This is an article by Jimmy Rodriguez, COO & Co-Founder at 3dcart, a leading shopping cart software. Read on for expert tips by a Subject Matter Expert (SME).
As an online store owner, you should do everything within your power to differentiate yourself from your competitors. Stock superb products, offer top-notch customer service, and couple it up with exceptional order fulfillment. Besides that, you should have an e-commerce returns process that works for you rather than against you.
Returns and exchanges are part of doing business. Research has shown that having a generous return policy can increase your store’s sales but doesn’t necessarily translate into an increased volume of returns because great return experiences increase customer loyalty. This article will cover some essential tips to help streamline your store’s return process.
1. Have a Clear Return Policy
There is no law requiring e-commerce stores to have a return policy, but a concise and transparent return policy offers customers security. It’s worth noting that potential customers will first review your return policy before purchasing from your store. If they don’t like the policy, they’re likely to continue shopping around.
When setting up a system to handle returns, the first step should be formalizing your return policy and communicating it clearly to your customers. While policies will vary depending on the nature of your business and the products stocked, here are basics that every return policy should cover:
- What items can customers return?
- What items are you willing to offer an exchange for?
- What products are “final sale”? (meaning they are non-exchangeable and non-returnable)
- What is the standard return period?
- In what conditions can items be returned or exchanged?
- How can a customer initiate an exchange or return?
- Who pays for the return shipping costs?
It isn’t enough to have a clear return policy in place. It should be displayed in strategic locations throughout your website to ensure customers see and read it before making a purchase. You can opt to display the return policy as a link on the website’s footer along with other vital agreements and policies. A return policy summary can also be added to the terms and conditions and linked to the full policy. Other key places to add the return policy include:
- Checkout Page
- Product Page
- FAQ Page
When the return policy is clearly outlined on your website, it’s hard to miss when making a purchase, and it sets the right expectations even before purchase. Hiding the policy in fine print will only frustrate you and your customer during the return process.
The return policy is enforceable by merely displaying it. However, if you wish to cover all your bases, you can add an unticked checkbox to the final checkout screen where customers can check the box to show they agree to the store’s return policy.
The return policy is enforceable by merely displaying it.
2. Offer Free Returns With a Flexible Return Period
In the past, stores that chose extremely liberal return policies that didn’t require a receipt or time limit paid for that decision dearly. Many customers abused the policy, returning products they had bought decades ago or items they had been fished out of dumpsters.
To avoid making the same mistake, offer free returns and a flexible return period. Most return policies are one size fits all, disregarding the wide variations of individual behaviors. That’s why you should put a little more thought when coming up with a return policy.
The art of finding a balance between customer satisfaction and store inventory management should be the first consideration when outlining return policy. Since a copy and paste store policy is not an option, answering the below questions will assist you in coming up with a unique return policy:
a. What's the Store's Average Inventory Sell-Through?
Sell-through rate is a measure of the amount of inventory a retailer sells compared to the stock purchased from the manufacturer. It’s used to measure how fast a retailer can convert their investment into revenue. The sell-through rate can also help you identify the period for your return policy. The faster the sell-through rate, the shorter the return policy period should be, and vice versa. For most stores, a 60-day return policy works best.
b. What Is Your Competitors' Return Policy?
It’s essential to consider what your competitors are doing when crafting your return policy. If your direct competitor offers a more flexible return policy, it’s worth considering how it can influence consumers when deciding whether to purchase from your store or theirs. Your return period should match or better that of your competitors.
By carefully answering the above questions and considering each of your responses, you can better shape the terms of your return policy. Also, note that a longer return period is recommended because the longer the customer stays with the item, the more they get attached to it, and the lower the chances of returning it.
3. Make Returns Easier For Customers
With more people embracing online shopping, there has been an increase in returns. The return process can make or break your store. Customers are more likely to come back and purchase from your store if they had a positive return experience in the past.
To improve efficiency, more stores are using intelligent logistics technology. However, stores should be as human as possible and stay aligned with customer needs and expectations.
