One of the least glamorous tasks when you’re setting up your online store is the one that can make or break your business: returns.
Make a return policy that’s too restrictive, and customers won’t buy from you. Make it easy to abuse and the cost of excessive returns can wipe out your profit. Creating a return policy that works is an issue for all retailers, but it’s especially important for online stores to get it right.
That’s because e-commerce return rates are a lot higher than return rates for purchases at brick-and-mortar stores. Because of free-returns policies set by mega-retailers like Amazon, online customers expect to be able to return their purchases for free.
But as the number of returns keeps climbing, some major online players are having trouble managing the flood of returned goods and controlling costs. E-commerce shoppers returned about $400 billion worth of products last year, and some experts say the yearly return total could top $1 trillion soon. In response, some online retailers are outsourcing their returns process to third-party startups. Amazon—the reason online shoppers expect free shipping in the first place—has been quietly banning customers who make too many returns.
To create a return policy that works for you and your customers, it helps to understand why online shoppers return so much merch, which types of returns you can reduce, and which returns are just part of the cost of doing business.
Why Do Customers Expect Free Returns?
Customers look for free returns in part because they can. Online and multichannel retailers like Amazon, Nordstrom, and Zappos have had free return policies for years, so many customers now expect it wherever they shop online.
Any retailer or reseller who wants to stay competitive offers some sort of customer-friendly return policy, and the most ambitious small stores offer free returns to compete with bigger players. Even people who flip estate-sale and thrift-shop items on eBay often provide free returns to stand out from other sellers. A UPS report found that 88 percent of online shoppers look at stores’ return policies, so make sure yours is on par with or better than your competitors’.
Customers also look for free returns because there’s no way to for them to handle or try on the merchandise before they buy, which means they’re more likely to change their mind about an online purchase than one made in a store. A free return policy reduces the risk that comes with buying a product they haven’t sampled, tried on, or held in their hands. If customers know they can send it back for free, they’re more likely to buy.
Why Do Customers Return Online Purchases?
When a product description doesn’t include enough information, the customer may be disappointed when the item arrives. Without details about size, measurements, materials, and other specifications, customers are more likely to buy the wrong item and need to return it. These details can also cut down on the number of customers who order the same item in different sizes with the intention of sending back the ones that don’t fit.
Sometimes even lots of details about the product can’t prevent a return, because the customer may just decide the item just doesn’t work for them. Or maybe they misread or skipped over important information in your product description. In these cases, hassle-free returns can make it more likely that they’ll shop with you again.
The fear of return fraud, especially wardrobing—customers using or wearing items and then returning them for a refund—is the reason some store owners hesitate on free returns. Return fraud is worth attention because it costs merchants money on shipping, and items can’t be restocked if they’ve been worn or damaged. However, the cost of return fraud is a small fraction of the overall cost of returns—about $15 billion for e-commerce and brick-and-mortar retailers combined in 2017. Most customers are busy people who don’t want to return something unless they must.
Build a Good Return Policy, Step by Step
Now that you know why online shoppers want free returns and why they make returns, it will be easier to write a return policy that meets your customers’ needs and yours. Here are the steps to work through.
1.Think about how your pricing can accommodate free returns.
We all know that “free shipping” isn’t free. Retailers that offer it are either selling huge volumes of low-margin items or building shipping costs into their overall pricing, or both. The same is true for free returns. Factor in your expected return rate and costs when you price your merchandise. If your store is brand-new and you don’t have historical return data yet, a Google search for average return rate for the types of products you sell can give you some numbers to start with.
2. Consider offering free returns on selected items.
Nordstrom offers free returns across the board, but it also sells higher-end goods that have bigger margins than a typical discount retailer or small artisanal online seller. Not all of Amazon’s products are eligible for free returns, only those that say so on the product page. This helps keep down costs related to returning heavy, fragile, or otherwise hard to deliver items, like huge TVs.
You can also limit free returns by location or shipping speed. For example, Zappos offers prepaid labels, but only for returns from within the US. And most online stores only offer free shipping on the least expensive delivery option, not on express or same-day deliveries.
3. Set rules for free returns.
To head off return fraud, you can require that items must come back in their original packaging or with the tags attached to qualify for free returns. For example, Zappos only accepts returned items in their original packaging. Large garment tags and stickers that cover package seams can make it harder for fraudsters to use your merchandise for free. You can also choose to charge a restocking fee if the returned item wasn’t defective. If you go the restocking fee route, make sure that’s clear in your shipping policies.
4. Consider returnless refunds and exchanges.
This may seem counterintuitive, but you might want to offer what Amazon calls “returnless refunds.” Returnless refunds and exchanges keep customers happy and let merchants avoid eating the cost of return shipping on items that doesn’t cost much to produce or that probably won’t re-sell.
For example, a t-shirt I ordered recently arrived in the wrong color—because I clicked on the wrong color. I called the retailer to find out how to return it. Rather than spend money on return postage, processing, and restocking, they sent me the correct shirt at no extra charge and told me I could keep or give away the first one. I was surprised, but it was a win-win. The seller avoided losing money on the return and I didn’t have to hassle with packing the item up and taking it to the post office.
If you go the returnless refund/exchange route, only apply it to the items for which it makes sense financially. Do the math carefully. And be sure to track your returns.
5. Monitor your return metrics.
Many retailers like Sephora, Best Buy, and Home Depot use a third-party agency to track customers’ returns and flag their accounts if their return habits seem excessive. These customers may have their returns declined for a year.
You can do something similar by tracking customer returns in your shop or payments dashboard. This lets you see who may be abusing your return policy, which items are returned most often, and how much you’re spending on free returns. If you have a serial returner who you suspect is wardrobing or abusing your returnless exchange policy to get free stuff, you may want to decline their orders in the future.
6. Include details and high-quality images in your product descriptions.
To overcome the fact that customers can’t interact with online products before they buy, savvy sellers include lots of product information, like dimensions, weight, reviews, warranty, colors, photos, and videos. If you notice a trend of from customers who say the item wasn’t what they expected, improve your product descriptions. You’ll have happier customers, and fewer returns.
7. Choose a shipper that can handle your returns with tracking.
This lets you and your customers verify that returns have been sent and received and can prevent a lot of back-and-forth messaging during the time between the return and the refund.
8. Put your store’s shipping and return policy on every page of your site.
Once you’ve decided on your policy, make sure your customers can see it. This is easy to do with the Gator Website Builder, which lets you build your online store with drag-and-drop tools so you don’t have to code.
Use clear language and keep it simple. Nordstrom sets the standard: “Free shipping. Free returns. All the time.” They include a link to the full policy for anyone who wants to know the details, but that simple message on each page lets shoppers know that buying and returning will be hassle-free.
If you’re being selective about free returns, make sure that’s clear in all the returns policy messaging on your site. Free returns for US orders? Free returns on t-shirts and jeans (and not enormous TVs)? Spell it out so shoppers know what to expect. Note: If you’re going to offer returnless refunds and exchanges on some items, it’s probably best to simply say “free returns” so you don’t invite scammers to abuse the policy.
Casey Kelly-Barton is an Austin-based freelancer who enjoys writing about business development and marketing, e-commerce payments and fraud prevention, and travel.