E-commerce Returns Management: Processes & Best Practices

The holiday season is a testing time for online retailers. You need to be prepared to handle the huge uptick in the volume of orders. Inventories need to be stacked at all times. Providing a smooth customer experience is a must. But that’s not it. With the volume of orders going up, so do returns.

From wrong products to damaged goods to size issues, the reasons for e-commerce returns are aplenty. In fact, in 2018 alone, the total value of e-commerce returns hit $37 billion. And this number is only increasing with each year passing. 

But, dealing with returns is anything but straightforward. Every return order should be processed on time – either an exchange or a refund for the customer – while ensuring that the maximum value is extracted from these goods. 

So, here’s a complete guide to e-commerce returns management that can help your business get the maximum value from the returns.

Table of Contents

• What are e-commerce returns?
• What is e-commerce returns management?
• Challenges in e-commerce returns
  • 1. High Costs
  • 2. Logistical Hurdles
  • 3. Fraudulent Returns
  • 4. Customer Expectations
  • 5. Environmental Impact
  • 6. Impact on Profitability
• How to reduce e-commerce returns?
• E-commerce returns management best practices
  • 1. Have a customer-friendly return policy 
  • 2. Make returns easy
  • 3. Have the right automations in place
  • 4. Equip your receiving team with the right instructions
  • 5. Seamless internal collaboration is a must-have
  • 6. Recovering the highest value from returned goods
  • 7. Assessing the financial impact of returns 
  • 8. Listening to your customers
• Final Words

What are e-commerce returns?

E-commerce returns are items that customers send back after buying online. Customers return products for several reasons. It could be because there’s a defect, or the size doesn’t match, or that the customer simply doesn’t like it.

As a brand, handling these returns efficiently is crucial. It’s not just about taking back a product. It’s also about maintaining a good relationship with the customer. A smooth return process can encourage them to shop with you again.

What is e-commerce returns management?

E-commerce returns management is how businesses deal with items that customers return or send back. It’s a plan for handling these returns smoothly and efficiently.

Let’s break down the process step-by-step:

1. Customer returns the product: Say a customer buys a product online and decides to return it after it gets delivered. Here is where the e-commerce returns management process begins. At this stage, it’s important to ensure a hassle-free return process – ideally, have door pickup. 
   
2. Business inspects the product: Once the item is returned, it is important for the business to inspect it thoroughly. This step is vital to ensure the product is in its original condition and meets the return policy criteria. The inspection might involve checking for any damage, verifying that it is the correct item, and ensuring that it hasn’t been excessively used or altered.
   
3. Refund or Exchange offered: Once the returned product passes the inspection, the business then proceeds to the next step. Depending on the company’s policy and the customer’s preference, the business offers either a refund or an exchange. A refund might be processed back to the customer’s original payment method, while an exchange could involve sending a replacement to the customer.
   
4. Communication with the Customer: Throughout this process, maintaining open and clear communication with the customer is crucial. This involves updating the customer when the returned item is received, informing them of the inspection results, and notifying them about the status of their refund or exchange. Regular updates can help build trust and reassure the customer that their return is being handled efficiently.

Challenges in e-commerce returns

E-commerce returns have their own unique challenges that can affect a business’s operations and customer relations. Here are some of the challenges that you should be aware of:

1. High Costs

E-commerce returns management involves several expenses that can significantly impact a business’s bottom line.

For instance, a business selling home decor items might face high shipping charges for returns, especially on bulky items that customers send back due to a mismatch between the aesthetics of the product and that of their house interiors. Moreover, integrating custom e-commerce development services can enhance the online shopping experience, potentially reducing the frequency of returns by ensuring a better match between customer expectations and the actual product. In such scenarios, using specialized Shopify development services or other e-commerce-related agencies can improve the online shopping experience, potentially reducing the frequency of returns due to mismatched expectations.

Solution: To manage high return costs, businesses can promote exchanges over returns by offering discounts. This approach saves on shipping, as exchanges usually require just one round of shipping versus two. Whereas when the customer returns a product and then purchases a new one, there are two rounds of shipping – which adds to the cost. 

2. Logistical Hurdles

The process of managing the reverse flow of goods requires careful coordination and can strain resources.

For example, a company specializing in electronics may receive returns from various geographical locations, making the process of collecting, sorting, and redistributing items complex and time-consuming.

Solution: Implementing return centers or hubs in various regions could streamline this process. This approach means that instead of sending all returns to a single, central location, a business manages returns through multiple centers spread across different areas or regions. This ensures that items are quickly inspected, refurbished if necessary, and prepared for resale or redistribution. This also minimizes downtime and logistic complexities.

3. Fraudulent Returns

Returns fraud can take various forms, from benign to highly organized criminal activities, and can result in a significant drain on revenue.

An example of returns fraud could include customers buying items, using them for a specific purpose, and then returning them for a full refund.

Solution: Businesses can introduce clear return policies, perhaps with a digital verification system that tracks product usage or condition. This can help in identifying and preventing fraudulent return practice.

4. Customer Expectations

In the competitive world of e-commerce, meeting and exceeding customer expectations on returns is crucial for loyalty and repeat business.

For example, a customer may become frustrated if they have to wait for a long period for their return to be acknowledged and processed.

Solution: By automating the return acknowledgment process and providing timely updates every step of the way, customers can be reassured that their needs are being promptly addressed.

5. Environmental Impact

Managing the ecological footprint of the returns process is important for businesses committed to sustainability.

For instance, a business selling electronics may face the challenge of properly disposing or recycling products that cannot be resold.

Solution: Establishing a partnership with recycling firms can help. It can ensure that items that can’t be resold are dealt with in an environmentally responsible manner, reducing landfill waste and potentially recovering valuable materials.

6. Impact on Profitability

A high volume of returns can directly affect the profitability of a business – not in a good way.

For example, seasonal merchandise like holiday decorations may be returned in large volumes post-season, often too late to be resold in the current year.

Solution: Offering store credit instead of refunds for such items can help maintain profitability. Credit will most likely be spent within the same business, potentially on items with better margins or with a lower likelihood of being returned.

Recommended read: Top 7 Customer Service Softwares for Ecommerce Businesses

How to reduce e-commerce returns?

Reducing e-commerce returns is a critical goal for any online retailer. Effective e-commerce returns management can save costs, maintain profit margins, and ensure customer satisfaction. 

Here are some strategies to achieve this:

• Accurate Product Descriptions: Clear, detailed product descriptions prevent misunderstandings. For example, providing precise measurements, material descriptions, and high-quality images can help customers make informed decisions, reducing the likelihood of returns due to unmet expectations.

• Size Guides and Tools: Especially for clothing, returns due to a mismatch in size are common. A business can implement interactive virtual fitting tools to help customers choose the right fit right when they’re buying. 

• Customer Reviews: Encouraging and displaying customer reviews can offer real-life insights into the product’s fit and quality, aiding potential buyers in making better choices.

• Quality Control: Rigorous quality checks before dispatch can ensure that every item sent meets the company’s standards, reducing returns due to defects or damage.

• Flexible Exchange Policies: Offering an easy exchange can be more appealing than a refund. For instance, if a customer orders a shirt in the wrong size, facilitating a hassle-free exchange for the correct size can avoid a full refund.

• Feedback Loops: Implementing a system to collect feedback on why customers return items can help identify patterns and areas of improvement in your products and internal processes. For instance, a business finds that a certain wireless headphone model has a high return rate. Customer feedback reveals buyers have complained about discomfort while wearing the headphones. This insight can help examine issues like clamping force or ear pad material. Consequently, the company can refine the product design. This way, the business can tackle the root cause for returns. 

• Exceptional Customer Service: Providing prompt and helpful responses to customer inquiries can resolve issues before they result in returns. For example, let’s say a customer is navigating the shoes section on your website but is unsure about how to buy. Having a live chat functionality on your site makes it very easy for the customer to quickly get in touch with a support rep and get their questions answered. When the customer has clarity on what to buy, it can minimize the chances of them returning the product.

Recommended read: ​​How Ecommerce Live Chat is Shaping Online Shopping Experiences

E-commerce returns management best practices

While reducing e-commerce returns is crucial for a business, sometimes returns become unavoidable. And that’s why you should be aware of the best practices to handle them adeptly.  

Here are the key best practices that can transform returns into a seamless process. They will also help enhance the customer experience and reinforce brand loyalty.

1. Have a customer-friendly return policy

Customers today make highly informed decisions. Amongst the factors they consider before making a purchase, a brand’s return policy sits at the very top.

It is, in fact, something that tells the customer whether or not they can trust your brand.

So, how do you create a return policy that doesn’t put away customers? Here’s a simple hack to follow: make it easy to find, read, and understand. 

Have your return policy prominently displayed on your site so that it’s easily accessible for the customer. A few things you can do:

• Have the return policy displayed on all product listing pages
• Create one extensive webpage on returns. 
• Provide links to your return policy on order confirmation and status update emails

Zappos, for instance, has a link to its returns page, under every product listing.

As much as you make your returns policy stand out, it’s important to create one that communicates expectations clearly. Many online retailers lose the plot here by either crafting policies that are vague or not providing enough information for the customer. Make sure the terms of your policy cover the following:

• Deadline for applying for returns
• Conditions that need to be met for validating a return
• By when would the customer hear back from you
• By when would the refund be issued
• Estimated delivery time, in case of a product exchange 

2. Make returns easy

Do your customers find it easy to apply for returns? According to UPS, only 53% of shoppers are satisfied with the ease of making a return to a site they were shopping from.

A lot of times, the customer is asked to fill up redundant forms, courier the items themselves, and even pay for shipping in some cases.

All this decreases the likelihood of the customer purchasing from you again. So, how do you simplify your return process? Here are a few things you can do:

• Allow customers to initiate a return via your website/mobile app. Run load tests before the start of the holiday season to ensure that your portal can handle the surge in requests. 
• Take up ownership for collecting the product from the customer. If you’re short on manpower, tie-up with a third-party vendor for door-step pickup.
• Ask the customer for a convenient time to collect returns. In the case of working professionals, it’s important to schedule a pickup at non-office hours.
• Returned products need to be packaged properly before shipping them to the warehouse. Don’t ask the customer for packaging during pickup. Instead, equip your local teams to get this done. 
• Keep the customer in the loop regarding the status of return orders (more on this later).

For instance, this website selling Lockout Tagout Tags has a very simple return procedure. By sending order details to their specific email address, customers can immediately have follow-ups regarding order replacement. The goal is to minimize the number of steps a customer takes to initiate a return order. 

3. Have the right automations in place

Automations have become quite common in logistics today. They go a long way in speeding up processes and minimizing grunt work.

And the good news is they can also make your return process faster. Despite the exceptions that creep up while handling returns, having the right automations can be a game-changer for your warehouse teams.

Real-time inventory management: Updating inventory levels in real-time helps your warehouse teams decide where to stock returned goods, whether or not an exchange can be processed, and proactively communicate to vendors about refilling stock (for instance, when a particular product is seeing high return rates). You could install LED displays in warehouses with a real-time counter. You could also provide wearables that track stock levels across warehouses.

Status update emails: I’m sure you already keep customers in the loop regarding returns. Most online retailers send updates upon receiving the returns and after shipping the new product/issuing a refund. But how do you communicate delays? Keep in mind that delays can happen for reasons not under your control. It’s always best to notify customers about it. To do this, you can set up a trigger: when a return order isn’t fulfilled within ‘X’ number of days. push out an email/SMS informing the customer about the delay. Create variations of the status update email based on the possible reasons for the delay and trigger them accordingly. 

Smooth movement of returns: Returned goods have to be routed based on their conditions. Damaged ones need to be refurbished. Some need to be sent back to the vendor. Others to scrap. To expedite this sorting and movement of returns, sortation conveyor systems are a great option. If you already have these in place, do a load test before the holiday season. Furthermore, for moving goods quickly across warehouse and distribution center floors, Automated Guided Vehicles can help.

Issuing credit: In most cases, the process of issuing reimbursements involves forwarding receipts and order IDs to the finance department. When the volume of returns rise, there’s a high chance some of these receipts can get missed. Instead, have the receiving team at the warehouse validate the returned product and trigger a refund request online, which is automatically routed to the finance team. What can also help here is if the finance team has a dedicated group email just for managing refund requests.

Recommended read: Navigating Ecommerce Automation

4. Equip your receiving team with the right instructions

A very important step in managing returns is the accurate identification and sorting of the returned products. This is a labor-intensive activity, without a doubt.

But there are a few things you can do to sort returns efficiently.

Have a separate space in your warehouse where you want to inspect all returned products. Instruct your receiving team to manually check each and every product and validate if it matches with the original item. They will also have to assess the condition of the item, the number of items received, and the sender’s name, amongst other things.

Using return labels can save a lot of time here – simply scanning the unique ID on the label would tell if the returned item matches the original product purchased.

The most challenging part here is dealing with the exceptions. Some products might get damaged while unloading, some might be completely different from what the customer originally ordered, and others might get misplaced while shipping. These are just a few scenarios.

• Come up with a list of unexpected scenarios in handling returns
• Create detailed workflows for each of these scenarios 
• Ensure these workflows can be scaled as the volume of return orders increases in the holiday season. 
• Ensure every team involved in handling returns is cognizant of these workflows and knows what their role is. 
• Test out these workflows before applying them to actual returns. 

The biggest benefit of creating these workflows is that your receiving team doesn’t have to wait for instructions whenever an exception pops up.

5. Seamless internal collaboration is a must-have

Time is of the essence when processing returns. Why?

The longer a returned product stays in the warehouse, the more is the depreciation seen in its value. This brings us to the need for seamless internal collaboration – to move returns out of the chain quickly.  

