Return Policy Best Practices: How to Satisfy Customers and Drive Profit

The secret to ecommerce success is keeping your customers happy. A great end-to-end online experience requires an effective, customer-centric return policy. Returns are an expected part of managing an online business. On average, shoppers return anywhere from 15 to 40% of the purchases they make online. The entire process of return shipping, restocking, and refunding has a substantial financial impact on sellers.

While returns can hurt your revenue, they also provide an opportunity. This is where your company’s return policy comes in. When executed right, your returns policy can help you build customer loyalty, drive sales, and increase your bottom line.

In this article, we discuss why the return experience is so important and share best practices for effectively handling online returns.

Why Your Return Process Matters

An effective return policy should be a key part of your ecommerce fulfillment strategy. Today’s shoppers expect a positive and frictionless shopping experience. A stellar return policy and process make things easy for shoppers and offer them assurance and confidence. This goes a long way toward boosting conversions and winning lifelong customers.

Your ability to handle returns impacts the staying power of your brand. With today’s customers more likely to leave a brand after a negative experience, your return policy is the key to winning unsatisfied customers back and generating positive reviews for your business.

A bad return experience, on the other hand, could cause you to lose that unhappy customer for good. You also run the risk of that customer talking about their negative experience online, putting off new potential customers, and damaging your online presence.

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Why Do Customers Return Their Purchase?

Since shoppers can’t see, feel, or try out products they buy online, they may have various reasons for initiating a return. They could have ordered the wrong size, received a damaged or defective product, or simply changed their mind about the purchase. An increasing number of customers are also bracketing their purchase—they’re ordering multiple versions of a product to try out at home before returning the ones that didn’t work out for them.

It’s important to consider these reasons when crafting your return process. Find out the most common reasons why customers return your product and use this information to determine the scope of your policy.

How to Create an Effective Return Policy

The first step in optimizing your return process and experience is to create a clear, reasonable, and customer-centric return policy. A written policy helps to remove friction, set expectations, and assure customers that they can trust your business. In addition, a return policy provides guidelines for you to handle return requests consistently and accurately and ensure you deliver a positive experience.

The following are some best practices for creating a sound return policy.

Know the Costs and Potential Impact on Your Business

While returns are a necessary part of ecommerce, they are costly. In 2020, returns accounted for over $400 billion in lost sales. The return cycle involves multiple costs like labor, shipping, warehousing, restocking, refunding, and conditioning items for resale. If they aren’t managed effectively, returns can significantly cut into your revenue.

To create a return policy that serves rather than hurts your business, you need to account for several factors across your entire business. The right kind of return program will depend on your industry, the type of products you sell, how often these products are returned, and what your competitors are offering. For example, if you’re in the fashion industry, your return rate will likely be higher than a seller in the food and beverage industry.

Use these factors to find a balance between customer satisfaction and business cost. If returns are frequent in your industry, for instance, you may offer a longer return window to give customers flexibility and only cover the cost of shipping if the product is damaged or defective.

Cover All The Bases

Your return policy should clearly outline all the details and components involved in returning a product. Decide the kind of program you want to provide, and include these points in your policy:

  • Products eligible for return
  • Products eligible for exchange or store credit
  • Non-returnable/non-exchangeable products
  • Return window for eligibility (how many days past purchase date)
  • Required condition for product returns (e.g., must in original packaging)
  • Process for initiating returns
  • Timeframe for when customers can expect a return to be processed

By outlining these specifics, customers know exactly what to expect from you and there is less room for error and creating a negative experience.

Make Your Policy Visible

Put your return policy throughout your site so that customers can’t miss it. Link your policy within the shopping cart, put it on website pages, include it on your FAQ page, and place it in your website footer. This ensures customers are well aware of your policy and minimizes any questions and uncertainties.

Focus Your Refund Policy on the Customer

As the cost of customer acquisition continues to increase, many merchants are looking for new ways to retain their existing customers. According to data from UPS, 73% of online shoppers say that their returns experience impacts whether or not they want to buy from a merchant again. A customer-centric return policy can be the difference between a one-time purchaser and a loyal repeat customer.

How to Optimize Your Returns Process

After creating a clear policy, you then need to optimize your returns process to create a smooth experience. Here are some best practices:

Make it Easy for Customers

Make the returns process as easy as possible for shoppers. Consider including pre-printed return labels, offering in-person drop-off, making returns accessible through the customer account, and implementing live chat for customers to initiate a return or follow up on the status of one. By making things easy, you can avoid causing additional frustration from shoppers.

Streamline the Process

Return logistics is often a pain point for both sellers and customers. Consider outsourcing a part of your returns process, investing in inventory or logistics software, or partnering with a 3PL provider to streamline your returns. This could help remove some of the bottlenecks slowing down processing and creating additional costs. You also want to ensure all return information is available in real-time so that any member on your team can provide status updates to customers without a problem.

Turn a Return into an Exchange

A return doesn’t always have to result in a full refund. If your customer ordered the wrong item or received a damaged item, give them the option to exchange their purchase. An exchange is a great way to minimize revenue loss on the purchase while keeping customers happy.

Upsell and Cross-Sell

Another way to improve your return process is to turn returns into a profit. If a customer is initiating an exchange, you have the opportunity to upsell and cross-sell and suggest new products that the customer might not have considered the first time around. You’ll be able to minimize loss while improving the order value.

Resell and Restock the Product

Depending on the product, you may be able to repair, repackage, and restock the product to reduce your losses. You’ll want to factor in the costs of refurbishment and determine how to best recoup the costs of the return.

Offer a Product Warranty

It might be not feasible to resell your product after it reenters stock. You might consider offering a product warranty instead, especially for more expensive products. This protects your business from paying to replace damaged items while ensuring customer expectations are met.

Reducing Your Return Rate

While returns can be great for business, they still cut into your margins. Optimizing your return process should also involve reducing your return rate and increasing customer satisfaction from the start.

One way to do this is to optimize your website to create more product clarity. Leverage product descriptions, clear product visuals, size charts, customer reviewsuser-generated content, and product visualizers. These features give customers all the information they need to set the right expectations and make the right purchase the first time around, minimizing the need for them to return.

Use Your Return Policy to Boost the Customer Experience

In a competitive ecommerce environment, an effective return policy can be a differentiator for your business. A clear return policy paired with an efficient return process is key to turning around a bad customer experience and creating a positive outcome for your business. With the right processes and technology in place, a good return policy can help you generate more sales in the long run.

Looking for more ways to increase customer loyalty? Download our infographic on customer lifetime value.

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