One of the least glamorous aspects of online commerce is the one that can make or break your business: returns.
That’s because e-commerce return rates are a lot higher than return rates for purchases at brick-and-mortar stores. And thanks to the standards set by mega-retailers like Amazon, Nordstrom, and Zappos, customers expect to be able to return their purchases for free.
How can your online store offer a competitive return policy without losing money on 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 have come to expect it. 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’.
What to do: We all know that “free shipping” isn’t really free because smart retailers build shipping costs into their overall pricing. The same is true for free returns. Factor in your expected return rate and costs when you price your merchandise.
Customers also look for free returns because there’s no way to for them to handle the merchandise before they buy. A free return policy reduces the risk that comes with buying a product they haven’t sampled, tried on, or held in their hands.
What to do: Put your store’s shipping and return policy on every page of your site. 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 more, but that simple message on each page lets shoppers know that buying and returning will be hassle-free.
Who Offers Free Returns Now?
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.
What to do: Offer free returns. You can still set rules on how long customers have to return items, whether tags can be removed, etc.
Why Do Customers Return Online Purchases?
There are three basic reasons customers return items. The product description didn’t include enough information, the customer ordered items that didn’t work for them, and return fraud.
1. 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.
Without these details, 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.
What to do: If you’re getting returns from customers who say the item wasn’t what they expected, it’s probably time to improve your product descriptions. You’ll have happier customers and fewer returns.
2. However, you’re selling to humans. Even if you include every possible product detail, busy or distracted customers may miss that information.
To justify my thrift-store browsing habit, I resell some of my finds on eBay. Last week a customer bought a dress that had several photos and detailed measurements. However, she overlooked the measurements and the dress didn’t fit. It happens. And sometimes people just change their minds.
What to do: In these cases, gracious acknowledgment that we’re all human can go a long way. Take the return if it meets your criteria and let everyone move on.
3. And then there’s fraud.
The fear of return fraud, especially customers using or wearing items and then returning them for a refund, is the reason some store owners hesitate on free returns. It’s true that an estimated one percent of returns are fraudulent, but most customers are simply busy people who don’t want to return something unless it doesn’t work for them.
What to do: To head off return fraud, you can require that items must be in their original packaging or have tags attached to qualify for free returns. Stickers that cover package seams and large garment tags can make it harder for fraudsters to use your merchandise and send it back. You may also choose to charge a restocking fee if the item shipped was the correct item and wasn’t defective. If you go the restocking fee route, make sure that’s clear from your shipping policies.
Another option, adopted by retailers like Sephora, Best Buy, Home Depot, and Victoria’s Secret, is to 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. Small online sellers can do something similar by tracking customer returns so you can ban or limit returns from those whose behavior seems fraudulent. However, expect to lose those customers and see them complain on social media. Another option might be to simply decline new orders from those customers.
Once you’ve improved your product descriptions, made your return policy clear, and come up with a way to watch for fraud, there’s one more thing you’ll want to do. Choose a shipper that can handle your returns with tracking, so you can verify when your customers have send the items back to you. That also gives your customers peace of mind because they can be sure you received their returns.
Casey Kelly-Barton is an Austin-based freelancer who enjoys writing about business development and marketing, e-commerce payments and fraud prevention, and travel.