Here are a few tips to make the return process as efficient as possible:
a. Offer a Personalized Return Slip
Having a return slip when your goal is to make profit sounds counter-intuitive, but it’s the first step to offer excellent customer support. The more steps a customer goes through when returning an item, the higher the likelihood of complaints and chances of them dissociating with the retailer.
Return instructions can be indicated on the back of the return slip to ensure the customer knows what they need to do with regard to returns. Additionally, you can offer the return slip both on paper and in electronic form.
b. Offer a Prepaid Return Label During Shipment
Most retailers overlook return labels, yet they play a critical role in a shopper’s experience. A pre-paid label drastically reduces customer frustration, especially if it’s included in the original packaging. To make the return process manageable, you can add a tracking identification number so that both the retailer and the customer can follow up on the return shipment status.
c. Focus on Engaging Customers Post-Purchase
A large number of customers say post-purchase engagement impacts how they view a retailer. For a positive impact, communication should come from a retailer rather than a third party to keep their experience consistent. The purchase should mark the beginning of a long relationship with a customer and not the end of one. Having a post-purchase platform where all customer questions regarding a return can be answered is a great way to nurture the relationship.
4. Use an RMA to Automate the Process via Your Website
A return merchandise automation (RMA) system helps manage returns for online stores. The system consists of a first form that a customer submits with the reason for making the return. The system then generates documentation such as a shipping label to help accelerate the return process. An RMA system doesn’t just speed up the return process. It also helps keep track of returns, re-enters eligible items back into inventory, and keeps track of the financial impact of a refund to your total revenue.
An RMA system makes use of different order types to classify and sort orders. Some of the order types include;
- Credit only – Credit only RMA orders are used when a customer returns an item for a credit. Once the customer asks for credit, the system automatically adds each line independently and marks the item as a return.
- Repair – For repair orders, the RMA system keeps track of items returned by customers for repairs, as well as items from your inventory that are out for repairs.
- Replacement – For replacement orders, the system makes it possible to receive returned items from customers and send replacement products.
- Reject and ship back – Once a product is returned, it must be inspected first; if it fails the inspection, it should be shipped back to the customer.
An RMA system can speed up the return process while ensuring your customers stay happy. It also encourages your customers to spend more money in your store and emphasizes your desire to please customers post-purchase.
5. Watch Your Profit Margins
Running a business is a balancing act, and for an e-commerce shop, it’s even harder to counterbalance an appealing return policy with a healthy bottom line. A liberal return policy can result in high returns that eat into your profit margins. There is only so much you can do to prevent returns from happening. There will always be a customer looking to return a product.
Here are a few suggestions to help prevent customer returns from eating into your profits:
a. Offer Store Credit Instead of Returns
Store credit is a spendable balance offered to customers that they can use in your store to purchase a new item. It provides a solution to fund the reversals’ headache while keeping the customer’s cash in your store. While it might be a brilliant solution, it can work against you if a customer feels forced to take store credit.
b. Claim a Refund From Your Shipping Carrier
Most carriers offer a money-back guarantee for deliveries and provide a refund if they don’t deliver on time. Take advantage and follow up for refunds.
c. Offer Exchanges
Under direct exchange return policies, a customer returns an item, and you offer a similar item. In most cases, the causes of e-commerce returns are due to a defective part or an incorrect size. By providing an exchange option, you get to keep the cash from the initial sale, and you can sell the item once it has been set right.
An eCommerce store can be a great way to earn a living, but to ensure profitability, you have to audit it to pinpoint areas that need improvements regularly. The return policy is probably one of those areas. However, with the knowledge shared above, you can confidently create a unique return policy that best suits your store and massively improves the return process.
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This post is a contribution by Jimmy Rodriguez. Jimmy is COO & Co-Founder at 3dcart, a leading shopping cart software. As an ecommerce authority, he’s focused on helping internet retailers succeed online by developing strategies, actionable plans, and customer experiences that grow and improve performance.