Ecommerce Fulfilment Services

Returns Management Guide for E-commerce Businesses in 2023

returns management guide for e-commerce businesses, what is returns management, returns management process
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What is Returns Management?

Returns management is how you deal with products that your customers decide to send back. It is often a crucial aspect of e-commerce and retail operations that many businesses overlook. Returns management encompasses everything from the moment a customer decides to send an item back to the final destination of the returned product, including whether they want a refund or want to exchange the item.

What is a Returns Management Process?

The returns management process for an e-commerce business will vary depending on your business model. It aims to strike a balance between offering a seamless return experience to customers and ensuring the business doesn’t incur unnecessary costs.

For example, a bespoke clothing brand’s returns management process might involve more checks on product quality. In contrast, a digital products shop might have more involved checks to confirm if the product has been used before being returned.

For every e-commerce business, the returns management process should follow a similar path:

  1. Customer Initiates Return: Your customer decides to return a purchased product and informs your business via a return request with details on the reason for their return and if they would like to exchange the item or receive a refund. 
  2. Verification: Your business verifies that everything’s shipshape for the customer to return the product. For example, is the return timely? Does it meet the requirements of your returns policy?
  3. Shipping It Back: Once your business confirms the customer can ship back their product, your business will either provide them with a prepaid label so they aren’t out of pocket or pass on the returns shipping cost to the customer.
  4. Product Inspection: Once your business receives the returned product, it’s time to confirm the product quality is as expected based on the customer’s reason for returning.
  5. Refund or Exchange: Your business will issue a refund or exchange for your customer. 
  6. Final Disposition: The returned product is either restocked (if it’s in sellable condition), refurbished and sold, recycled, or disposed of.

How Returns Affect the Supply Chain Process

Product returns have a profound impact on the supply chain process. While returns are an inevitable part of every e-commerce business, they introduce complexities that can significantly influence various supply chain components. This requires a well-thought-out returns management process to ensure you can control all of these moving parts when processing returns, including;

Inventory Management

Returns can lead to fluctuations in inventory levels. Products that are returned and deemed resellable need to be reintegrated into the inventory, which can cause challenges in forecasting and inventory planning. If you are handling your own returns management process, this also adds extra administrative work on your end to manually change your stock levels to accommodate for these items.

Warehousing and Storage

Returned goods require additional space, resources and systems in place for inspection, sorting and repackaging. This can put a strain on warehousing operations, especially during peak return seasons, such as after Christmas. If you opt to sell returned products as refurbished, this also requires a dedicated storage area to ensure they are not mixed up with new products.

Logistics and Distribution

Product returns require reverse logistics, meaning products move from the customer back to the warehouse or returns centre. This requires additional transport resources, planning and coordination by your order fulfilment team. This extra transport also adds to your company’s carbon footprint, making it more important than ever to ensure you follow sustainable fulfilment practices where possible.

Cost Implications

Handling product returns involves additional costs for shipping, inspection, repackaging, restocking and potentially discarding unsellable items. There are also indirect costs, such as lost sales if items are out of stock when new customers are still looking to buy but are later returned by another customer. These costs can severely impact your profit margin for products and the costs associated with them need to be factored into the original sale and shipping costs for an item.

If you’re managing returns for your e-commerce business in-house, this can provide a lot of extra stress and headaches. With a third-party logistics pal (like us!) in the picture, they’ll bear the brunt of these disruptions, ensuring returns are just a blip on the radar and effectively managed to keep your business operations running smoothly.

What is the True Cost of Product Returns?

A lot of e-commerce businesses make the mistake of thinking that the true cost of product returns is just refunding the customer. However, the true cost of product returns includes all the following costs to your business.

  • Handling and inspecting the goods.
  • Restocking.
  • Waste from unsellable items.
  • Lost sales due to tied-up inventory.
  • Refunding the customer’s payment

And believe us, that’s not all. The true hidden cost can be potential ding to your brand’s reputation when returns go wrong and customers leave negative reviews!

Why a Good Returns Management Strategy is Important

A good returns management strategy should boost customer confidence and safeguards your profits. A clear and hassle-free return policy can be a competitive advantage, with many consumers checking return policies before purchasing. They are also likely to check your brand’s reputation before purchasing. A solid returns strategy ensures positive customer experiences, which reduces the risk of one bad review costing you hundreds of sales. 

