Returns Management Process

Part
01
of one
Part
01

Returns Management Process

Key Takeaways

  • According to Chuck Fuerst, surveys indicate that most consumers expect to be able to make a return from the website they purchase a product. About 9 in every 10 customers review the return policy online, which becomes the basis of whether they go ahead and buy or not.
  • Another recent survey published in CBNC estimates about 70% of high-quality apparel returned products are to be restocked and resold.
  • According to statistics published in Statista, the survey shows that 69% of the respondents agreed that they outsource their return management.
  • 71% of consumers show they want a consistent experience across multiple channels, but unfortunately, only 29% say they get it. In-store and online return policies should be the same to offer customers the same experience irrespective of where they shop.
  • Damaged products account for 65% of item returns. Customers are usually upset when an item reaches them in faulty conditions, and they will return them. Defective goods are another challenge and should be inspected and removed from the retailer's inventory.

Introduction

The report provides the best practices for managing the return process, including the description of each, why the practice is best, and an example of where the practice is applied. The research also details a step-by-step breakdown of the processes involved in handling returned goods.

However, information on the percentage and value of return goods sold as salvage, refurbished, and resold products were unavailable in the public domain. Instead, we found information on top reasons why products are returned and suggested solutions. Finally, we provided top third-party return management companies based on revenue and market share. We described each company, headquarters location, target- sub-industries available, and the year each company was founded. Below, we provide the research summary and the research strategy used.

1. Best Practices for Managing the Returns Process.

[a]. Minimize the Processing Time of Refunds

  • According to Mark Beresford, few websites state that refunds are only processed on items returned to the warehouse, but in practice, it is a common situation. Studies show that a delayed refund can frustrate the buyer because it creates an impression that the retailer has ineffective and inefficient administrative processes. In the customer's mind, it should only take 2 to 3 days to return the product to the centralized warehouse. Consequently, items should be processed and the consumer notified within the perceived period according to the buyer.
  • A study published by the Fulfillment Lab indicates that 88% of customers would limit or stop shopping with a retailer who took longer to process their refund. At the same time, 77% of respondents agreed they would be less willing to recommend a retailer to their friends if they took longer to issue credit.
  • According to Hassan Monsoor, one of the worst things a retailer can do to customers is delay a refund. One must ensure to give their returns as fast as possible. Instant and automated consumer returns are one of the best ways to ensure customers enjoy a seamless experience.
  • Studies show that customers feel vulnerable when the return process begins as they do not have the money or the product. That's why it has become paramount for retailers to speed up the refund process to build trust and ensure customer satisfaction.
  • An excellent example is Costco, which prioritizes customer satisfaction. Costco makes returning products easy and painlessly possible.

[b]. Clear and Concise Returns Policy

  • The return policy needs to be easy to understand and easy to find. The information must be available and displayed on the website and receipts. The policy must be communicated throughout the purchasing process to ensure consumers know what they are getting into. A flexible policy will require the retailer to provide a return label for customers to ensure anyone is allowed to return their item frictionless. Further, to make it even easier by making it possible to print out on the website should customers lose their return label.
  • According to Chuck Fuerst, surveys indicate that most consumers expect to be able to make a return from the website they purchase a product. About 9 in every 10 customers review the return policy online, which becomes the basis of whether they go ahead and buy or not. On the contrary, some retailers vaguely believe not availing discourages customers from returning items, but in reality, it frustrates them, resulting in low sales.
  • The return policy must also be the same across all channels. 71% of consumers show they want a consistent experience across multiple channels, but unfortunately, only 29% say they get it. In-store and online return policies should be the same to offer customers the same experience irrespective of where they shop. An easy-to-understand return policy in all brand channels makes customers' experience seamless.
  • According to Mark Beresford, a clear and concise return policy makes customers understand what they should do when returning products. Offering a flexible, free and easy return makes customers loyal and likes to spend more money on such retailers.
  • A clear return policy explains everything customers need to know, for instance, if the retailer accepts alternative payment methods such as BNPL, PayPal, or After Pay and Klarna. Furthermore, retailers must indicate what customers should do when returning an item in-store if it was bought online. A well-organized, concise return policy helps create a more efficient consumer process.
  • Excellent examples of companies with the best return policy are Amazon and Nordstrom. These companies have a comprehensive return policy listing the standard return process of products.

[c]. Offer Store Gift or Credit Card

  • Sometimes, the customer who paid for the original purchase in cash might expect a cash refund. Unspent gift cards or store cards present an excellent opportunity to remind customers about the brand to return more products. A retailer may offer the customer these unspent gifts and store cards instead of cash when you can't find the original order or the customer has lost the proof of purchase.
  • Edgar, Dunn & Company, ( EDC), working in the Middle East, has benefited enormously from this approach, especially where the customer pays for the item using "cash on delivery." Instead of transferring the money forth and back to the retailer, the money is added to their store account or a gift card issued to them. Store credits are convenient for the customer's next shopping. Also, customers may send the gift card to their family and friends, introducing new customers to the business.

