Your eCommerce returns policy is critical to convincing consumers to click the Buy button. Online shoppers need to know how easy it will be to return items that don’t meet their expectations, and making returns cheap and easy removes a barrier to sales. However, processing returns can be a significant expense, so it’s essential to create a returns strategy that’s in line with your company values and keeps costs to a minimum.
Here are five factors you need to consider before you implement your returns strategy.
The returns time balancing act
The longer you give your customers to send back returns, the longer you must keep your books open on each sale. But long return windows can also give consumers the confidence to make an online purchase, and they have powered many eCommerce success stories. One prominent example is Zappos, which offers customers a 365-day window to return unwanted shoes.
However, some companies known for generous return policies have tightened their return windows. For example, Lands’ End used to offer a lifetime warranty on all its products but now only accepts returns within 90 days of purchase.
Your returns policy should allow enough time for customers to find time to pack and ship a return package. At the same time, a shorter return time may reduce opportunities for damage, and it can simplify your inventory management. Your returns strategy needs to find the balance between reassuring consumers that they have time to make a return while not undermining your bottom line.
Who pays return shipping costs?
Online shoppers love free shipping in general, but they particularly love free return shipping. When designing your returns strategy, consider how you can manage returns to minimize shipping costs so that you can offer your customers free or reduced return shipping. For example, you might have customers drop off returns in a physical location (your store or a shipping center, such as a FedEx office). Then returned items can be sent back to the warehouse in bulk, greatly reducing the cost of shipping. If you need to charge for return shipping, consider a fixed fee per item or package. Customers are more likely to buy if they know the cost of making a return beforehand.
Resell, discount, or throw away
Understanding what will happen to returned products in your warehouse is critical, and the answer may depend on your product line. For instance, returned food items are unlikely to be resalable. But a product may be resold if the packaging is intact and in original condition after a return. Working with a 3PL that can evaluate returned items and work with you to determine which ones can be resold is an excellent way to minimize the cost of returns.
Some companies have created a separate vertical for returned items that aren’t in new condition or can’t be sold as new. Selling them at a discount allows you to recoup some of your costs and keeps products out of the waste stream. An example of this is the Allbirds Rerun vertical. The shoe company allows no questions asked returns within 30 days and sells lightly used returns in this vertical.
You will want to set up a process to send some returns back to the manufacturer. The factory should reimburse you if an item comes back because of a manufacturing defect.
Some returns that can’t be resold can be donated, but some items may need to go into the dumpster. After a spate of bad press about eCommerce returns, especially of large items such as mattresses filling up landfills, it’s incumbent on online sellers to find ways to repurpose returns. And that can improve your profitability, too.
No matter what you do with returned items, setting criteria for returns handling in advance is crucial. Without clear instructions, your reverse logistics processor won’t know what to do with returns, and they may end up in a dusty warehouse corner. You don’t want to pay storage fees for products you won’t be able to sell, so get clear on your criteria for returning products to stock and disposing of those that you can’t sell.
Returns processing locations
There are various ways to handle reverse logistics. Some companies have a returns warehouse that handles only inbound shipments and doesn’t process consumer orders. Or you might ship orders via 3PL and accept returns in-house so that you can evaluate the condition of each item. But that process is time-consuming, and products can end up stranded at your warehouse.
To have the best chance of recouping profit from a returned unit, a best practice is to return items to one or more of your 3PL locations. A fulfillment warehouse that knows how to process and store your stock is in the best position to handle your returns. However, not all 3PLs offer reverse logistics services, so look for that when you search for a new fulfillment partner.
Ending the preventable return
One of the best ways to reduce the cost of reverse logistics is to minimize the number of preventable returns. Preventable returns are items that come back because the warehouse shipped the wrong SKU or quantity or the product was packaged poorly and got damaged in transit.
The key to stopping these types of returns is working with a logistics provider with an excellent accuracy rate. Reducing fulfillment errors can lower your return rate. Check accuracy data before you sign with a new 3PL and keep an eye on your returns data. If your fulfillment company is producing errors that hurt your profitability, it might be time to switch.
Make your returns policy clear to consumers
A final pro tip: Whatever returns policies you implement, make them crystal clear to your customers. Consumers are more likely to buy when they know what to expect from the returns process. By creating a returns strategy incorporating the five factors above, you can build a reverse logistics operation that helps your business grow rather than holding it back.
About the author
Jake Rheude is the Vice President of Marketing for Red Stag Fulfillment, an eCommerce fulfillment warehouse that was born out of eCommerce. He has years of experience in eCommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.
