The title of this post may seem contradictory at a first glance. How can product returns become a source of revenue? The very act of handling returns means not only giving up revenue, but also incurring additional expenses in labor, supplies, and – for eCommerce companies – postage.
Yet good returns management can actually make your company stand out among its peers. Customers are more likely to trust you, buy from your company again, and refer their friends. In this way, doing a good job of handling returns is one of the most important things your business can do right.
How a Well-Run Product Returns Process Can Make You Money
While it’s tempting to see returns as a necessary evil that comes with business, a closer analysis reveals this is not the case.
Consider this: 60% of customers will review your return policy before making a purchase. That means the majority of people go out of their way to look up your return policy in order to feel secure about their purchase. This also means that customers will inevitably use what they read to make a decision about whether or not to purchase from your store.
Customers are more likely to purchase from stores with lenient return policies. How much more likely is a subject of heated debate, but the basic fact is indisputable and well-researched.
Generous return policies make customers more likely to purchase in the first place. Good return experiences also make customers more likely to purchase again. In fact, according to ShipBob, 95% of shoppers who are happy with the returns process say they will purchase from the same retailers again.
At this point, it’s clear that a well-managed returns process both decreases the cost to acquire customers and increases customer retention. These are two of the most important marketing metrics to track and optimize.
Another reason to create a good returns experience is because happy customers are more likely to refer their friends. Unhappy customers, likewise, are likely to turn their friends away from your business.
Reverse Logistics: What Happens When Products Go Back Where They Came From?
We’ve made the case that a good return system is good for your business. However, in order to implement returns management processes that make sense, you need some background information. You can’t separate supply chain management from marketing, after all.
According to our client Fulfillrite, reverse logistics covers returns, recalls, repairs, refurbishments, warranties, and more. In other words, anytime items go backward in the supply chain, this is called reverse logistics.
Reverse logistics is very important to understand. Returns are extremely common. For brick-and-mortar stores, 8-10% of items are returned on average. For eCommerce, it can range from 20% to 30% or even 40%.
You cannot ignore returns. You cannot treat returns as an afterthought, or low-priority legal requirement. It’s a major part of your business’s branding, marketing, expense management, and revenue generation.
For most businesses, setting up reverse logsitics means the following:
- Designating one specific location to be returns facility.
- Giving customers instructions on how to send their returns to that facility.
- Giving workers or another company instructions on how to take in the returns and what to do with them.
Done well, a good reverse logistics system keeps administrative costs low, makes it easier to maintain an acceptable level of quality assurance, and generally reduces inefficient scrambling.
How to Handle Product Returns Properly
With all the above in mind, here are some best practices which you can follow in order to properly handle product returns. By following these steps, you can keep processes simple and customers happy.
1. Reduce the need for returns by writing clear product descriptions.
An ounce of prevention is said to be worth a pound of cure. When it comes to returns management, this axiom is especially true.
Ecommerce tends to have a much higher rate of return than brick-and-mortar stores. This is because customers often mistakenly purchase items which they do not want. This is often the direct result of customers being confused about what exactly they are buying and what it will be like.
The easiest way to reduce returns if you’re running an eCommerce store is to write clear product descriptions. If you run a brick-and-mortar store, the easiest way to reduce returns is by good packaging design.
2. Give customers a generous time window for returns.
Customers typically expect a 30-day return window. It makes sense, too. As few as 5% of shoppers return orders more than 30 days after purchase.
We recommend that you give people at least a 60-day return window. This is for two reasons. First, it looks generous and exceeds customers expectations. This can cause them to be more likely to purchase in the first place.
Second, shorter return windows come with a sense of urgency. When providing a long return window, it becomes much easier for a customer to procrastinate and thereby never return the item at all.
3. Pay attention to the items which are frequently returned.
It’s always a good idea to pay attention to which items are being returned. If you notice a specific pattern, you may want to address it. Items which are frequently returned often have either defects or unclear product descriptions or packaging.
In both situations, once you identify an underlying trend, it’s much easier to resolve it, reduce return expenses, and generally optimize your business.
4. Conduct regular quality assurance testing on your products.
This rule of thumb is good to follow even if you are not strictly concerned with returns. You want to make sure that your products are not breaking down when customers use them. By regularly sampling your own products, you can find defects before they go out and prevent the inevitable returns that would happen if they did.
5. Make it easy for customers to return products.
When customers take time out of their day to return products, they are in a delicate state. They may be irritated with your company, but you still have a chance to make them happy. One of the easiest ways to do this is simply by making returns as easy as possible.
- Paying for return shipping
- Giving them labels to print
- Not asking too many questions
If you can do these three things, it will make your customers likelier to trust you and come back for another purchase. Remember: 95% of customers that return products come back to make another purchase!
6. Be kind, decent, and empathetic to customers.
It’s a rule you learned in kindergarten, but it bears repeating here. Good customer service goes a long way. When a customer wants to return a product, make it easy and treat them well. You want to retain their business and you want them to refer their friends!
By streamlining the product return process, you’re doing your customers a massive favor. Generous return policies make customers more likely to buy and more likely to come back when something goes wrong. Done well, returns go from being an expense to being a good opportunity to show just how pleasurable it is to work with your company.
Set up good processes for product returns and your customers will thank you with their continued business!