Not Every Return Program Is Right for Your Business

Although every e-commerce website deals with returns, return policies look very different from one site to another. Some businesses offer a full refund on online returns, while others offer store credit in exchange for returned products. Some businesses provide free return shipping on product returns, while others pass shipping costs to customers.

Ultimately, a good return program fulfils your company's goals without being too costly to operate or too difficult for your customers to find, understand, or use.

Smaller businesses, by contrast, may benefit from a less generous program. According to data from CNBC, the average return represents 30% of the purchase price. This cost may be too much for businesses operating on tight margins. Instead, many smaller businesses offer stricter return policies, such as charging for shipping or only offering store credit.

In the end, there's no one-size-fits-all return program. You’ll need to crunch the numbers and consider how much each aspect of your policy could impact your bottom line. We’ll examine some of these costs in the next section.

Building Your E-commerce Returns Program: Factors to Consider

When designing a returns policy, merchants should consider several factors to balance customer satisfaction and profitability. Some of these factors include:

  • Customer expectations: It's important to understand the expectations of your target audience and what they consider a fair and reasonable returns policy.
  • Product type: The type of product you sell will play a role in determining your returns policy. For example, perishable goods or custom-made items may have more restrictive return policies.
  • Shipping costs: Shipping costs can add up quickly, especially if you offer free returns. Merchants should factor in these costs when determining their returns policy.
  • Profit margins: A product with a low-profit margin may not be able to absorb the costs of free returns. Merchants should consider their profit margins when deciding whether to offer free returns.
  • Brand image: Your returns policy can significantly impact your brand image and customer loyalty. A fair and reasonable policy can help to foster customer trust and increase loyalty, while a restrictive or complicated policy may discourage customers from making repeat purchases.
  • Competition: It's important to consider your competitors' actions when designing your returns policy. Offering a more generous returns policy than your competitors may help to differentiate your brand and attract more customers.

Top Reasons That Customers Return Products

These statistics highlight the most common return reasons, and can help merchants to better understand why customers return products, and to design returns solutions that take these factors into account. According to Invesp:

  • 23% of returns are due to customers receiving the wrong item
  • 22% of returns are due to the customer receiving a product that doesn’t match the product description or image
  • 20% of returns are due to customers receiving a damaged product
  • 35% of returns are due to unspecified reasons

10 Refunds and Return Best Practices for Your Ecommerce

1. Understand the EU laws concerning Returns

As a merchant, it is important to be aware of the legal framework surrounding returns in the European Union (EU). The EU Consumer Rights Directive sets out minimum standards for returns, including the right for consumers to return goods within 14 days of receipt for a full refund, without giving any reason.

In addition, EU member states may have additional consumer protection laws that apply, so it is important to be familiar with the specific requirements in your country. Failing to comply with these laws can result in legal consequences and a loss of customer trust.

2. Communicate your returns policy prominently on your website

It's essential to make your returns policy easily accessible to customers so they can understand their rights and the process for returning a product. A dedicated returns policy page on your website should be easy to find and clearly outline your policy, including any conditions that must be met for a return to be accepted and the timeframe within which returns can be made.

3. Reduce Returns by Providing Important Details on Every Product Page

Providing detailed product information on every product page can help to reduce the number of returns by ensuring that customers have all the information they need to make an informed purchase decision. This can include product dimensions, materials, care instructions, and any other relevant details.

4. Clearly state the types of products eligible for returns and any exclusions.

It's important to be transparent about the types of products that are eligible for returns and any exceptions, such as perishable goods or custom-made items. This helps to manage customer expectations and reduce the number of returns.

Setting clear conditions for returns helps to ensure that products are returned in a resalable condition and reduces the cost to your business.

5. Specify the timeframe within which customers can request a return (e.g. 14 days from delivery).

Defining a specific timeframe within which customers can request a return is an important aspect of your returns policy. This helps to manage customer expectations and ensure that the return process is handled promptly.

Typically, merchants set a timeframe of 14 days from the date of delivery, in line with the minimum standards set out in the EU Consumer Rights Directive. This gives customers a clear deadline for initiating the return process and helps to manage expectations.

However, it's important to consider the nature of your products and your business model when setting the timeframe for returns. For example, if you sell perishable goods, you may set a shorter return timeframe. On the other hand, if you sell high-ticket items, you may offer a longer return period to build customer trust and encourage purchases.

6. Provide clear instructions on how customers can initiate a return (e.g. through an online form or email).

Providing clear instructions on how customers can initiate a return is an important aspect of your reverse logistics strategy. This helps customers understand the process and feel confident that they can easily request a return if needed.

There are several ways to provide instructions on how to initiate a return, including:

  • Online form: A dedicated online form on your website that customers can use to initiate a return. This can include fields for entering product details, the reason for the return, and contact information.
  • Email: A designated email address that customers can use to request a return. Make sure the email address is prominently displayed on your website and in your returns policy page.
  • Phone: A dedicated phone line for returns, which customers can call to initiate a return. This can be particularly useful for customers who need additional support or have questions about the return process.
  • Use a Returns Portal: Consider using a returns portal such as Bigblue to manage the return process. This can streamline the process for you and the customer by providing a centralized platform for tracking return requests and managing the logistics of return shipping. A returns portal can also help you to track and analyze return data, which can be valuable for improving your returns policy and reducing the number of returns in the future.

