Returns Management: Best Practices for Improved Efficiency
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All ecommerce stores need to have a robust returns management system in place.
No matter how good your products are, some customers will want to return their purchases for a variety of reasons. Perhaps they ordered more than one size, the item may arrive damaged, or maybe they simply changed their mind once the order arrived.
Whatever the reason, you need to ensure that you’re offering an easy and straightforward returns process for your customers.
Many website builders are designed to help you with this, with returns features built-in. Processing returns, however, is a little more complicated than just giving people their money back – there are various steps to returns management that you’ll need to optimize.
Luckily for you we’ve put together this article showcasing the best practices for returns management in order to improve the efficiency of your business.
What Is Returns Management?
Returns management, which is also sometimes referred to as reverse logistics, is the process of overseeing products that are returned to you by customers.
Once you’ve received an item back from a customer you must make various decisions as part of your returns management process.
These decisions include what you will do with the product and what resolution you will offer the customer.
You’ll need to determine if the product can re-enter your inventory and be re-sold, if it’s damaged and can be repaired or recycled, or if it needs to be totally written off.
You’ll also need to decide what type of resolution you will offer the customer. You may offer them a replacement item, a refund, store credit, or a product repair.
Advice from the Experts
Top tip! Remember that whatever resolution you want to offer your customers needs to be clearly written in your returns policy and featured on your website.
Benefits of Optimized Returns Management
There are various benefits to having an optimized returns management system in place including:
- Better profit margins. An optimized returns management system ensures you aren’t losing unnecessary money or spending too much time and money finding resolutions.
- Higher customer satisfaction. The better your returns system the more satisfied customers will be with their overall experience of your brand.
- Reduce the number of future returns. If you’re able to analyze and understand why products have been returned, you’ll be able to take steps to reduce the number of products returned in the future.
- You can resell the items. An optimized returns management system allows you to determine if an item can be resold once it has been returned rather than it being automatically thrown away, adding a further boost to your profit margins.
- Filter return types. You’ll also be able to filter your return types if you have an optimized product management system in place which will allow you to identify the returns which are beyond your control (e.g. a customer changes their mind) and the ones that should never have happened in the first place (e.g. a customer receives a broken item).
Returns Management Best Practices
Take a look below at some of the best practices for implementing an optimized product returns management process that will improve the overall efficiency of your business.
1. Understand the Difference Between Controllable and Uncontrollable Returns
It may surprise you to find out that there are actually two different types of returns you may face as an ecommerce business. They are controllable and uncontrollable returns.
It’s important that you understand the difference between the two as you’ll need to manage each in a different way.
Controllable returns are returns that could be prevented in the future. These are returns that are sent back due to things such as items with defects that made it past quality control, items that are damaged as a result of poor packaging, or items that didn’t arrive on time due to slow shipping.
You can take steps to prevent controlled returns from happening again and impacting your profits such as investing in more durable ecommerce packaging or reviewing your shipping strategy and switching to a speedier shipping provider.
Uncontrollable returns are returns that you simply can’t do anything about. These are returns where the product has been sent back due to a reason totally out of your control such as the customer changing their mind about a product or not liking it when it arrives.
2. Work Out How Much Returns Cost Your Business
The majority of businesses in 2023 offer free returns to their customers. While this is a great way to keep customer satisfaction high, even when they’re making a return, much like free shipping it can be detrimental to your bottom line if misjudged.
It’s crucial therefore that you work out and understand exactly how much returns cost your business so that you can both plan this into your budget and look for ways to reduce costs.
You’ll need to work out how much every element of a return costs your business. From calculating shipping costs of returns to providing returns labels and a tracking system to customers, as well as how many hours are spent processing the returns – there’s a lot to factor in.
If you feel like the costs of your returns process are too high, you may have to charge customers a fee to return a product. Bear in mind, however, that this can be off-putting to online shoppers and may lead them to choose a competitor to purchase from.
Sometimes the hit you take in covering the cost in returns is worth it for the increased customer base offering free returns can provide you with.
3. Communicate Your Returns Policy Clearly
One of the most important parts of offering a great customer experience and optimizing your returns management system is to ensure you’re communicating your returns policy clearly to customers.
Make sure you feature your returns policy on your website as well as any partner sites/marketplaces you may sell on – it should be easy to find. And consider including a printed copy within your customer’s package.
Take the time to write out a returns policy that is clear and easy to understand. The last thing you want is disgruntled customers claiming your policy is unclear or worse, that you’re going against what you initially promised.
4. Create a Transparent Process
The sales process of an ecommerce website is usually very transparent, especially when it comes to shipping products. Customers can usually see when they’ve placed an order, once their order has been processed, when it’s been shipped, and track when it will be delivered.
The same transparency should also be applied to the returns process too.
Once a customer has set up their return and/or sent their order back to you, they will likely be eager to know what the status of their return is.
Set up tracking software so that customers can easily keep track of where their return is up to and consider using text or email alerts to communicate with customers when their return has hit key stages such as reaching the warehouse and the refund being processed.
You should also ensure your customer service team has access to returns information in order for them to effectively deal with customer queries about the status of their return.
Advice from the Experts
Top tip! Check out our guide to customer service phrases to help you offer the best customer service possible, not just for returns but for every aspect of your customer experience.
5. Consider Using a Fulfillment Center
Returns management is one of the most important parts of running a successful ecommerce business but it’s also one of the most time-consuming.
As your business grows and you make more sales, you may discover that you simply don’t have the time or the resources to manage the process yourself. That’s where a fulfillment center comes in.
Not only do fulfillment centers store, package up and ship your products for you but they will also handle the full returns process including processing the returns and offering a solution to customers.
While using order fulfillment for your returns management can be time-saving and stress-free, you will face higher costs than if you undertook the task in-house because you’ll need to pay the center a fee.
You’ll also have to be willing to give up control of the overall customer experience and trust that your chosen fulfillment center will handle returns quickly and professionally. How they do this will reflect on your brand, so it’s important to choose carefully.
Returns Management: Summary
Returns management is a key part of any ecommerce business and while it may not be the most exciting or glamorous aspect, if you want your brand to be a success you’ll need to invest time, resources, and money into optimizing the process.
An optimized returns management process can help to improve the overall efficiency of your business as well as give your profits a nice boost.
To recap, our best practice tips for optimizing your returns management systems are:
- Understand the difference between controllable and uncontrollable returns.
- Work out how much returns cost your business.
- Communicate your returns policy clearly to customers.
- Create a transparent returns process.
- Consider using a fulfillment center.
Implementing these tips can help you to ensure every aspect of your returns process is running smoothly and costs you as little money and time as possible.
Don’t forget to let us know in the comments your top tips for running an optimized and effective returns management system.
Frequently Asked Questions
The simple answer is: yes! Investing both time and money into your returns management is important if you want your ecommerce business to be successful in the long run. A well-optimized and efficient returns management system will help to improve overall customer satisfaction, reduce the number of future returns, and result in bigger profits and more sales.
No. If you don’t have the time or resources to manage your returns in-house, or if you simply don’t want to, you can use a fulfillment center instead. A fulfillment center will manage every aspect of the fulfillment process from storing, packaging, and shipping items to processing and managing customer returns.
While you’re never going to be able to avoid all customer returns, there are some things you can do to make them as rare as possible. Ensuring your products match the product descriptions and images listed on the website, using a shipping provider who will deliver the items quickly, and using high-quality packaging that will keep items safe from damage can all help to prevent customers from making a return.
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