About $428 billion in products have returned in 2020, which makes up 10% of the total sales. According to the National Retail Federation, the estimated cost of returned products in 2020 was $101 billion.
This data reveals how much portion has been covered under returns management. It takes considerable time and money to run the return management system, which should be handled meticulously. Several other terms are associated with the return process, such as reverse logistics, controllable returns, refund policy, in-store credits, etc.
In this article, we’ll be discussing the returns management process and how to stay profitable with your return process.
Why Returns Matter
The return process is crucial for e-commerce businesses because of the following reasons. It is estimated that 96% of shoppers return to a company that offers an easy return policy. Also, 62% of the customers believe in buying again from the same store with free return rates.
We’ll see that returns management can be a USP in many businesses. It’s a solid point that can be used in marketing to attract customers. This is one of the biggest reasons every firm should have a return policy. It also shows how many business owners pay attention to customer feedback.
What Is A Returns Management Process?
Returns management is a process that undertakes the return policy of customers. The activities that come under return management are– interfacing with customers, reverse logistics, gatekeeping, and restocking the items as they’ve been returned. It is meant to streamline the entire process as everything is organized and run properly. It also helps identify why a product return occurred in the first place.
By identifying the loopholes in your business, you can rectify and control them to prevent further return issues. Mismanagement of the return process can create obstacles in the future. Therefore, it is essential to understand the importance of good returns management.
Controllable Returns vs Uncontrollable Returns
There are certain variables that e-commerce entrepreneurs should take care of. These are:
These returns are something that entrepreneurs have control over. It can be rectified by drawing out different strategies suitable for the returns. For example, those hurdles are removable if you consistently get the incorrect order number, invoices, improper packaging, etc.
You can train your employees to work more punctiliously. Even the higher authorities can get involved in the process to eliminate further mistakes.
These are the returns that entrepreneurs cannot control. The returns are not in their hands; hence, they cannot take control of the situation. For instance, if the customers are unsatisfied with the products or suddenly change their minds about buying them, there’s nothing but to accept the returns.
Understanding The Returns Management Process
1. Customer receives the product, is unhappy, and requests a return or refund
There could be plenty of reasons why customers return a product. Let us assume the customer is not happy or satisfied with the product and is likely to return it. In the first step, the customer would file a request for the return of the product along with the valid reason associated with it. The request is made either on the website or the email ID provided by the company to the customers.
2. Company approves or disapproves the return, exchange, or refund
Based on the reasons given by the customer, the company either approves or rejects the return request. If the reason turns out to be appropriate, then the company can either approve the refund (made from the customer’s end) or exchange offers. You can also opt for in-store credits to attract customers instead of leaving them unhappy.
Whatever steps are taken must be mentioned beforehand in the policy so that customers know how you carry out your returns management. However, giving the options to your customers engages them in your website.
3. The company picks up the product from the delivery address
The next step would be to pick up the return order from the dedicated address. In this process, the company can also ask customers to leave their orders at nearby return processing centers to cut the shipping cost.
4. The product is delivered back to the sorting facility or warehouse and inspected
Once the product is delivered back to the warehouse or sorting facility, it is inspected to check the product’s quality. It should meet all the requirements of a returned product before sending back the exchange or refund.
5. The product is restocked and put back in inventory
If the product genuinely has some defects, it can be discarded or repaired by the company. The new product is put back in the inventory to restock. It is advisable to repair the product in most cases depending on the kind of damage it has.
Returns Management vs Reverse Logistics
Even though both terms are sometimes used interchangeably, it is not the correct way to define them. Both systems work differently, and the end person is different in both cases.
As mentioned above, returns management is the process that customers undertake. Returns management is responsible for successfully establishing e-commerce return policies. It includes several steps, such as– interfacing with customers, reversing logistics, gatekeeping, and restocking the items as they’ve been returned.
It is a part of returns management where the seller is responsible for carrying it out further. In this process, things operate reversely, where the product reaches customers to sellers. Once the product reaches the seller, other factors, such as reuse, recycling, etc., happen.
How To Stay Profitable With Your Return Process?
