The universal shipping rate: easy for customers, tricky for retailers

At luxury retailer Neiman Marcus Group, part of its red-carpet customer service includes making online shopping as easy as possible. That includes returns, but there’s one part of its returns policy to which Neiman Marcus Direct gave particularly hard consideration before rolling it out. That was how to price return shipment paid by customers, Greg Shields, vice president of operations at Neiman Marcus Direct, tells Internet Retailer.

Neiman Marcus Direct uses Newgistics, Inc.’s SmartLabel service—a pre-addressed package label that is included against the possibility of return with every outbound order—for Neiman Marcus Online and the catalogs of Neiman Marcus Direct, plus the web sites and catalogs of its Horchow Catalog and Chef’s Catalog brands. The system automatically subtracts a fee to cover return shipment from the credit issued to the customer upon return.

Setting that fee took careful thought, as Neiman Marcus, No. 38 in Internet Retailer’s Top 300 Guide to online retailers, opted to make the amount of the fee standard, Shields says. “We have the ability through our software to dial it up or down based on weight, but we thought that would be confusing to the customer, especially the customer who shops with us frequently, and we have a lot of those,” he says.

The challenge was to fix the universal fee at a level that would cover costs for a wide variety of package weights and sizes. Neiman Marcus Direct solved the problem by setting a different standard return shipping and handling fee for each of its brands. Shields notes that the average set point varies among the brands based on the nature of the merchandise they offer. “The Neiman Marcus Online product -- handbags, shoes, accessories -- is light. The Neiman Marcus Direct product is a bit heavier and Horchow is heavier yet. With pots and pans, Chef’s Catalog has heavy products,” he says.

After looking at the average weight of products shipped by each brand, Neiman Marcus Direct then looked deeper into shipment profiles to calculate the return shipping charges to customers. Outbound packages were being shipped out containing an average 2.5 units; if returned, packages came back containing an average one unit. “We spent a good deal of time figuring it out,” says Shields. “You have to set that rate very carefully and communicate to the customer what the cost of sending the package back is going to be.” Shields notes that since Neiman Marcus Direct went fully operational with SmartLabel, 90% of customers who’ve used the service have given it positive ratings.