[Updated post from February 24, 2021]
We get it. No online store wants to lose valuable sales. But returns have become a huge part of online shopping culture, so brands need to learn how to manage returns effectively if they’re going to build a successful business.
Today, it’s impossible to run a thriving brand without a well-thought-out returns strategy – and this is where your e-commerce return policy plays a major role. Every merchant needs a comprehensive return policy if they’re going to attract and retain customers while still controlling return volumes, but putting one together can feel like a daunting task.
In this guide, we’re going to cover how to write an e-commerce returns policy – and why it’s so critical for your business to get it right.
Let’s get started!
An e-commerce return policy is a set of guidelines from an online retailer that details the conditions and processes for customers who wish to return or exchange items they’ve purchased. A return policy should provide clarity and transparency on what products can be returned, the window for accepting returns, the condition for returned items, and more.
Having a consistent and well-written return and refund policy is important for both online stores and their customers. This helps to build trust and confidence in the online shopping experience, which in turn increases customer loyalty and repeat business.
According to the National Retail Federation, Retailers processed $1.29 trillion in online returns during 2022, accounting for 16% of total U.S e-commerce sales. This is actually a lower rate than previous years, with rates as high as 20.8% in 2021, thanks to the COVID-19 pandemic causing more consumers to pivot to online shopping.
To make it more complex for brands, these returns are not evenly spread throughout the year. With online purchases typically spiking in the lead-up to the holiday season, this results in a big volume of holiday returns in the new year that brands are expected to process efficiently to ensure customer satisfaction.Moreover, return rates will vary depending on the product category. For example, clothing and apparel see the highest return rates in e-commerce, whereas books and furniture see some of the lowest:
Returns culture’ refers to how seamless returns are essential to meet customer expectations in e-commerce. The ease and convenience of online shopping mean that consumers can browse and purchase items from the comfort of their own homes. However, not being able to touch or try products before purchasing increases the likelihood of an incorrect purchase.
To compete effectively with brick and mortar shops, online stores have adopted hassle-free return policies to make it easy for consumers to return or swap items that don’t fit their needs. This has led to a proliferation of features such as free returns policies, easy-to-use return systems, and free return shipping to create a positive customer experience.
However, lenient returns do have a dark side. The rise of consumers ‘bracketing’ their purchases (buying multiple versions of the same item to try and return later) has set return rates skyrocketing. As a result, categories like clothing and apparel now see return rates as high as 60%.
Plus, it’s tough to keep a business profitable if you have no idea what your long-term revenue growth looks like. As well as lost revenue, E-commerce returns can result in additional shipping and handling, higher labor costs associated with processing returns, and lost resale opportunities.
But when many customers decide where to buy based on an online store’s return policy, e-commerce brands are faced with the challenge of balancing customer expectations with the need to retain revenue. But believe it or not, a well-thought-out e-commerce return and refund policy can mean more – not fewer – sales.
It might sound counterintuitive, but customer returns aren’t necessarily ‘bad’ for business.
Why? Because the ability to return (and to return easily) simply what customers expect – and meeting customer expectations is definitely good for business.
It’s common knowledge that consumers love easy returns – to the point that many potential customers refuse to make an online purchase without it.
Over half of U.S. consumers say they won’t shop with an online store that doesn’t offer a hassle-free return and refund policy, with a further 49% checking details of the return policy before making a purchase.
The reason is simple – if a purchase isn’t right for whatever reason, online shoppers know they have recourse to return or exchange a product as they see fit. If you don’t have an e-commerce returns policy that’s generous and accessible, that equals a lot of potential customers choosing to shop with competitors.
Processing returns may mean a loss of short-term revenue, but return and refund policies pay off further down the road if you make a good impression. A striking 95% of customers say they will shop with a retailer again if their return experience was positive.
It’s important to note that not every return experience is alike. While some online shoppers want to return purchases due to a simple change of mind, there can be complex resolutions needed.
For example, if a customer receives an item that is damaged or defective or their order contains the wrong items, they will expect the brand to jump into action to remedy the situation. If the brand has a streamlined system in place and sends out replacement items promptly, this increases customer loyalty by turning a negative customer experience into a positive one.
Without a return and exchange policy set in stone, an online business is left to reinvent the wheel every time they receive a return request. This is inefficient and labor-intensive for the customer service team, resulting in slower returns processing and a higher likelihood of mistakes being made – neither of which will endear you to customers.
Moreover, effective return and refund policies help retailers identify trends in return behavior and identify areas for improvement. By tracking and analyzing return data, brands can understand why customers are returning and exchanging items and take steps to address those issues, whether it’s by improving product descriptions, providing better sizing information, or addressing quality control issues.
Your e-commerce returns must make clear what customers are entitled to. For example, can customers get a full refund, store credit, or an exchange for another item of the same value?
Which policies you choose to adopt will depend on what products you’re selling and the difficulty of resale. For example, if an item is customizable, you may choose to exempt this from being eligible for any kind of return because it cannot be added back to stock.
However, note that stipulating different conditions for every product category will make your policy confusing, which is likely to put customers off purchasing. Instead, try to keep your policy as simple as possible, with a general set of guidelines to apply to nearly all of your products.
To ensure that returned merchandise can be resold, online stores need standards for the condition that products are returned. It ensures that items can go back on the shelf as quickly as possible with minimum restocking fees. Common return conditions include:
Setting the optimum window for returns and exchanges can be tricky for an e-commerce business; consumers need a reasonable timeframe to ship items back to the warehouse, but the retailer also needs a good chance of those returned items being resold to avoid losing revenue.
