30% of online purchases are returned. In 2015, that was $107 billion dollars lost in returns. This issue is particularly pressing for retailers because the return experience is a pain point for many customers. As a result, a great return experience increases customer loyalty. Returns negatively impact your business’ bottom line, and most retailers don’t invest in their returns process. Not to mention, return rates aren’t going down any time soon.
“Retailers are not very good at managing returns right now, and so unless they invest in their ability to manage returns, the volume of returns coming back will cause problems in their overall supply chain,” said Tom Enright, supply chain research director at Gartner Research.
This investment starts with a clear ecommerce returns policy. We wish we could tell you “And here is the perfect return policy!”, but the truth is, your returns policy is a very individual document to your company. So since we can’t just whip up the best policy for you, we decided to help you create a great returns policy that increases return customers and helps you sell more.
BONUS: Before you read further, download our Inventory Management Software Whitepaper to see how Logiwa uses real-time tracking to help customers get up to 100% inventory accuracy and increase shipments by 2.5x.
Your Returns Policy Can Generate More E-commerce Sales
What if we told you that a clear and customer friendly returns policy could increase your online sales? It’s true. In a study published in the Journal of Retailing, Narayanan Janakiraman and his team concluded that a generous monetary return policy increases sales. This means your “100% back money guarantee” can actually encourage your customers to buy more.
It does mean that returns are likely to increase, but Janakiraman’s analysis showed that sales increased more than returns. It’s important to remember that each return is an opportunity, not a lost sale.
It’s important to note that over 60% of customers review your return policy before buying from you. If they aren’t happy with what they see, they will likely shop around.
Grant Carbone, an international sales expert, fully advocates for flexible return policies (if they fit your products). In fact, he described a scenario that pushed him to a competitor while furniture shopping.
He said that he had selected $20,000 worth of merchandise, and a shag carpet caught his eye towards the end of his trip. He asked if he could return the rug if it didn’t match his office furniture and if they would waive the restocking fee since it was a freestanding item. They refused, and Grant went to a competitor and spent twice as much and purchased two shag carpets.
The moral of the story here? “They lost a $20,000 furniture sale, their main income, because of a policy that stated they wouldn't take a return on a $400 carpet sitting on the floor,” said Grant Carbone.
Your policy is part of the customer experience
In another study, published in the Journal of Marketing Research, showed that when customers believe a product has a lower level of risk, they’re more likely to make a purchase. Not only that, but customers may be willing to spend more if your return policy lowers the consequence for a “bad” decision.
Your returns policy is a very company-centric decision. A 100% returns policy may help you sell your high-ticket items. A 100% guarantee on low-ticket items may cost you more than the item’s worth in restocking and shipping fees.
What about pushing the restocking fee and shipping back onto the customer? That would make them less likely to send a product back, wouldn’t it? Well, that’s true. However, it also makes it less likely that they will purchase from you again in the future.
Is losing that customer’s lifetime value worth refunding that one sale?
Use Your Return Process to Positively Interact with Your Online Customers
In many cases, it can be hard to interact with your customers if you sell in online marketplaces like Amazon and Walmart. This makes branding difficult for most marketplace sellers. While a returns scenario isn’t ideal, its a chance to interact with your marketplace customers.
Most major marketplaces let their sellers handle returns. Which means your returns policy can be a differentiating factor between you and your competitors. Most customers dread the returns process, so when you can provide a positive and friendly experience, it sticks with them.
Do You Use Your Return Opportunities to Cross-Sell or Up Sell?
You should always start with truly listening to your customer. Only then will your representative know if the situation is right for exchanging, cross-selling or up selling.
Did your customer order the wrong size or color? Then perhaps you can offer a free exchange.
Could you offer your customer similar or best-selling products to go along with their exchange at a discounted rate?
Would they be happy with an online credit versus a monetary refund?
If the answer to those questions ends up being no, and your policy says you’ll offer a full refund, then you should do so. You have to look at the big picture in terms of your refund policy. Don’t lose a lifetime customer over one product return.
How to Write a Great Returns Policy
Writing a great returns policy is no easy feat. But you can do it, and you can do it well. Your return policy depends on your ecommerce business and the sort of products you sell online. Certain product categories are plagued with return policy abuse for different reasons.
You have to keep these scenarios in mind when creating your returns policy. You won’t be able to prevent return abuse completely, but you can certainly make it more difficult.
Common Types of Return Abuse
Wardrobing or Renting
You’ll see this when someone wants to use a product or wear clothing for a short amount of time. Many evening wear retailers don’t allow returns at all due to the nature of their product. After all, people don’t usually wear evening gowns often.
A product category that you might not consider being a part of the “renting” return scheme is electronics. You might have heard about people purchasing huge flat screens for the Superbowl, but what about game systems? This Reddit user was called a “lazy inspired genius” for his Xbox coup.
This is an in-store example, but people are known to “rent” electronics, like cameras, for vacations as well.
