Free Exchange, with small exchange fee on checkout (exchange insurance

Cost recovery on Exchanges, and customer reaction

[lgn1]

We are looking at cost recovery on exchanges, and are considering spreading the risk of exchange across all customer to keep the exchange insurance small.

Our exchange rate is less than 5% which is very good for products that involve sizing. Virtually all our returns are due to sizing issues.

We plan on charging a $2.00 fee, for the peace of mind of doing a free exchange due to sizing issues. We plan to make this opt-out on check out, which means the resizing insurance box is prechecked, to increase the percentage of customers that will take the insurance.

On the plus side, the conversion rate should increase, due to the customer not worrying about paying for the cost of an exchange.

Also, this should reduce the number of people doing a return for refund, instead of an exchange.

On the negative, the customer is paying an extra fee, but the shipping insurance is a tiny portion of an average sale (less than 2% on average).

Also, I wonder if the customer will be a little more sloppy on choosing the sizing, resulting in a higher return rate.

I'm hoping for an 80% acceptance rate, on this peace of mind insurance.

Has anybody tried this?

Putting yourself in the customer position, what would be your reaction?

Any comments would be welcome.

[tangor]

Are you sure you want to put a business plan in the public domain?

[lgn1]

Yes because I post anonymously, and I don't mention what I sell.

[ken_b]

We plan on charging a $2.00 fee, for the peace of mind of doing a free exchange due to sizing issues.

If you're charging a fee it's not "free".

It doesn't make sense to me. One customer pay a fee to be able to make an exchange, the next customer doesn't pay and gets a full refund?

Why wouldn't the first customer just return for a full refund and the place a new orfer for the correct size?

[tangor]

Chuckles. Go for it!

My advice has a $$$ value for things like this.

[lgn1]

The fee is really insurance.

So to clarify:

They pay a $2.00 insurance and if the item is the wrong size, they can exchange the product, without incurring any additional shipping charges (we send a free return label, and we ship out the different size to the customer).

If they don't pay the insurance and want to exchange, they are on the hook for the cost of returning the product, and the second shipping charge to ship the second parcel.

If they don't pay the insurance, and they pay to return the product by there own method, they only get the price they paid for the merchandise only back.

Returns, with no exchanges it a total waste of time and money, so we want to convert returns to exchanges.

[tangor]

If it is clothing you might have all other kinds of regulations involved. Hard goods, maybe you can do something there. Meanwhile, this only opens the seller up to all kinds of consumer vandalism... and trust me, the consumers (and bad actors) will beat the retailer to death.

I think a century or so experience of how to deal with returned goods is a pretty good place to start AND STOP.

Just sayin'.

[lgn1]

Fortunately, our products are usually purchased by customers who are well bred, so consumer fraud, is just a drop in the bucket.

Since this is our slow season, we are going ahead with the program to test it out. Probably so many different variables involved, this is probably the best course of action.