A 30-day return/exchange period is considered standard in e-commerce, so consumers will expect this at a minimum. However, it’s critical to clarify exactly when the return window starts and finishes. While using the date of purchase might be easiest, it could be deemed unfair by consumers if they have to wait a long time to receive their order. Instead, consider using the date of delivery (your carrier or 3PL will be able to confirm this for you).
There are certain items that cannot be returned, either for safety reasons or due to difficulty reselling. For example, underwear, swimwear, and jewelry such as earrings cannot normally be returned or exchanged due to hygiene concerns. Other items might be listed at steep discounts on final clearance sales, under the condition that they cannot be returned. If a product is exempt from your general return policy, it’s important that this is clearly listed o the product page.
It’s important to tell customers how long it will take to process a return or to receive a replacement item. Otherwise, this could leave consumers wondering when they’re going to see a refund appear in their bank account, leading to a higher volume of customer inquiries than necessary. Moreover, if a customer is purchasing a product that has room for error, like color or size, they’re going to want reassurance that their return will be processed quickly.
Last, but certainly not least, online retailers need to provide step-by-step instructions for how online shoppers navigate the returns process. If you have an online returns portal, make sure it’s clear how customers can access this and what information is required to lodge a return or exchange. If they have to reach out to a customer service representative, make sure to list all of the customer service channels available.
If customers are shipping returns to your warehouse, be sure to list how returned items should be packaged and the address where they should be sent. If all orders include a return shipping label, this information should also be enclosed with the package.
The best way to avoid confusing customers is to keep highly descriptive or complex language out of your return and refund policy. As well as causing your customer service team to be bombarded by repetitive questions – which is what you’re trying to avoid by creating a return policy in the first place – it can look as though you’re trying to mislead customers (a big no-no). Try to keep your e-commerce return policy at a grade 9 reading level for clarity.
E-commerce return policies that are difficult for customers to find add friction to the customer experience – and could prevent them from converting at all. One-third of consumers say that difficulty finding a returns policy online will put them off purchasing!
Moreover, your want your e-commerce return policy should be a key selling point for your brand. If you bury it many pages deep within your website, potential customers won’t know that you offer free returns or a seamless exchange process. It’s a good idea to put a link in the footer labeled either ‘returns and exchanges’ or ‘return policy’ for clarity.
You should also consider linking to your return policy in the following places:
Most return and refund policies offer their customers exactly the same terms and conditions, no matter whether they are shopping with a brand for the first time or seventh. While this may be easier from an administration standpoint, your e-commerce return policy offers an opportunity to reward your most valuable customers.
For example, you could offer free return shipping or longer return windows to customers with a certain loyalty status. A more flexible returns process recognizes their ongoing loyalty to your business, boosting the odds of repeat business.
The question of whether merchants are obligated to pay for return shipping is an ongoing issue. Return shipping costs add up quickly and affect your profit margins, especially during return-heavy periods like the holiday season.
However, it’s important to note that not offering return shipping could cost you in sales. Customers want a seamless returns experience – and paying for shipping is something that adds a lot of friction.
However, there are times when covering free shipping costs is the right thing for businesses to do to mend a damaged relationship. For example, if a customer receives a damaged product or their order hasn’t been fulfilled correctly.
Many consumers demand a full refund not because they hate the product, but because the brand isn’t proposing an alternative to resolve their dilemma.
For example, if a customer has ordered the wrong size, it should be quick work for the business to process the return and arrange to ship out the correct size. But more often than not, exchanges take longer to resolve than a return does – especially if they don’t receive the replacement item until after the return is processed.
The exchange process prevents revenue from disappearing by replacing a returned item with something else, which also boosts customer satisfaction. With the right cross-selling and upselling strategies, exchanges can even result in merchants capturing more revenue from customers.
You can persuade customers to exchange products by offering free shipping, longer return windows, or even bonus loyalty points. Check out our full blog on increasing e-commerce exchanges here.
Consumer behavior changes considerably during the holiday season when customers are buying gifts for loved ones. However, these gifts aren’t always going to land well with the recipient – this makes flexible return policies even more critical. When there’s a bigger lag between the purchase and the return – not to mention overstretched parcel networks that slow down the delivery of returned merchandise – so it’s necessary to give customers a little more time to return items.
For example, if your standard return policy is 30 days, you may want to double this to 60 days over the height of the holiday season (November – December) to ensure that customers have plenty of time to make returns or exchanges.
Many online shoppers prefer to return items at a storefront due to the ease of finding replacement items and receiving a refund quickly. However, it’s not uncommon for brands to silo their e-commerce customers to a mail-only returns process, which is far more cumbersome and time-consuming. When seamless returns are the key to customer retention, in-store returns go a long way toward easing concerns about the return process.
Everyone from customer service reps to in-store staff needs to have an in-depth understanding of your e-commerce returns policy so they can action it correctly. If you are bringing in a new policy or making adjustments to eligibility, it’s essential to make sure that everyone touching your policy is brought up to speed before you introduce it. This avoids cases where customers are incorrectly denied the opportunity to return goods.
Managing and processing returns is a big drain on an e-commerce brand’s time and resources, but it’s critical to get this right to retain customers and increase loyalty. If you can meet customer expectations for a seamless and easy returns process, your business is much better positioned to build a loyal customer base.
For best results, consider partnering with an e-commerce fulfillment provider like Ryder E-commerce which can offer you advanced integrations with third-party returns solutions such as Loop, Returnly, Happy Returns. This takes the pressure off so that you can focus on what matters – growing your business!