Prepaid vs. Scan-Based Return Labels: What Is the Difference?

Statistics show that 15–40% of online purchases are returned, compared to about 9% in physical stores. However, more than 90% of consumers will shop again at a store if the return process is easy and includes free return shipping. A straightforward way for small e-commerce businesses to manage returns is to provide customers with a return shipping label. There are two main types of return labels: prepaid and scan-based. What is the difference?

A prepaid return label is paid for in advance before the package is shipped. The online store purchases the label, usually through a carrier’s website or shipping platform, and then emails it to the customer who requested the return of their purchase so that the customer can print the label and affix it to the package.

A scan-based return label (also called a “pay-on-use” label) is generated but not paid for upfront. Shipping costs are only charged when the carrier scans and processes the package. This allows businesses to generate labels in bulk without incurring immediate costs for those that aren’t used, and to include them with all orders rather than emailing return labels on request.

Each type of return label has its pros and cons for e-commerce businesses. For many, scan-based return labels are the go-to choice because they can be included with all outbound packages and require less communication with customers, saving time and making it easier for customers to return orders.

However, scan-based labels are not without their drawbacks. First and foremost, they have more expensive initial shipping rates than prepaid shipping labels, which are charged at regular rates. This can be a serious disadvantage for small businesses selling lightweight items. In addition, scan-based labels may be subject to additional surcharges that you won’t find out about until they’re scanned. And even without the surcharges, charges for scan-based labels are usually a surprise, making it difficult to budget for returns.

Besides, a lack of communication with customers can actually be a negative thing because you won’t know the reason for the return, and this kind of feedback is important for small e-commerce businesses that can’t really afford a high return rate.

The main disadvantages of prepaid return labels are that you pay for them even if they don’t end up getting used, and there is usually a fee to cancel an unused prepaid label. In addition, returns using prepaid labels require more effort on the customer’s part: first, they have to request a label from the store, and then they need to print it, which can be a challenge if they don’t own a printer.

On the other hand, prepaid return labels are not without their advantages. They tend to be more affordable, particularly for lightweight packages, especially if you print them through a shipping platform like PostageMaker that offers shipping discounts. And what you pay upfront is usually the final amount; there are no surprise surcharges.

So, both prepaid and scan-based return labels have their pros and cons for online merchants, and your choice should depend on what’s best for your business: some businesses choose scan-based labels to streamline the return process to make it easier for themselves and their customers, while others opt for prepaid labels to save money and get feedback from their customers.

If you decide to go the prepaid return label route, consider using PostageMaker to print your return labels. We offer up to 50% discounts on USPS and UPS shipping labels and allow our customers to create prepaid shipping labels in a few easy steps. You can save the labels as .pdf or .gif files and email them to your customers who have requested a return.