7. Consider offering free return shipping to make the process more convenient for customers.

Offering free return shipping can make the process of returning a product much more convenient for customers, and can help to increase customer satisfaction and loyalty. This can be particularly important for online purchases, where customers may be reluctant to initiate a return due to the cost and hassle of return shipping.

Matter of fact, a study by Accenture found that 69% of consumers say that the availability of free returns is the most important factor when making an online purchase.

Here are some benefits of offering free return shipping:

  • Increased customer satisfaction: Customers appreciate the convenience of free return shipping, and are more likely to initiate a return if they know that the process will be straightforward and cost-effective.
  • Improved customer experience: Offering free return shipping can help to ensure that the entire customer experience, including the return process, is positive and stress-free.
  • Increased customer loyalty: Providing a positive return experience, including free return shipping, can help to increase customer loyalty and repeat purchases.

Of course, offering free return shipping may not be feasible for all businesses, and there are trade-offs to consider, such as the cost of shipping and handling and the impact on profitability. However, the benefits of offering free return shipping outweigh the costs for many businesses.

8. Make sure your returns policy is easy to understand and written in plain language.

This will help to ensure a great customer experience, ensure you that your customers are fully aware of their rights and the process for initiating a return, and will reduce the likelihood of misunderstandings or disputes.

Here are some tips for making your returns policy easy to understand:

  • Use plain language: Avoid legal jargon or complex language, and write your returns policy in a straightforward and easy-to-understand manner.
  • Be concise: Keep your returns policy as short and concise as possible, focusing on the most important information.
  • Use clear headings and bullet points: Make your returns and refund policy easy to navigate by using clear headings and bullet points, and by breaking up text into short paragraphs.
  • Highlight key information: Use bold text, underlining, or other formatting techniques to highlight important information, such as the returns timeframe, eligibility criteria, and instructions for initiating a return.
  • Include visuals: Consider including images or other visual elements to help illustrate key points, such as step-by-step instructions for initiating a return.

9. Consider offering exchanges or store credit in addition to refunds.

In addition to offering refunds, consider offering other options such as exchanges or store credit. This can be particularly useful for customers who are dissatisfied with a product but would like to purchase a different item from your store, rather than receiving a refund. According to a survey conducted by Accenture, 48% of customers who returned a product said they would prefer to receive store credit, while only 27% preferred a cash refund.

Here are some benefits of offering exchanges or store credit:

  • Increased customer satisfaction: Offering exchanges or store credit can increase customer satisfaction and reduce frustration, as it gives customers more options for resolving their issue with a product. In the same survey, 86% of customers said that having a choice of returns options is important to their overall satisfaction with a retailer.
  • Reduced financial impact: Exchanges and store credit can help to reduce the financial impact of returns on your business, as customers are still making a purchase, rather than receiving a full refund.
  • Increased customer loyalty: Offering exchanges or store credit can help to build customer loyalty, as it demonstrates your commitment to providing a positive customer experience and resolving any issues with products. A study by Narvar found that 63% of customers who returned a product were more likely to make a future purchase if they were offered store credit.

10. Consider offering a satisfaction guarantee or extended return policy for high-ticket items to build customer trust.

Offering a satisfaction guarantee or extended return policy for high-ticket items can build customer trust and increase customer confidence in your brand. By offering a longer return period or a guarantee, customers can feel more secure in their purchase, knowing they can return the item if they are not satisfied.

According to a survey by MetaPack, 63% of customers are more likely to purchase if a retailer offers a satisfaction guarantee. This can be particularly beneficial for high-ticket items, where customers may be more hesitant to purchase due to the cost.

Here are some benefits of offering a satisfaction guarantee or extended return policy:

  • Increased customer confidence: A satisfaction guarantee or extended return policy can instill confidence in the customer, making them more likely to purchase products from the brand.
  • Higher conversion rates: Offering a satisfaction guarantee or extended return policy can increase the conversion rates by making customers feel more secure in their purchase decisions.
  • Customer loyalty: Providing a satisfaction guarantee or extended return policy can create customer loyalty by showing the brand values customer satisfaction and is willing to stand behind its products.
  • Better customer reviews: When customers are satisfied with their purchase experience, they are more likely to leave positive reviews, increasing the brand's online visibility and reputation.
  • Reduced returns: By offering a satisfaction guarantee or extended return policy, the brand can reduce the number of returns and increase customer satisfaction.
  • Increased revenue: By offering a satisfaction guarantee or extended return policy, the brand can increase revenue as customers are more likely to make repeat purchases and recommend the brand to others.

In conclusion, managing returns is an essential aspect of any e-commerce business. By following the best practices discussed in this article, you can streamline the returns process and increase customer satisfaction. From having clear return policies to offering easy-to-use return portals, these tips will help you create a positive customer return experience. Implementing these best practices will benefit your business by reducing costs and also help you build a strong reputation and loyal customer base. Remember, happy customers are repeat customers, and a positive returns experience is key to returning them to your online store.