Today’s consumer is connected, informed, and has more options for shopping than they can evaluate. The power is in their hands, and (among other demands) they expect to be allowed to return products that they find unsatisfactory.
Managing product returns is complex enough in a traditional brick & mortar retail store. Handling returns for eCommerce purchases can be even more daunting.
We’ve compiled some recommended practices for handling eCommerce returns to help you develop a returns management strategy that works for your business and your customers.
Why It’s Critical to Manage eCommerce Returns
The gap between merchants who are intentional about returns management and those who aren’t is wide and growing. And, customers notice! It’s important that you understand the impact returns management can have on your eCommerce business.
Here are a few reasons why you need a returns management strategy:
- 95% of online customers will purchase again from a merchant who provides a good return or exchange experience.
- 47% of 2013 holiday shoppers expected free returns, and I’m willing to be it’ll be higher this year.
- This 2012 study showed that free shipping on returns could increase sales up to 357% over two years.
- Regulatory agencies (like the European Union) are cracking down on merchants’ returns requirements.
The way your company manages returns impacts your customers’ experiences. It impacts your sales. It impacts your company’s operations. It impacts your profitability.
How you handle returns is not a part of your business you want to overlook.
Handling eCommerce Returns
We compiled some credible industry recommendations about how to handle eCommerce returns, how to structure a return policy, and how to turn returns into a competitive advantage (instead of an expense).
Actually have a return policy.
Nicole Fallon, writing for Business News Daily, talks about how important it is simply to have an eCommerce returns policy.
Given the hassle and costs associated with returns, it may be tempting to just say that you won’t do it. A “no returns, period” policy isn’t going to fly with customers who expect top-notch service and convenience…
Developing and publishing a clear return policy has a few benefits:
- It builds trust with your potential customers, helping to demonstrate that you aren’t scamming anyone. (You aren’t, right?)
- That trust can actually increase sales.
- It clearly documents what customer can expect from you and why they are allowed to return.
- It communicates the operational policies of your business internally. Everyone needs to be on the same page.
Attacking eCommerce returns by the seat of your metaphorical pants is a recipe for disaster. You’re leaving money on the table if you are without a documented, published return policy.
Make returns convenient for your customer.
Different groups of people have different preferences and needs. The reasons they want to make a return will vary. The ways they prefer to do so will also be different. You position yourself well against your competitors if you can accommodate for these differences.
Some ways you can make returns convenient are:
Accept eCommerce returns via shipment or in physical stores (if you have them).
A study performed by marketing research statistics firm Lab 42 showed that roughly one third of customers prefer to return an online purchase in a physical store.
Allowing in-store returns also gives you an opportunity to upsell. You have a customer, who has already showed interest in your brand, walking into your store on a journey they otherwise wouldn’t have made. Any extra purchase you can squeeze out of them is sugar (revenue) on top.
Publish web content that is specifically about the returns process.
Make it very easy to find. Make it very easy to read and understand. If technically possible, allow the customer to kick off the return process right from that page.
Per Todd Fallansbee, at Web Marketing Today, consider publishing a FAQ (frequently asked questions) page and contact phone numbers. He also recommends using friendly, unrestrictive language and avoiding jargonny small print.
Don’t just make this web content an afterthought. Many retailers put so much time and money into their eCommerce sites, then tack on return policy pages at the last second. Make sure, just like the rest of your site, your returns content is usable, readable, mobile-friendly, etc. It’s important content.
Provide pre-printed return labels.
By giving your customer a pre-printed label, all they have to do is slap it on the box their product showed up in and drop it off at their nearest drop box. Sometimes FedEx or UPS can even pick it up from their home or office.
This makes the return process even simpler. The customer doesn’t have to figure out the right label–shipping labels can be a little confusing. They don’t have to print off the label (Oh man! I’m out of ink again!). They will appreciate the convenience.
Have you ever returned a product to Amazon? If so, you know what I mean.
Protect your own business, too!
Unfortunately, generously providing your customers with a convenient returns policy means some of them will try to take advantage. You need to protect your business from this less-than-honest subset of your customers.
Pre-printed return labels help prevent fraud.
We already talked about providing pre-printed return labels as a convenience mechanism. But, they also help to prevent fraudulent returns!
When you pre-print the return labels you can include information like original invoice numbers, quantities, SKUs, etc. That way, when your company receives the return package, they’ll know exactly what should be in it.
(Kudos to Todd Fallansbee, again.)
Pay the cost of providing free return shipping.
Tier I retailers may have the capital to eat the costs of return shipping, but your growing business may not be so flexible. If free return shipping will have a big impact on your bottom line, consider limiting your return policy.
One great way to do this, recommended by Jennifer Goforth Gregory, is to only offer free returns (or free shipping) once the customer has reached a certain cart size. In other words, provide “free shipping and returns on orders over $50″…or whatever amount makes sense.
This protects you by making sure you don’t eat $20 in shipping costs on a $5 product. It also gives you an upsell opportunity. A customer who meant to spend $40 may end up spending $60 to avoid paying for shipping.
Put a reasonable time limit on your return policy.
It’s usually understandable for a customer to take 30, 60, even 90 days to return an item. It’s not really cool if they try to return an item they purchased two years ago. Shopify recommends setting a limit.
Setting and clearly articulating the time-frame limit of your return policy will help prevent you from taking inventory that you’ll have to mark down exceptionally or just get rid of.
But, here are some things to keep in mind:
- Allowing some discretion from your employees is a good idea. I’m pretty happy if a customer service rep honors the 30-day policy on day 32.
- Consider adjusting your policy around the holidays. Maybe set a hard date like January 15 to accommodate for early Christmas shoppers–I wonder what getting done early is like.
- Differentiate reasons for returns. A defective product and a fit issue are two very different reasons for a customer to return. The former probably demands some more flexibility in the policy.
Understand what returns cost you.
Be sure to take the time to understand the financial impact that returns have on your business. This is one of the recommendations presented by Armondo Roggio at Practical eCommerce.
Consider the following:
- How does your average return rate benchmark against your industry and competitors?
- How do your eCommerce returns compare to your in-store purchased returns? eCommerce has shown to produce fewer returns.
- How much does it cost to ship different groups of your products in either direction?
- How accurate is your fulfillment process? Bigcommerce recommends you eat the cost of your mistakes. How often are you making them?
- How do returns impact your inventory numbers? See How Increasing Your Sales Can Reduce Profitability.
Returns Management in the Big Picture
Returns play a big part in the “big picture” of your business. Returns management impacts customer experience, supply chain management, inventory, and customer service.
Managing returns requires that you can update inventory quantities across your entire organization. It requires that you have the pricing elasticity to mark down this incoming inventory. You must be able to throttle how much you buy from suppliers (so you don’t end up with too much of something). You must be able to deal with broken or faulty products.
Your customer service and customer management teams–or maybe just you–need to understand the return process too. They need visibility into where returns are, so when a customer calls, looking for their refund, you can give them a good answer: “Your return shipped, but we haven’t received it yet.”
Effective returns management, especially in an eCommerce or multichannel business, requires technology. If returns are a pain point in your organization, check out the solutions we can offer to help: