The importance of a great returns strategy

Returns, refunds, and exchanges – they aren’t necessarily what you want to deal with as an online retailer, but unfortunately, dealing with returns is unavoidable.

Unlike shopping in-store, customers are unable to experience items the items they want pre-purchase, which means that they need to be able to return or exchange the item if it doesn’t suit their needs, or to request a refund if they receive products of inferior quality. That means that you need to have your returns policy ready, so you can be prepared for dealing with the inevitable requests, to ensure that you continue to provide the outstanding service that customers expect, and to minimise both the inconvenience and cost to your business.

Post-COVID, a great returns policy is even more important

Estimates for the number of returns of online purchases range from 15% to more than 30%. For some types of products, return rates for items like clothing are often even higher, because many customers order multiple sizes with the intention of returning the items that don’t fit.

With even more customers shopping online since the pandemic began, customer expectations are even higher. COVID-19 encouraged many customers to take their first steps into buying online via marketplaces that are well known, and therefore trusted, and in many cases, gave people the time to shop around, rather than simply heading to Amazon.

When you’re selling on marketplaces, if a customer requests a return or refund, you have to abide by the policy that the marketplace stipulates. This is one of the reasons that many customers have the confidence to buy from marketplaces; they know that marketplaces will see that their requests are treated fairly, and that if they request their return within the specified window, they’re going to get it.

That sets the bar pretty high for retailers. When buying from an eCommerce website that customers aren’t familiar with, if the returns policy doesn’t come close to marketplace ones, then they’re likely to head back to Amazon or eBay to complete their purchase, even if the cost is slightly higher.

Returns can be a deciding factor in conversions

Customers want to be able to change their mind about their purchase – and that means that your returns policy needs to show customers that they can easily do that if they want to. If they find that it may be difficult to get their money back, or to exchange their item (for a different size, for example) then they will simply look elsewhere.

The cost of returns are important

Customers want to be able to return their items free of charge. 83% of customers read returns policies before deciding to make a purchase. That means that if they find that they have to cover the cost of postage, or they have to pay a restocking fee, they’re less likely to buy from you.

However – you need to keep the cost of returns low in order to keep those returns from hurting your profit margins too. That means finding the returns solution that is most cost effective for you, as well as providing the most convenient way for your customers to return their items.

A great returns experience = repeat customers

Many customers value a great returns process so much that they are more likely to become loyal to brands that offer them a great experience. Simple returns lead to 72% of customers spending more, more frequently, with that business, and a massive 89% of repeat customers who encountered a great experience would buy from the business again.

The challenges of returns

Although clearly, returns are essential to increase the chances of customers buying from you, they do present a challenge.

Returns can have a massive impact on profit margins – and it is estimated that returns cost UK businesses more than £60 billion a year. When customers intentionally order more than they intend to keep, then the cost of the return can impact on your profit margins. Getting your return policy in place can help you to minimise the cost of customer returns.

The customer’s experience of returns can be a challenge too. Where they encounter a poor experience, they are likely to talk about it with family and friends, or more importantly, on their social media and on review websites. Keeping returns as simple, and as fast as possible is key, since many customers are used to getting their returns processed as soon as the parcel has been received by the courier, as they do with Amazon returns.

Cross border returns are even more complicated – the lead time for the item to reach you from the customer, as well as duties and taxes at the border means that you can end up even further out of pocket. By planning ahead, you’ll be prepared for international returns, and can make sure when a return is requested from overseas, you can process the return in the most efficient way, and minimise the cost.

It isn’t just for the sake of your business that you need to plan for international customers though. If you have customers worldwide, or expect to scale your business sufficiently that you will start to make sales in other countries, then getting your returns policy set up for international customers will ensure that they are able to trust you ahead of placing their order, and that they have a positive experience if they need to make a return.

DropShipping returns

When you’re making sales using DropShipping, traditionally managing returns has proven to be tricky – particularly if you don’t have a strong relationship with the supplier. In many cases, especially if your suppliers were overseas, you’d find negotiating the return difficult, (if not impossible) and sellers would find themselves out of pocket. Working with UK-based suppliers make this easier, but where retailers were working with multiple suppliers, it could still be time-consuming to get returns processed. Many businesses that were purely DropShipping would find that they needed to accept the return, and either be out of pocket, or keep the item to send to another customer – and of course, holding onto items like this means that funds are tied up. That might not be a huge issue if it is a low-cost item, and you’re not experiencing many returns, but it can become a huge problem for high value products, and if you encounter more returns than you expect.

We knew this was a major challenge, and so standardising the returns process was high on our agenda when we were planning the Avasam platform. It was a big task to get this right, and we made the functionality live in the September update last year. The result was absolutely worth it though – since now our users can simply click through to begin a return, and there’s complete visibility to know how far along the request is. See more about how our automated returns process works here. In addition, if there’s ever an occasion where a refund has been declined and you disagree with the decision, you can escalate that to the Avasam team, and we’ll review it for you.

How to create a great returns policy

Review returns policies from other successful retailers before you get started – this will help you to know what is standard. If the goods you are selling are in a particular niche, check the policies of your competitors.

That means you’ll be able to match them, and maybe even offer customers an advantage if they purchase from you and then need to return. The policy that you write will depend on the needs of your business, but it should certainly keep the interest of your customers at heart too. Be sure to cover:

When you’re creating your returns policy, you’ll need to make it as clear for your customers as possible. Avoid using any language that is overly wordy, complex, or evasive – customers want to understand exactly what they can expect if they want to make a return.

Once your returns policy is complete, be sure to make it readily available for your customers to find and read before they make their purchase. Link to your returns policy in your website footer, throughout your FAQ page, on listing pages, in the customer’s basket, at checkout, and when you set up customer support chatbots.