Ecommerce has revolutionized retail, offering convenience and expanding market reach. However, with this digital shift comes a significant challenge: return rates. Customers frequently order multiple sizes, colors, or styles, keeping their preferred choice while returning the rest. While this benefits shoppers, it creates logistical and financial burdens for retailers.
Research shows that nearly 30% of all online purchases are returned, compared to just 8.9% in physical stores. To maintain profitability and customer loyalty, businesses must adopt effective returns management strategies.
The impact of returns on marketplace trust
A key factor affecting trust in marketplaces is the ease of returns and refunds. In fact, a recent survey we conducted found that 36% of shoppers cited difficulty with returns or refunds as a reason for losing trust in an online marketplace. Alongside product quality and unreliable sellers, this is one of the top three factors damaging consumer confidence.
Understanding these trends can help you refine your return policies and improve customer satisfaction.
What is ecommerce returns management?
Ecommerce returns management efficiently unwinds the sales process, beginning when a customer decides to return an item. This journey involves several key steps: receiving the returned product, assessing its condition, updating inventory records, and resolving the customer's request through a refund, exchange, or store credit.
1. Return initiation: Customers start the process by submitting a return request online and receiving instructions and authorization.
2. Item shipment: Customers ship the item back using a label provided by the retailer.
3. Receiving and inspection: The returned item is inspected to determine its condition and suitability for resale.
4. Inventory update: Inventory records are updated to reflect the return, ensuring accurate stock levels.
5. Customer resolution: Depending on the item's condition, customers receive a refund, store credit, or an exchange.
6. Restocking or disposal: Items in good condition are restocked, while others may be refurbished, recycled, or disposed of.
The goal here is straightforward—maintain customer satisfaction and trust while keeping operational losses to a minimum.
Why returns management matters
Ecommerce returns management is crucial for several reasons:
1. It provides a good customer experience
A smooth return process can drive customer loyalty. According to a survey, 96% of shoppers are more likely to purchase again if returns are hassle-free. Instead of viewing returns as a setback, retailers can use them as an opportunity to engage with customers, provide alternative solutions, and strengthen brand trust.
2. Impact on seller performance ratings
Returns management influences your seller rating and reviews. A Corra study shows that almost 50% of customers who leave a negative review did so due to challenges in receiving a refund. Another primary reason for negative reviews is that companies are not upfront about their policies, such as returns.
Given that 95% of customers read online reviews before buying a product, you must handle returns processes efficiently.
3. Maintaining inventory accuracy
Efficient returns help maintain accurate stock levels, which is essential for the inventory management process. Brands that do this effectively minimize stockouts, overselling, and reduce waste.
4. Controlling costs
Managing returns efficiently also helps improve operational efficiency. Reports estimate that returns cost merchants $100 for an ecommerce order, with much of the stock thrown away, donated, or sold off to liquidators. The cost of logistics, labor, transportation, repackaging, and refunds is not sustainable without an efficient ecommerce returns management process.
What are the main return management challenges?
While recognizing the importance of returns management in ecommerce, the practical challenge lies in implementing these practices without compromising profitability. At a time when 76% of online customers want free returns, any changes to your returns strategy will risk damaging the consumer experience. Here are some of the primary hurdles businesses face.
Shipping costs
Shipping costs are a significant pain point in returns management. The expense will typically fall on the retailer, where many have a free returns policy to attract customers. Sellers can try to shape consumer behavior to help reduce shipping costs of returns.
For example, you could charge for the least-desirable (most costly) method and offer free returns for the least expensive method. In doing so, customers can receive free returns while retailers reduce costs.
Restocking fees
A restocking fee is typically deducted from the customer's refund amount as a cost for inspecting and repackaging returned items. The objective is to discourage frivolous or unnecessary returns. However, a restocking fee policy can deter buyers who like to try products, which could be particularly damaging in "try before you buy" sectors such as fashion.
You will need to weigh up whether providing a better customer experience and protecting your seller rating is worth the cost of soaking up the restocking fee.
Potential loss in value for returned items
Returned merchandise often loses value, particularly if items are no longer in season, have been opened, or can no longer be sold as new. A report by the National Retail Federation notes that retailers typically lose 10% to 20% of the merchandise value on returns. This depreciation impacts the bottom line directly and complicates pricing and discount strategies.
Keeping internal systems aligned with your actual stock levels
Accurate inventory management is crucial but challenging. Discrepancies between returned stock and what's reflected in inventory systems can lead to overselling or stockouts.
An integrated ecommerce setup that syncs data across all sales channels can help mitigate these issues by ensuring that stock levels are always up to date, enhancing operational efficiency and customer satisfaction.
Strategies for effective returns management
There are several strategies retailers can deploy to reduce ecommerce returns.
1. Detailed product descriptions
Consumers seek a buying experience that is smooth, seamless, and well-informed. Therefore, providing extensive information about products is crucial. Enhancing the customer journey with user-generated content (UGC) like reviews, photos, videos, and Q&As allows shoppers to access all the information they need to make confident and precise purchasing decisions.
For instance, by using a detailed sizing chart, customers can ensure they select the correct size, and reading customer reviews about sizing accuracy further aids in making the right choice.
Nearly two-thirds of consumers indicate that access to UGC would make them less likely to return products.
Lucardi worked with ChannelEngine to gain better control and accuracy of their product information and avoid misinterpretation while expanding onto multiple marketplaces.
2. Amazon A+ Content
Amazon A+ Content enhances product listings with detailed descriptions, high-quality images, and videos, providing customers with a comprehensive understanding of products. This enriched content helps bridge the gap between customer expectations and the actual product, significantly reducing return rates.
3. Integrating technology
Incorporating AI-driven analytics into your returns management can automate many aspects of the process, enhancing speed and efficiency. A key application of this technology is in updating inventory management. AI analytics can promptly adjust your inventory levels to reflect returns, ensuring accuracy and preventing issues like overstocking or understocking.
Moreover, advanced analytics can intelligently reroute returned items to the nearest warehouse where demand is highest and determine the most cost-effective return methods and routes.
Such automation not only boosts efficiency but also significantly reduces costs, making your returns process more effective.
4. Clear returns policy
According to Invesp, two-thirds of shoppers will check the returns policy before purchasing. The policy should be easy to find with a dedicated page and a clear link from your website or marketplace.
A clear and comprehensive returns policy can reduce return rates by offering customers multiple options and transparently explaining any associated fees. Customers are better informed about their choices by detailing the steps for returning items, the conditions under which returns are accepted, and any costs involved.
For instance, providing options like exchanges, store credit, or refunds and clearly stating any restocking or shipping fees helps set realistic expectations.
Explore our in-depth post-holiday returns strategies for marketplace sellers looking to optimize returns during peak seasons.
Efficient returns with ChannelEngine
ChannelEngine simplifies returns management through automation, reducing manual effort and processing times. Our platform offers:
- Automated returns processing - Streamlining return approvals and logistics across multiple sales channels.
- Real-time insights - Tracking return reasons and trends to improve product listings and customer communication.
- Inventory synchronization - Ensuring accurate stock levels across all marketplaces.
Companies like Lucardi and Expondo have leveraged ChannelEngine to enhance control over product information and streamline operations, improving efficiency and global scalability.
The Future of Returns Management
Returns are an inevitable part of ecommerce, but they don’t have to be a financial burden. By implementing a well-structured strategy, incorporating technology, clear policies, and data-driven insights, businesses can transform returns from a challenge into a competitive advantage.