Electronic “Bricking” and Switch Fraud
Customers will purchase an item just to break it or strip valuable parts to turn a profit on the item through a money-back guarantee (hence turning the item into a “brick”). Switch fraud occurs when a customer purchases a perfectly good item and returns a previously owned but broken item in its place.
The example below is an in-store “upgrading” scheme, but can you see how it could be applied to ecommerce if you don’t keep track of which customers return what items? Time frames can help limit this problem, but keeping track of customer returns would be key here.
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What You Need to Include in Your Policy
Customers do avoid stores with strict policies, but a strict policy and a clear one aren’t synonymous. You have to assess your inventory and determine the sort of return policy that would be fair to your customers AND your business.
If you sell swimwear, you can’t afford to have people return bathing suits without the tags and protective liners. You can’t restock them to sell to another customer. If you sell food items, you can sell an opened container of anything to another customer.
Here are some points you should make sure you include in your returns policy.
Return Time Limit
Like we’ve said, the time limit you choose should be dependant on the products you sell. If you sell a variety of products, then establish a time limit based on product categories.
Ecommerce retailers are exploring product categories that were previously only in the purview of brick and mortar stores. Mattresses are a really good example of this. Online mattress sellers usually offer a more generous return policy than in-store retailers.
Conversely, some retailers offer a lifetime guarantee, which can help customers make the leap to buy. Briggs and Riley, a luggage retailer, offers a lifetime repair guarantee. This helps them keep their customers happy, while keeps “upgrade” scammers at bay.
Briggs and Riley offers a lifetime repair guarantee versus a lifetime money back guarantee, which is a great way to keep customers happy.
L.L. Bean had to change their lifetime return and replacement guarantee. A small but growing group of customers who used the policy to return heavily used and damaged items. In a letter to their customers, L.L. Bean said:
"Increasingly, a small, but growing number of customers has been interpreting our guarantee well beyond its original intent. Some view it as a lifetime product replacement program, expecting refunds for heavily worn products used over many years. Others seek refunds for products that have been purchased through third parties, such as at yard sales."
How Your Customer Will Receive Their Refund?
Refunds can come in many ways. Will you offer store credit? Exchanges only? Money back guarantee?
Store credit can be a great way to offer a customer their money back while ensuring that they will shop with you again. Your customer doesn’t feel pressured to make a decision about an exchange right now, and you increase the chance that they will buy from you again.
Who Pays for Shipping on Returns?
According to the 2017 UPS Pulse of the Online Shopper study, 79% of shoppers said that free shipping on returns was important to them. Free returns shipping is quickly becoming the customer expectation. Actually, 47% of retailers believe that “customers are significantly less likely to shop without free shipping” according to a Total Retail 2017 study.
Ecommerce retailers like you are forced to make a choice: increase customer conversions with free shipping, or lose customers by putting the shipping cost on them. This is only a decision you can make looking at your entire business. Total-cost optimization is your goal.
Now back to returns. Who will you have pay for the return shipping costs? 27% of US Internet users said that free return shipping was important to them. If you don’t offer it, do you run the risk of losing customers? Again, you have to make this assessment based on your business and your products.
How to Market Your Ecommerce Returns Policy
There are a variety of ways you can market your returns policy. It’s important that potential and current customers understand your return policy. Not to mention, depending on your policy, it can help you stand out from your competitors!
Post it on Your Website
Your returns policy should be easily accessible on your ecommerce website. You can have a tab for it on your main site menu, but most online retailers keep it in the footer menu. Many customers will simply search online for your return policy, so make sure it’s optimized for search engines.
Include Your Return Policy in Confirmation Emails
Brick and mortar retailers will print their return policy on their receipts. You can do something similar. As part of your order confirmation email, you can include your return policy towards the end of the email. If your customer does have an issue with their order, this email is likely the first place they will turn.
Don’t Forget to Compare Your Return Policy to Your Marketplace’s Policy
You’ll need to check your return policy against the rules for your specific marketplaces. For example, Amazon requires their sellers to have policies that are at least as favorable as their own. Amazon sellers are expected to uphold Amazon’s policy and rules for each product category.
Be sure that your customer service reps understand the rules for each marketplace you sell on.
Great Ecommerce Returns Policy = More Sales and Happy Customers
No business wants to hear that their products didn’t make their customer happy. If you invest in your reverse supply chain, retrieving products from your customers, then you can actually save your business money. Create a customer-friendly returns policy that aligns with your company values and products, and you’ll have a healthier bottom line and happier customers.
Download our Inventory Management Software Whitepaper
Logiwa ensures accurate and real-time inventory management across all your warehouses. Our software provides detailed reporting so that you can:
- Predict reoccurring spikes in customer demand
- Avoid out-of-stock situations
- Avoid overstock situations
- ... and more
You can learn more about our full capabilities by reading our whitepaper.Download Now
Written by Ruthie Bowles
Ruthie is a content marketing consultant for Logiwa. Her specialties include small business development and inventory management.