But, returns are hardly managed end-to-end by one single team.

The support team needs to communicate with the warehouse team for updates on order status – as customers are likely to follow up over emails, calls, and texts.

The logistics team needs to work together with the finance team to process the issue of credit in cases where the customer wants a refund.

The receiving team needs to coordinate with the vendors to send damaged goods back to the vendor’s location. Else, if the product is unopened, they need to communicate with the necessary warehouse personnel to issue an exchange for the customer.

All these different lines of communication need to work seamlessly, in parallel. A common way to go about this is by writing emails to different teams, forwarding order receipts, using Ccs to loop in colleagues, and so on. But this approach can get overwhelming when the volume of return orders surge. Important information can easily get missed.

This is where a tool like Hiver can be helpful – it allows teams to speed up internal collaboration without sending more emails.

Recommended read: Finding the Right Ecommerce Help Desk

6. Recovering the highest value from returned goods

On one hand, handling returns on time is crucial to building customer loyalty and retention. On the other, it’s important that you recover the maximum value out of the returned goods, in order to cut your losses.

Post segregation of the returned goods, ensure the workflows you have in place channel these items to the path of the highest selling price.

• Unopened boxes can be re-stocked and sold again on your e-commerce site. 
• Opened products that are still relatively ‘new’ can be sent to a local brick-and-mortar store. 
• If the goods are defective or damaged, you might want to return them to the vendor and get them repaired before adding them back to your warehouse stock. 
• Even if the items amount to nothing, you can still make money by selling them as scrap material.

Treat every returned good as an asset and ensure there’s a process in place to derive the maximum value out of it.

7. Assessing the financial impact of returns

No matter how easy you make it for the customer to apply for returns, managing the return chain is expensive and complicated.

So, how do you make it cost-effective?

For that, you need to be aware of the financial impact returns have on your business.

Cerasis recommends a simple equation to calculate the cost of managing returns. 

Processing Costs + Logistics Costs + Credits/Replacements Cost + Asset Depreciation = Total Reverse Logistics Costs

Processing Costs: As the name suggests, this includes the costs incurred while processing and handling the returns. For instance, right from the customer applying for a return, to RMA (return material authorization),to sending the receipts to the warehouse and any repair cost associated with the returned item.

Logistics Costs: All costs linked with the transportation of returned goods. This includes transportation of the returns to the departure location, shipping of returns to the warehouse, as well as shipping of any replacement items back to the customer.  

Credits/Replacements Cost: The main purpose of applying for returns is to get an exchange or issue of credit. 

Asset Depreciation: All returned goods – from unopened boxes to even scrap – have a monetary value associated with them. The longer they are held in storage, the higher their value depreciation. This depreciation needs to be factored while calculating the total reverse logistics costs.

Figuring out the individual costs would give online retailers a clear picture regarding what part of the return process can be optimized to minimize expenses.

8. Listening to your customers

Feedback is the best way to optimize and improve. That’s true for handling returns as well.

Find out what the customer is saying about your returns process. Do they find it hard to apply for a return? Are they frustrated about the time taken to receive an exchange? Are they having to follow up constantly with your support team for updates?

Ask, analyze, and improve. Because 95% of online customers will purchase again from a merchant who provides a good return/exchange experience.

At the same time, don’t ask too many questions and overwhelm the customer. Keep your return experience survey simple and short. Here are some of the questions you could ask.

What was the reason for your return?
Was the item shipped in exchange in good condition?
Was the support team quick to respond to your queries you had?
Were you able to track the shipment easily?

Don’t forget to leverage multiple touchpoints to reach out to the customer. If you have a mobile app, send an in-app survey. Else, you could email or SMS them the link. Try your best to avoid paper forms, though.

Incorporating the Voice of the Customer is the easiest and most effective way to align the return experience with changing customer expectations. Don’t forget to include a QR Code (made via QR code creator) to make it easier for customers to provide feedback.

Final Words

To sum it up, managing returns is all about getting your people and processes right. Ensure your personnel are trained to handle the volume of goods coming in and create processes that help you save time in moving these goods out of the return chain. Also, investing in a robust help desk software can help streamline your brand’s returns management process. 

A centralized help desk will help you store all your customer data, including past conversations and purchase history. You’ll be able to store your customer feedback for every purchase and their return experience. This will help you serve your customers better every time, which will ultimately lead to a great customer experience. 

If you are looking for such a help desk solution, you might want to consider Hiver. Hiver allows central visibility of your customer data and queries within your Gmail inbox. This way, your frontline support reps can have contextual discussions with your customers, helping in faster issue resolution. 

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