Four Tips to Help your e-commerce store Save on Returns

August 2019

*Orginal article by Andrew Tavener
Edited by: Maria Guerrero

E-commerce stores have grown rapidly, thanks to the boom of the internet and advanced shipping developments. Many small retail businesses have used this to their benefit by maximizing their customer reach through online marketplaces. In fact, these international marketplaces are anticipated to hold 39% of the online retail market by 2020. Online shopping has given consumers the advantage of faster, and easier access to millions of their favorite brands. On the flip side, retailers are faced with the difficult task of managing deliveries and returns efficiently while staying at low costs.

Although expanding into the e-commerce realm leads to higher exposure and sales for a business, it also faces a higher chance of returns. Throw in return insurances policies required by online marketplaces, and returns become extra complicated for brands. For example, Amazon requires third-party sellers to receive automatically authorized returns. Meaning, potential sellers must accept returns without having any direct contact with the customer. Consequently, removing the chance for sellers to get in contact with their customer and offer support through replacements or exchanges. However, there are multiple ways online retailers can control their return rate and keep their costs low.
Here are four strategies e-commerce sellers should be incorporating into their return process strategy:

1. Return policies should be aforethought.
Changes in online marketplace policies allow retailers to rethink the way returns are handled on their end. According to research from Royal Mail, nearly half of buyers (47%) stated they are less likely to shop from an e-commerce store that charges for returns, and 60% would be unlikely to shop again if an online retailer makes their return experience difficult. With this is in mind, it is obvious that creating a well-planned return policy is crucial for positive customer experience. Sellers need to determine whether to offer one return policy – for example, Amazon’s – or one-of-a-kind policies for each marketplace/channel or even for certain product choices (for example low-end vs high-end).

If retailers choose an “Amazon-style” return coverage with automatic returns and free shipping, this can be promoted upfront as a segment of a company’s brand. Nevertheless, a simple online returns process helps increase sales and locks in customer loyalty – and overlooking the effects of poorly planned returns can be costly.

2. Having a free returns policy isn’t always the best choice.
Returns can have a massive financial impact on profits. Depending on the industry, return fees can range from a few dollars to big bucks. So, while it is uncommon to charge for restocking fees or completely deny returns, it may make sense financially. For example, a business selling new laptops might need to charge a restocking fee to support thin margins. Likewise, for subscription services, it makes sense to charge a restocking fee since the products are tailor-made for an individual. Therefore, evaluating whether marketplace returns policy is worth it for your business, is an essential step before deciding to launch an e-commerce platform.

3. Sellers must optimize returns automation based business needs.
Online retailers with high return rates may find it necessary to automate returns more frequently. Whereas, smaller businesses can manage returns in-house through software that simplifies the creation and printing of return postage labels. Barcodes on labels quickly pick out customer data and product numbers cut down human-errors and save time.

Integrating with internal systems is essential for massive retail operations with high return volumes. Returns sitting in the warehouse can’t be efficiently put back into stock if there is no proper system in place. There should be a consistent flow from the consumer to the warehouse to the shipper into marketing, sales, and accounting.

For businesses with few internal fulfillment resources, a third-party logistics service can help. Retailers need to weigh the advantage vs the costs of in-house fulfillment and returns processing compared to using a third-party service. Another way to control returns if there aren’t in-house resources is to monetize returns sending returned stock directly to a reverse logistics partner that liquidates inventory.

4. Returns always cut into profits, so it is vital to minimize them.
Excellent customer service helps avoid unnecessary returns by solving a customer’s trouble through support, speedy product replacements and exchanges. However, if you are a seller on a marketplace that automates returns without the need of contact, it makes it difficult for retailers to intervene and provide support.
To combat this, sellers should use “scan-based” return labels when possible. With these labels, the retailer is charged only if the label is used. Research shows that 10% of requested returns are never actually sent back. Meaning, scan-based labels are huge money savers.
Providing customers with current, correct product info is additionally important. For example, having your e-commerce store provide order status, inventory processes provides customers with knowledge on when they’re product will ship. Moreover, detailed product descriptions and high-quality images help avoid any product confusion for the customer. 

Finally, it’s essential to track which products are frequently being returned and understanding why. Develop a “reason for returns” report by manufacturer and SKU. This gives vendors time to fix issues in a product and avoid future returns.

Changes in return insurance policies by Amazon and other marketplaces are an opportunity for e-commerce companies to take charge of returns. Online retailers can use this as an opportunity to create better communication among customers and, most importantly, loyalty to the brand. While concurrently addressing how returns affect the bottom line, as well as, streamline logistics.