Upgrade Customer Service
There is still plenty of room to stay profitable with the return process. Keep the customers updated with your new return policies. Provide them with a hassle-free experience to make the customers stick to your brand. Details such as the date and time the complaint was registered, the returned item, its shipping and delivery details, and so on should be transparent between you and the customers.
Invest in Inventory Management
Try to invest your capital as much in inventory management as possible. The high investment helps you systematize your orders placed vs orders returned. Furthermore, it enables you to keep the perfect positioning of your inventory in the warehouse. Moreover, you can strategically use your partnership with 3 PL shippers so that they can pick up the return order swiftly.
Educate Your Staff
Apart from customers, keeping your staff updated and educated about the exchange policy is equally important. Assist them at every step and educate them more about the legal terms and conditions of refund or return. If the staff knows about the return policy from head to toe, they can easily convey it to the customers.
Include a Clear Return Policy On Your Website
The return policy must be clear and to the point. Never hide any information in your return policy from customers. On the other hand, try to include only relevant details so that customers can understand them in one go. Maintain transparency with your customers to build a trusting relationship.
What Is a Return & Refund Policy And How to Use It to Drive Sales
Return policy means the return of goods to the sellers from buyers. The return policy document includes refund information, procedure, requirements, time frame, customer support contact, and other necessary details. Customers usually file for a return policy because of several reasons, such as faulty products, wrong orders, and different products– are some of the top reasons.
The refund can be seen as the outcome of the return policy where customers demand a 70% -100% refund of their money (subject to shipping charges).
A poll found that about 91% of customers believe that a return policy is essential, especially for online businesses. Customers for whom the return policy matters can be a good chance for entrepreneurs to drive sales. Things that you can practice to increase sales of your products are:-
Have a Shopper-Friendly Returns Policy
About 67% of the customers check the return policy before making purchases. This itself signifies that the return process is undoubtedly one of the most crucial factors for your customers. Make your return process flexible for customers. Launch flexible time duration (of return) in your business. Mention a specific period in which the product is returnable.
Promise a Hassle-Free Returns Experience
The return policy should be free from obstacles. It should not hinder customers at the time of filing returns. It saves both customers and entrepreneur time.
Get smart with your returns
Use something beyond refunds. Try to devise different alternatives, such as store credits and exchange offers to keep your business intact. This would increase your sales and skyrocket your retention rate.
Automate Your Returns Management Process
About 25% of e-commerce sites don’t support non-product-related queries, such as returns or tracking details. Product returns management is a cumbersome process that cannot be dealt with by a single individual. It either requires a team or some technical tools that could help you with the process. Use some tools to automate the returns process to make everything streamlined.
Tips For a Great E-commerce Returns Process
1. Offer Free Returns With a Flexible Return Period
Customers get attracted by the term flexibility. Just like you offer flexible shipping days, you can provide flexibility in the return period. Give your customers the freedom to choose order pick-up, time duration, shipping, and so on. However, you also have to be aware of your business needs, which are:
a. What is your store’s average inventory sell-through?
A sell-through rate is the amount of inventory sold by online business owners within one month as a percentage of the stock you received from your manufacturer(s) during the same period.
STR helps you monitor the monthly sales and given target. You can also adjust your goals, strategies, and sales based on the STR. The formula to calculate your STR is–
STR= (total sales/ stock on hand) X 100.
An ideal STR should be above 80%.
b. What is your competitors’ return policy?
Always keep an eye on what is your competitors offering. If they have a better return policy than you, you must think of something different to attract more customers towards yourself. E-commerce businesses run on creativity more than products, so employ it throughout your business.
2. Use an RMA to Automate the Process via Your Website
RMA, or return merchandise authorization, is a process that returns the product for refund or replacement. Apart from the refund and return process, it includes the cancel order process, exchange process, wallet system, refund payment system, and many such things.
E-commerce business owners can use this RMA to automate their entire return process. They can incorporate RMA into the website, which can help with automatic regulation and requests for online return orders. It will also help them with accuracy and increase customer satisfaction.
3. Watch Your Profit Margins
An organized e-commerce returns processing helps you find out specific factors in your business. For instance, if it takes more money in your reverse logistics, transportation, and reselling the items, then with the help of returns management, you can quickly rectify these hurdles. Once you have figured out a way to eliminate the loopholes, you will be able to generate more significant profit margins.