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Returns management is the part of an e-commerce supply chain that deals with customers returning products to a retailer. It covers the return shipment of the product (logistics), the business of organizing and restocking the product (inventory management), and customer support – to name a few things.
Processing returns can take up a lot of retailers’ time – even more so for small businesses with few staff. Then there’s the cost – it’s estimated that returns cost businesses a staggering 66% of the product’s original price2. And with customers generally expecting businesses to cover the expense, returns can quickly eat into their bottom line.
An effective returns management process will optimize every step of the process – from labor to transport to inspection – to save time and reduce costs. Furthermore, it will help you identify sustainable alternative paths for returned products beyond just disposal or resale, such as refurbishment and recycling. These routes will help your business build its reputation as an environmentally responsible brand.
Returns have become a huge influence on consumers’ purchasing decisions. 67% will check an online retailer’s returns policy before committing to a purchase3, whilst 84% will not shop again with a retailer after a bad returns experience4. And you don’t need us to tell you that retaining a customer is a lot cheaper than acquiring a new one.
An optimized returns management process will help your business deal with returns quickly so that customers receive their refunds without delay. They are more likely to become a repeat customer – and even leave your business a positive review online.
So, what steps should your business follow for an effective returns management process? Of course, the answer depends on your returns policy – but these are the general guidelines to help you optimize your operations.
At the point a customer initiates a return, you should ask them if they want a replacement, refund, or exchange. Once the product arrives back to your processing location, notify the customer that it has been received.
The product should be inspected for any damage. At this point you should decide whether the customer is eligible for a refund in line with your business’s returns policy.
Does it need to go for cleaning? Repairs? Replacement parts? Or perhaps it’s in a suitable state to go straight to your warehouse ready for resale. Move the product on to be processed quickly.
It’s important to refund the customer or send them a replacement product as quickly as possible. This is key to building a positive relationship between them and your brand.
This is crucial. Recording the reasons customers return products to you will help you address pain points. For example, perhaps lots of customers complain a particular item is “not as described on website” – this is a sign to evaluate the product listing and add more specifications and high-res photos. Knowing exactly why your customers return products is the key to fixing the problem!
One of the leading challenges for businesses is the cost of returns management. 79% of consumers expect free returns when shopping online5, so it’s easy to see how they have become so expensive for retailers. But, by implementing returns management best practices, you can mitigate many of the costs.
It may sound expensive, but research6 has shown that free returns are a leading motivator for online shoppers to buy directly from a brand, so the investment could pay off for your business in terms of increased sales. Perhaps you could offer the service on a trial basis to determine if it makes financial sense.
Many visitors to your e-commerce website or app will check your return policy before committing to a purchase, so ensure it is clear, simple and fair. It should cover the cost of the return (whether it is free or if you will deduct the cost of shipping from their refund), timeframe (the window of time they have to send it back), and a FAQs section (this will reduce the number of customer enquiries you’ll have to deal with). For tips on writing a small business return policy (with free template), click here.
Customers don’t want to wait a long time for a refund or replacement product; a bad experience in this area will deter them from buying from you again.
The returns process should be hassle free for customers. A couple of quick tips:
Transparency is key. A customer returning a product to your business should be kept updated regularly. Be sure to send them a message once you have received their return, and once you approve their refund – with details on how long they should expect to wait before receiving it in their bank account.
Every product that is returned essentially doubles its carbon emissions output. But, there are some sustainable steps you can take to reduce the impact. Partnering with a sustainability-focused logistics carrier is one option. DHL’s GoGreen Plus service has recently launched a landmark initiative which allows customers to reduce the carbon emissions associated with their shipments through the use of Sustainable Aviation Fuel.
Reverse logistics is the stage of your supply chain at which your customers return products to your business. It covers returns, reselling, repairs, repackaging and recycling. Returns management is a strategy to optimize every step of this.
How to handle customer returns effectively
There are several technologies to help you automate – and thus streamline – different stages of your returns management. These include:
Speed should always be a priority. Customers expect their returns to be processed quickly, with a refund or replacement product issued as fast as possible. Speed will also benefit your business, ensuring the returned product is back within your inventory and ready for resale without delay.
A return policy is a set of rules laying out for what reasons and within what timeframe a retailer will accept returns. A refund policy is usually part of the return policy and explains when returned products are eligible for a refund, and how long it will take.
Returns can cause bottlenecks in the supply chain flow if not managed effectively. Products waiting to be processed require storage space which increases warehouse costs for businesses, and leads to less available inventory for customers. All reasons to optimize your return logistics!
Discover how partnering with DHL can help you optimize your returns management. Open a DHL Express Business Account, here.