Returns tend to cut into profit and leave customers unhappy. In 2019, 48% of customers returned products purchased online, which resulted in $369 billion in losses. 

Returns cut into profitability for many reasons. With every returned item, you have to account for:

  • Taking on the cost of the return shipment 
  • Storage space for returned items
  • Disposal of damaged items
  • Losing a customer 
  • Negative customer reviews 

As long as your online sales continue to grow, returns are inevitable. However, that doesn’t mean returns are the end-all, be-all. Returns also come with an opportunity to collect customer feedback, optimize internal processes, and provide more customer value. 92% of shoppers say they will buy again if the returns process was easy and overall positive — this statistic is worth exploring. 

It’s time to debunk the idea that returns lead to lost profit and nothing more. The truth is not every return leads to a lost sale or customer. With a smart returns management process, there are many ways to mitigate or leverage returns to support product development and improve the customer experience. The result? Better products that keep your customers coming back. 

The key is to create a customer-friendly return policy that builds trust with your customers while designing a returns management process that’s accurate, efficient, and dependable. 

What is a returns management process?

A returns management process is designed to handle product returns for your online store, whether for an equal exchange or a full refund, and deciding what to do with an item once it’s returned. Many aspects of the supply chain are impacted by returns, such as warehousing, inventory management, and profitability. 

Understanding the returns management process

The returns management process is sometimes referred to as “reverse logistics.” This is the opposite of shipping products to a customer, as the customer ships a product back to you. In most cases, returns management follows a simple three-step process but can be further streamlined based on your customers’ unique needs and your business. 

Step 1: A customer initiates a return

The first step is for the customer to complete. With the instructions given (which should be stated clearly on your returns policy and easily found on your website), a customer will start the returns process and explain why they’re making a return.

This is an excellent opportunity to prompt customers into taking a survey that asks for feedback. By collecting returns data, you’re able to gain insight into products on why they’ve been returned and make changes to prevent this from happening again or as much. 

Depending on your returns policy, a customer may be given the option to receive a full refund, replacement, or store credit. From there, most online stores offer the customer a printable return label (47% of online shoppers want an easy-to-print return label). Then, the customer can use whatever packaging they have to ship the product back.  

Step 2: The returned product is received

Next, a customer sends the return directly to a predetermined location: a fulfillment center, a retail location, an e-commerce warehouse, or even sometimes an e-commerce seller’s home. Whether you manage returns yourself or your fulfillment provider manages them on your behalf, you decide what to do with the product once it’s received: restock it, repair it, recycle it, quarantine it, or even donate it. 

Step 3: The return is processed

From here, it’s essential to act quickly. If the customer qualifies for a full refund, be sure to process the refund as soon as possible. If the customer requested an exchange, ship out the updated order right away. If the item returned is applicable for resale, mark it as available inventory to not lose out on a potential sale.

How to stay profitable with your return management process

By looking at returns to generate customer loyalty, improve brand experience, and even enhance internal processes, returns can lead to an opportunity to drive more revenue in the long run. Here are some ways to optimize the return management process.

Upgrade customer service

When a customer returns a product, use this opportunity to connect with them and get feedback on why. By taking the time to follow up with unsatisfied customers, you’re given a chance to build brand loyalty by building trust. You could also offer them an incentive to purchase a product that better fits their needs using store credit (e.g., a discount code). 

Invest in inventory management

With so many customers adopting ‘try and return’ habits, your business needs to have inventory adequately managed. Make sure always to have returns that are resellable marked as ‘in stock’ and that you have enough storage capacity. If you’re experiencing a high volume of returns, it might be time to invest in inventory software, which can help you manage inventory in real-time.  

Educate your staff

If you have employees who process returns for you, work with them to find ways to make the returns process more efficient. For example, if products are consistently being returned due to damages while shipping, your team can experiment with improved packaging options and dunnage to prevent future shipment damage.