Efficient returns management can lead to significant cost savings by reducing the resources required for reverse logistics and minimising the number of unsellable returns through quick restocking. Properly managing returns by repurposing, recycling, or donating unsellable items, can also reduce the environmental footprint of a business. 

For your business, analysing reasons for product returns can also provide valuable insights into product quality, customer preferences and potential improvements to decrease the amount of product returns you receive. 

How to Process Returns for Maximum Value and Minimal Waste

If you’re an eco-conscious business owner, then ensuring you produce minimal waste when processing product returns is likely on your mind. But how do you do this in a way that benefits your business’s bottom line?

Here’s your game plan:

  1. Swift Processing: Time is money! Make sure your returns management process is quick and effective.
  2. Fix & Reuse: Receive a product return with a small defect? Repair and sell it as refurbished.
  3. Eco-friendly Disposal: If a returned product is beyond saving, make sure it doesn’t harm our lovely planet by using recyclable or compostable materials where possible.

How to Reduce the Number of Returns in Your Business Without Upsetting Customers

Reducing returns without upsetting customers requires a blend of proactive measures, clear communication and top-notch customer service. The objective is to minimise the reasons customers might have for returning products in the first place while ensuring they have a seamless experience if they do choose to return.

Here are our top tips for reducing the number of returns in business without upsetting customers in the process.

Comprehensive product descriptions and crystal-clear photos

Ensure product descriptions, specifications, and sizing are as accurate as possible. Misleading descriptions are a common cause of product returns for e-commerce businesses. You should also provide clear, high-resolution images of the product from multiple angles and consider including product demonstrations or 360-degree videos.

Genuine customer reviews and Q&As

Encourage customer reviews to provide real-world insights about the product. Potential buyers can gauge your product’s suitability for their needs based on these reviews. A Questions & Answers or Frequently Asked Questions section on the product page can also address common queries and concerns. You can also use chatbots or live chat support to answer customer queries in real-time.

Virtual try-ons, size guides & samples

If you are a fashion brand, implementing size guides or virtual try-on tools for clothing and accessories is a great way to reduce fit issues when your customer receives the product at home to try on. 

For products like cosmetics or fragrances, you might consider offering free or low-cost and non-refundable samples. This way, customers can try before committing to a full-sized product.

Clear policies & confident customer service

You should display return and exchange policies prominently on your website. While it might seem counterintuitive, clear policies can instil confidence in the purchase decision. We recommend linking them in the footer of every page on your website as well as featuring them more prominently on product pages. 

It’s also important to equip your customer service team with adequate product knowledge that empowers them to assist customers in making informed decisions.

Flexible return windows & exchanges

A slightly extended returns window can reduce the urgency customers feel about returning a product immediately, giving them more time to decide. Oddly enough, longer return windows can result in fewer returns as customers have time to try the product and change their minds about returning it.

During the initial phase of your returns management process, promote the option of exchanging products as an alternative to returning. This can be especially effective for size or colour variations.

Communicate with your customers

Offer accurate delivery timelines, tracking information and ensure timely delivery to reduce returns arising from late deliveries. Once customers have received their goods, sending follow-up emails with guides on how to use the product, or offering tips and tricks, can enhance user experience and reduce the likelihood of returns. 

If the customer decides to return anyway, always ask for feedback. This can offer insights into recurring issues, which can be addressed at the source.

Returns Management FAQs

What is the best way to track returns?

The best way to track returns is to use a method that reduces the amount of work for your business without compromising on accuracy. This can be achieved with an integrated returns management system, however, these can come with high running costs and only combat a very small part of your returns management process.

From inventory management to recycling returning products, by outsourcing our order fulfilment processes to an e-commerce order fulfilment partner (like us!), you can significantly reduce the amount of work for your business when managing returns. Get a quote from our friendly team today to learn more.

Is it legal to not accept returns?

For e-commerce businesses in the UK, the Consumer Contracts Regulations state that customers can request to return items within 14 days of receiving them.

As an e-commerce business, you are “distance selling“, which means customers also have the right to return goods even if they are not faulty. There are other rules e-commerce businesses must follow exclusively for “online selling“, such as making sure they can easily access and download your terms and conditions, which should include your refund policy. 

Need Help With Your Returns Management?

Navigating the world of returns management can feel a bit like tightrope walking. But don’t sweat it – Delta Fulfilment is here to help! With our top-tier e-commerce order fulfilment solutions, we’ve got your back (and your returns). Fancy a seamless return experience for your brand? Get a quote today and let’s make magic together! 

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