How to handle e-commerce returns

Have you set up an online shop? If so, you’re bound to be aware that there are many things you need to do to keep it running smoothly. As well as choosing your products and suppliers, managing your platform and providing cheap shipping, there is a key factor in the success of an online business that is often underestimated: how you handle returns.

Returns management – also known as reverse logistics – is something you need to give plenty of thought if you want your customers to be satisfied with your service. But it must also be organised smartly and effectively to reduce costs and avoid nasty surprises when you come to file your accounts.

In short, managing returns (and doing well) is one of those elements that could decide whether your online shop – whether you follow a classic model or dropshipping – is successful. But how best to do it? Today, we’ll provide you with some useful advice on how to handle the returns process in your store!

Handling returns: communicating your policy to customers

You’ve all bought things from online shops at one point or another, so you’ll be well aware that there are any number of reasons for returning something bought online. The product could be defective, for example, or the customer may have expected something different. Or perhaps they ordered the wrong size – particularly common for online fashion and clothing stores.

Statistics indicate that between 20% and 30% of products bought online are sent back.

What this means is that managers of online shops should make returns management as simple and transparent as possible. This is because – as we’ll see – handling returns well leads to more satisfied customers and therefore a better conversion and retention rate.

So how should you communicate your return policy to customers? Here are some tips.

• Make the conditions for returning goods immediately obvious. Communicate the conditions that apply to returns – your return policy – on your e-commerce platform in the clearest possible terms. How many days customers have to return the goods, whether customers are refunded with a voucher or a full refund, and who is responsible for paying the shipping costs are all examples of things to include in your return policy. There are countless online templates to help you!
• Explain how to return the goods. What do customers need to do to send the goods back to the shop? Do they need to sort out shipping themselves, or can they do it through your online shop? Other useful information includes how to package the product being returned and whether they need to include forms or other information.
• Don’t hide how your returns are handled. Making all information on returns easily accessible within your online shop is vital if you are to earn customers’ trust. The leading online selling platforms make it very easy to publish your return policy, and plugins like WooCommerce and slightly more complex software like Magento also provide the option to customise and communicate your approach to returns.
• Train up your customer support team. Your customer support team should be ready to respond to any queries or questions regarding returns, and prepared to sort out any issues.

Handling returns: benefits for online shops

Organising and communicating clearly how your online shop handles returns obviously demands a significant amount of effort. So why invest time and resources in it? Well, a transparent returns policy could make your online store more competitive – both compared to other online businesses and to bricks-and-mortar shops.

Here’s a statistic we found really interesting: 54% of customers state that free returns (or exchanges) are one of the things that encourages them to buy products online. And the users interviewed saw it as more important than delivery speed. Isn’t that fascinating?

Smooth returns handling therefore encourages customers to buy through your online shop. It also increases the conversion rate: an undecided user may ultimately be convinced by a decent, transparent returns policy. And if a returns process runs smoothly, it will encourage customers to come back to your online shop for further purchases.In addition, providing the option of returning goods allows online buyers to try a garment on, for example, providing another way of competing with physical stores.

To recap, handling e-commerce returns well:

• can increase the conversion rate
• improves customer retention
• makes online shops more competitive

Handling returns: the logistics of e-commerce

An online retailer’s job isn’t limited to making customers’ lives as easy as possible if they want to return a product. They must also ensure that the logistics of the returns process are efficient and flexible, to reduce costs and ultimately increase profits.

Up to now we’ve focused on the way your return policy is communicated, but your online store front hides a complex ordering and shipping process. The more well-oiled, effective and flexible this mechanism is, the lower the costs and the chances of hiccups and issues. And the same applies for handling returns.

There are various stages in the returns management process to bear in mind and optimise:

• Return shipping. Many of the costs stem from the route the goods must take to come back and how the shipping is organised.
• The warehouse. You need to set aside a space in your warehouse for returned goods. You need to check these products, verify their status and work out whether they need repairing, before assessing whether they can be sold again or whether they need to be withdrawn.
• Putting items back on sale. If the product isn’t damaged and can be returned to your virtual shelves, you’ll need to add it back to your stock list and potentially replace its packaging.

A warehouse for handling e-commerce returnsOnce you’ve analysed all the different aspects of these various stages – everything from the costs through to how workflows are organised – you’ll have a better idea what return policy to offer your customers. For example, free returns undoubtedly encourage sales and increase conversion rates, but are you sure the cost is sustainable for your online business?

The same goes for return shipping. Several couriers other special conditions for returning goods: you need to look at their offers and work out whether you are better off centralising your returns management or whether it is better to leave it to customers to do themselves.

Handling e-commerce returns: dropshipping

Dropshipping is an e-commerce model that enables you to sell products online without having to first buy them and keep them in your warehouse: the customer buys from your online shop, but the supplier sends the goods directly to the customer from their warehouse. We explained how it works here. In the same way, with dropshipping, returns are sent directly to the supplier, since you don’t have a warehouse to process them.

Opting for an online shop based on dropshipping changes the way returns are managed radically, with both pros and cons. On the one hand, you don’t have any control over any of the logistics process (from shipping to storage): if the mechanism is cumbersome, you are powerless to make it more efficient or simplify things for customers. On the other hand, all you have to do is explain the returns policy clearly, and your supplier should do the rest of the work.

Here’s what we’d advise you do. When choosing your suppliers – and with dropshipping this should be done extremely carefully! – it is vital that you consider how they manage returns and their location. For example, suppliers based in the same country as most of your customers will probably manage to offer better return options. When you speak to your suppliers, always ask about their return policy and see whether there is any scope for haggling!

You’ve just added another major building block to your online business! Are you ready to optimise how you manage returns?