As a small business, running an e-commerce website can be hectic. Managing the inventory, packaging, and delivery of products can be overwhelming. Return of products can also add to the chaos. Customers only gravitate to online stores that have easy return procedures. 66% of customers check the return policy before making a purchase, making it essential for retailers to think through the return policies before starting an online business. This approach is applicable for both stand-alone e-commerce websites and brands that sell on marketplaces like Amazon.
Handling returns is often easier said than done because it involves a variety of challenges.
Handling returns is often easier said than done.
Some Challenges That Come with Returns
- Interrupted warehouse efficiency: Unexpected return of goods can complicate warehouse operations and inventory management. Per-process handling costs can escalate, and this combined with resale challenges can become a major pain point.
- Extreme return policies: Some businesses have strict return policies to combat the increasing number of returns. However, customers only respond to and become loyal to brands that have flexible return policies.
Customers only respond to and become loyal to brands that have flexible return policies.
- Handling product damage: Once products are brought back to the warehouse, they have to be conditioned for resale. Most business owners ask customers what was wrong with the product but “It was damaged” is not an answer to work with. Figuring out the problem with a damaged product can consume a lot of time and money.
- Loss of liquidation: Sometimes you might want to liquidate an entire set of products if there is continuous return from that category, e.g. the previous season’s clothes, old electronics, etc. This might lead to selling them at prices far below than the retail price.
While there are a myriad challenges associated with reverse logistics, thankfully there are a variety of ways by which these can be overcome.
Facing the Challenges Associated with Handling Returns
- Use technology to your advantage: Returns come with a lot of supply chain confusion and losses. One way to reduce these is by streamlining back office operations and integrating them with the overall reporting system. This will help you identify the exact threshold to cross for a customer to become problematic. Addressing problems according to individual customer profile can help you reduce costs. For instance, beauty and cosmetics giant Sephora used this technique to identify clients who returned their products several times, mostly after trying them out. They imposed a rule that their products couldn’t be returned more than twice in any given situation. This is a well-balanced return policy that is fair to the brand and the customers.
- Use the data on hand: Collect all the important data associated with the returning of goods. The number of returns for a particular product type, the type of damage,and the number of returns due to improper packaging are significant actionable data. Having this data on hand will help you improve your packaging and delivery efficiency and also aid decisions pertaining to restocking products. You can use tools like Optoro to carry out the data analysis process.
- Pre-print return labels: Protect your business from fraudulent returns. Attach pre-printed return labels that include invoice number, quantity, and SKUs. When products are returned with these return labels, your team will know the returns are authentic. They will then be able to proceed with the replacement process.
- Offer a reasonable return time limit: The time within which customers can return products is critical. Usually, small businesses have a 60-day return policy, but depending on the products you sell, set a reasonable return time-limit that does not affect your business or is too less of a time window for customers. If you are selling perishable goods or products that have a short shelf life, you can fix a 30-day or 15-day return policy.
- Create a balanced return policy: Creating a balanced return policy that does not affect your business is essential. But make sure this policy is flexible when it comes to retaining loyal customers. As a small business, you can bend backward to maintain your loyal customers. You can also ease out the return process by adding a small gift like a discount voucher as a “sorry” for a damaged product or even have a follow-up call to ask about the replaced products. If you rack up overhead expenses due to these measures, you can always take loans for your retail business.
Many hidden costs, like the costs on free shipping, are involved in the return process. Always keep a watch on your profit margins and avoid taking returns for products that are sold at steep discounts. Make sure your retail prices cover operating costs.
Though there are several ways to handle returns, steps should be taken to reduce returns in the first place. Optimize product descriptions and images to set realistic expectations among customers. Also, offer impeccable customer service as customers might sometimes want to try getting products fixed first instead of returning. Give them that chance.
This is a guest post by Joseph Brady, Vice President of Digital Marketing at Reliant Funding.