Why Your Return Policy Is Crucial To Your Success

return policy

On Singles Day this year, Alibaba set a new sales record with more than $30.8 billion in sales in 24 hours.  With many other shopping festivals like Black Friday, Cyber Monday and Christmas yet to come, we’re poised for a strong start for 2018’s peak season.

While it’s easy to bask in the notable uptick in delivery volumes and sales during this time period, we also need to consider the flip side of e-commerce retail – handling the returning of goods, especially during the peak season.  

Why is thinking about your return processes and policy important? Let us explain.

A good return policy is instrumental to drive sales during the peak season.

Data shows that your store’s return policy affects customer retention and sales. Research shows your return policy can influence up to 91% of customer’s purchase decisions – with 67% of shoppers checking your return policy before buying from you.

A report by the Internet Merchants Association found that the top six reasons for customer returns were:

  1. The customer ordered incorrect product or size
  2. The customer decided the product was not needed or wanted
  3. No reason for return given
  4. The product did not match the description on the website or in the catalog
  5. The product did not fit the customer’s expectations
  6. The company shipped the incorrect product or size

Whatever the reason, a deft return policy reassures customers that you care about them by giving them a hassle-free returns experience. The reasons are three-fold:

    • Customers aren’t likely to trust an online retailer that doesn’t offer an easy way to return purchases that fit the above reasons
    • Online shoppers made additional purchases when returning both in-store or processing a return on a website  
    • A well-thought-out, flexible return policy shows that you have confidence in your product and put your customer’s interests first.  

Getting your return policy in place not only encourages customers to shop but there’s another reason why this document can determine the trajectory of your peak season.

Let us explain.

Return rates increase during the peak season.

Data from Shopify suggest return rates can surge to 30%, reaching a high of 50% for luxury goods during the peak season. They also noticed customers are buying products with the intention to return some of these items immediately.

Some startling statistics:

    • 41% buy multiple sizes or variations with the intent of returning
    • 77% of returns come from repeat customers
    • 89% have returned an online purchase

With these statistics in mind, it’s clear higher-than-normal return rates are part and parcel of navigating the peak season.

return rates - peak season

Source: Shopify

When returns processing ranges from 20-65% of the cost of goods sold and eat into the profit margins you diligently worked for you need to pay attention to managing your return rates and the process around returns.

With that said, how can you make use of your return policy to drive sales and customer retention during the peak season?  

1. Set expectations for what and when items can be returned

Outline what your customers can expect from you during the return. Do you provide a full exchange of goods, offer an in-store voucher? Alternatively, return their money?

Other things you need to think about and communicate across:

  • The time taken to process the refund and when the customer should be able to see the refund in his / her bank account
  • Shipping timelines and options and how customers can check on your order:
  • Explicitly specify a warranty period, return period and an exchange period:
  • Conditions where the returns are valid. For example, must the items be unused? Must the items be in the state you received them and in the original packaging?

2. Make returns free

Offering free returns is an incentive for people to buy.

If customers are hit with unexpected return shipping or processing fees, they might think twice before purchasing. By stating that returns are free, you are reassuring customers that there are no hidden costs in the customer journey. Reassurance is critical to satisfying potential customers who review your return policy before purchasing.

Zappos’s CEO Craig Adkins famously remarked that:

“Our best customers have the highest returns rates, but they are also the ones that spend the most money with us and are our most profitable customers,”

However, we also understand that by offering return shipping, your business is absorbing the cost of shipping; both to the customer and return shipping. If not controlled properly, this can hit your bottom lines significantly; especially if you ship bulky items like televisions, kitchen appliances, and mattresses.

If you are concerned about excessive costs, think about which items get a free return and the time you allocate for free returns to manage these costs carefully.

3. Make your return policy easy to find

If a new customer came to your site, how many pages do they need to wade through to find your return policy? To ensure your returns policy is visible, here are some places to include your returns policy to make it easy to find:

    • Product page: This allows customers to keep your products top-of-mind as they review your return policy and encourage purchases
    • Homepage: Either put it in a dedicated tab on your navigation bar or in your site footer
    • Check out page: Putting a link to your return policy in the checkout   your brand’s promise and reassures your customers
    • Order confirmation emails: This indirectly shows your customers that their satisfaction is your top priority and you are prepared to handle a refund if they aren’t satisfied

Consider also providing return specific links and an FAQ page to direct your customers to if they have any questions on the returns experience.

In Conclusion:

As the peak season continues, expect a surge in orders, revenue, and yes, order returns as well. While processing returns can be tiresome and costly, a well-thought-out return policy can be your differentiating factor in providing a superior customer experience to your customers. A sensible return policy reassures customers, demonstrates confidence in your products and shows your commitment to put your customers first.

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