other things to consider - if you charge for shipping, you don't get a top rated plus discount of the shipping portion. This means you'd need more sales to cover an item's return.

If you have a wide range in item's price, you could be hurt when 99 items that aren't returned are inexpensive and the one time you sell an expensive, bulky item across the country it needs to be returned for free.

If you sell in a category with much lower final value fees than 10%, then your discount will not equal approximately 1% of the item sale price. For instance, for store sellers the FVF for musical instruments is only 3.5%

[myboardid]

Your logic isn't logical.  You don't need to cover the cost of the entire return in your math, only the cost of the return shipping, since all you are doing is switching from accepting buyer-paid remorse returns to paying for the return shipping.  And the comparison should be to the shipping cost of the returns you get in a year now, vs how many you would get if you make the change, and where that comes in comprison to the dollar amount of the FVF discount. 

Example - In deciding, I looked at my return rate as it is now, and found I had only 2 remorse returns in 2017, with about 6000 sales.  I made an educated guess that the number might quadruple with free return shipping, which would make eight.  Even if they were the heaviest things I sell and shipped from Hawaii (I'm on the east coast), that might cost me $150 or so in return ship costs.   Then I compared it to the 1% of my total sales including shipping cost that I receive back as a TRS.  In my case it is well over $3600.  So even if I'm wrong about my estimate of how many returns I'd now get, it makes sense.

I hate the principle of it, like most sellers it goes against the grain because I know I'm going to get some things back for no good reason at all, but it makes economic sense. 

Now, I don't sell clothing, which it seems to me would be the category that would have the most returns.  I think the math would be a lot different if I did.  Each seller has to do their calculations based on their own experience and their own numbers. 

[myboardid]

In my math in the above scenario, I didn't even consider that I might get more sales because of the policy.  In my most commonly-used categories, almost all my competition is TRS, so I don't think it will make much difference in the quantities of sales. 

[justin_collection]

The increase in sales may come about if many people drop out of top rated plus by not accomadating the updated requirements in June.

[justin_collection]

Good point on only having to cover the shipping since you'd get the item back. I guest that is a worst-case scenario of a worthless item. But even then you could now adjust the return amount.

[bigdeals.etc]

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@justin_collectionwrote:

This means for every 100 items you sell, you will save enough money to pay for one return.

I don't get this. How do you know how much money it will cost for one return? It's based off of the return shipping cost of the item which will vary depending on the size and weight of the item. So how can you equate this variable with a constant like the 10% discount? Some returns will have return shipping cost of $2.66 while others will be $20 and up.

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Other things to consider - if you charge for shipping, you don't get a top rated plus discount of the shipping portion. This means you'd need more sales to cover an item's return.

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Why not? Can you show me where the update details say this? The way I figure it is that eBay currently charges a FVF on the shipping you charge a buyer. By definition, the TRS Plus 10% discount is for your total FVF for the month. So why wouldn't it include the FVF you paid in shipping? They are both called FVF right?

[lookng2015]

Because eBay has NEVER based the FVF discount for TRS Plus to include shipping.

Why not? Ask them.

[bigdeals.etc]

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@lookng2015wrote:
Because eBay has NEVER based the FVF discount for TRS Plus to include shipping.

Why not? Ask them.

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Hm really? Wow I never knew that. Then I guess losing the 10% discount will be less of an impact than I thought because I've been slowly going from free shipping items to charging for shipping for so many years now.

[luckythewinner]

I just considered these three facts: 

a) Buyers already have access to free returns via false SNAD disputes. 

b) I have had 0 false SNAD disputes in the last 500 transactions

c) Although I am Top Rated, I have never once listed a TRS+ item

So the question about whether to bother with Free Returns answers itself. 

Unless eBay forces me to offer Free Returns, I can't be bothered to edit 5,000 listings. If they eventually do force me to offer Free Returns, it will be a pain to change all the listings but it probably won't have any effect when I do. 

[lemarcheaupuces]

What could happen in the worst case scenario?

an increase in returns?

it was my concern when decided to offer 30 days return long ago.

of course I don’t sell clothing, stay away from designer stuff and electronics.

i noticed nothing out of the ordinary so I stuck to 30 days

today I would go along with the flow, as I always do and see what happens.

i don’t believe “the free return” part will change anything.

i would b surprised if it did

again I speak for what I sell

so for me it’s not that it makes sense, I just don’t expect a loss.

and if wrong I can always change things.

[tunicaslot]

I do sell clothes and even tho my return rate is only about 1.3% for all returns - I don't think I'm going to risk it. I did get a promo from Ebay wherein they would cover any returns out of their pocket for 30 days - but I'm on the fence about even trying it for that long.

[lemarcheaupuces]

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@tunicaslotwrote:

I do sell clothes and even tho my return rate is only about 1.3% for all returns - I don't think I'm going to risk it. I did get a promo from Ebay wherein they would cover any returns out of their pocket for 30 days - but I'm on the fence about even trying it for that long.

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If I sold clothing, i’d B a little worried too.

[lancelotme]

Your buyer will come up with an excuse to make you pay for return shipping,so why bother to dwell on this subject.

[jpcustomsonline]

I'm surprised no one is mentioning the restocking fee. Sure, free returns cost you shipping. Which would be first class $2.66 for me. Pennies. But i have 10-20% restocking fees....  Because a lot of my buyers are either stupid, or ignorant. Now, yes, I know these are strong words. But, they are very accurate. I have an 8% return rate. I post detailed pictures, and information. Buyers, DO NOT READ. My pictures are more than enough to answer almost the majority of buyer questions. So yeah, I do a restocking fee. So now I no longer feel bad about getting returns. I get to make a little money on it. AND it pays for the effort it takes.  The extra time required for the whole process, including communication. Having to prove to the buyer that they are mistaken. Which was a lot easier when ebay didn't FORCE RETURN AUTHORIZATIONS! Freaken morons.... THe lack of availability of that item to be sold to someone else in that time span. So you could lose a sale, because someone bought your item by mistake .  The mandatory hold while the return is going, which can take weeks sometimes. So now you're out the item AND money. Having a part that now has scratches, because people don't CARE about someone elses property.

You are all forgetting the TRUE costs of doing business. And now you want to PAY for buyers mistakes? Anyone that doesn't think that telling buyers their returns are FREE, will increase returns, has not put any thought into it. At least before, a buyer might question " hmm, is it worth it?". Now?  Of course it's worth it. It's FREE. They can order 10 pairs of something, as if they are at a store trying things on, and try to find one that fits. You're sales will increase. Sure. Because buyers no longer fear having ANY actual cost associated with it. We aren't amazon. Or walmart. We need to stop being both.

[mistwomandancing]

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@justin_collectionwrote:

say your final value fees are 10%. With top rated plus you get a 10% discount on your fees. 10% of 10 is 1 so you are saving 1% of the sale price of your item for each item you sell.

This means for every 100 items you sell, you will save enough money to pay for one return.

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Except that mathmatically it doesn't remotely work like that unless you sell the exact same price, weight, shipping rate, for everything you deal in.

One sale may be a $70 item with $7 shipping.   Another a $6 item with $3 shipping.   How about those sales that include the shipping for free... so ALL of that combined price receives the 1% TRSplus discount.

Since it isn't a straight forward business in sales, this over-simplified formula won't work at all.