LP Login

Think Big. Move Fast.

Interesting article about e-commerce return rates at Internet Retailer:

Customers on average return 35% of the items they order from Zappos.com Inc., a web-only retailer of footwear, apparel and other merchandise. But there’s a certain group that returns 50% of what they buy.

Zappos loves those customers.

That’s because those consumers tend to purchase from among Zappos’ most expensive lines of footwear, then happily take advantage of the e-retailer’s generous and well-publicized returns policy: Zappos not only will take back any item within 365 days of delivery, but also pays for the return shipping.

And since it costs the same to ship a $300 pair of pumps as it does to ship a $30 pair of sandals, the Zappos policy of winning over shoppers with its returns policy has helped to bring in high profit margins on many of its orders, says Craig Adkins, vice president of services and operations at Zappos, which was acquired last year by Amazon.com Inc.

“Our best customers have the highest return rates, but they are also the ones that spend the most money with us and are our most profitable customers,” Adkins says.

  • Pingback: A thin line between your best and worst customers « ecpm blog()

  • http://thecliffgardner.com Cliff

    I have always been interested in evolving company culture and especially how Zappos works, so when I heard about the CEO’s new book, I decided to get an advanced copy.

    I finished reading my advanced copy of “Delivering Happiness: A Path to Profits, Passion, and Purpose” by Zappos CEO Tony Hsieh and it was truly inspirational while at the same time entertaining and “real” as Zappos may describe it.

    If you or any of your readers are interested…

    I am currently hosting a giveaway of one of my unread advanced copies of the book at http://thecliffgardner.com/?p=424. So far, only four entries so you’re chances are pretty good. ;-)

  • http://www.medifasthealth.org Jennifer

    How can they possibly make a profit off expensive products being returned? Especially if they are paying for return shipping??? I just don’t understand that…

  • Zapponian

    Jennifer – As the author notes, it’s actually easier on the more expensive products since they have larger margins.

    But basically, it comes down to technology, process efficiency, and margins.

    We do so much business with UPS, and we’re so tightly integrated with their World Hub, that we get their best pricing.

    We have one of the most efficient fulfillment centers on Earth. That means that we can ship, process, and re-stock at a very low marginal cost.

    And we’re efficient because our engineers have developed great technology for automating a lot of those fulfillment related operations.

  • Pingback: Tips from BradsDeals on finding online shoe deals. | BradsDeals Blog()

  • lr

    One question: What does Zappos do with the expensive shoes that are so profitable for them, when they are returned 364 days later, and they are out of style?

  • Pingback: Lightspeed invests in Shoedazzle | SGEye Eyes the World()

  • http://www.facebook.com/people/James-Chuaycham/100000401263193 James Chuaycham

    imo They must have high volume and calculating high enough margin (and high efficiency with low cost of operation) especially on expensive shoes to offset returned item costs(35% of customers returned their shoes approx). The trick is to keep loyal customer coming back and buy more. With great customer services and easy free return, zappos can potentially charge market prices or more but will convert more customers due to their easy return policy.

  • ReannVenus

    That a very good news..They are really doing a good profitable business and making the customer satisfied..