2. Returns Management Process

[a]. Verify Product Returns Request

  • The return process starts when the customers decide they are unhappy with the product. It could be a result of the damage to the product, or it might just be the wrong color or different size in the case of apparel. The customer requests a return, exchange, or refund from the retailer that delivered the item using the proper channels.
  • The sales staff must verify the customer's request when returning it to the store. The staff has to confirm that indeed the product was from their store. The receipt is the most common proof of confirmation. The original packaging must be intact with some products such as video games. Items such as clothing should show no signs of stains or wear and might still need their labels and tags.

  • When customers lack a receipt, they can use confirmation emails or bank statements as proof of purchase. If the customer is eligible for a refund or exchange, the retailer's cashier will create a return request through the system.

[b]. Create a Return Request

  • Accordingly, a dedicated gatekeeper or service staff decides the customer's eligibility according to the company's return policy.
  • The service staff then finds the past order in the POS system to process an in-store item return. Usually, different systems offer a different variety of options to find the order. The various options may include searching the order with product or customer information, inputting the order number or ID, and scanning the customers' receipt. The cashier can then start the return process by selecting the order. Cashiers have to select the number of products to return in the original order with some POS allowing the return of the product to stock on the screen.
  • Sometimes, the customer wants to exchange what they bought with another or the same product but with a different size or color. The staff then adds the new product to the cart. When the service staff cannot locate the order in the system, and the customer lacks the receipts, the cashier has to start a return request unassociated with any order.

[c]. Process Payment & Complete Return

  • Usually, companies that handle returns internally may have difficulties optimizing routes for pickups and deliveries as last-mile orders may be hard to accommodate. Retailers that accept returns and rely on third-party logistics services use digital prepaid shipping return labels.
  • If a product refund is accepted, the cashier will return the payment to the customer. Different POS systems might, however, offer different options, which may include a refund by cash, refund by the original method of payment, or refund by points or vouchers.
  • A refund by cash whereby the customer might expect a cash refund if they paid for the original order by cash.
  • A refund by the original method of payment in which customers will prefer to get a refund via the original method they used for payments. Some point of sale systems may require additional steps on the payment system in cases of terminal process transactions, unlike those that let one issue payments. The cashiers should therefore have the training needed for efficient handling.
  • And lastly, refund by points or vouchers whereby stores offer refunds in the form of points, gift cards, or store credits. The cashier can add the refund value to the customers' gift card balance or account, which they can use the next time they buy a product from the store.
  • When customers need a product exchange, the point of sale system calculates the difference in price between the new and old items. If there is no difference in price for the two items, there will be no need for any additional payment. If the price of the new item is lower, the customer should be able to get a refund of the difference. However, if the new item happens to be higher in price, the customer has to pay for the difference.
  • Some in-store product returns may incur additional costs other than the product price. Customers might pay for shipping and have their new items delivered later. In some instances, some brands require a restocking fee on opened products. During the return process, the staff should be able to add the additional fees

[d]. Complete In-Store Product Returns

  • Once payment is complete, the staff notes down the reasons for return. The product return offers invaluable data to help retailers make future merchandise decisions. Once the staff completes the return request, the POS synchronizes the data to the rest of the system. It should result in the updates in the original order, profit, taxes, and revenues, among others. Product returns information may appear directly in the original order in some cases, while in some, POS may create a new order and cancel the old one.
  • Accordingly, a delivery driver returns the product to a dedicated central warehouse or sorting facility. The auditor then sorts out the quality and tries to answer questions about why the customer returned the product, if it was in a good state during the delivery and the return process and whether it is good enough to restock.

[e]. Return Item to Inventory

  • In many cases, most POS allows returning the item to the inventory. The service staff records the quantity of the returned items at the stock end of the return process. The items, if in bad condition, are refurbished and, depending on the rules of the company, if still in good condition, may be sold to a future customer.

3. Data Points

  • According to statistics published in Statista, the survey shows that 69% of the respondents agreed that they outsource their return management. The chart below illustrates statistics of respondents who outsourced or did not do their returns management during the last quarter of 2021. Reusing material and products, including refurbishing and manufacturing, is covered by reverse logistics operations.
  • Experts project products thrown away upon return to be around 25% of their products. Returns and resale company Optoro suggests that every year, the United States returns create 6 billion pounds of landfill waste.
  • According to CNBC, 25% of return goods are thrown away in landfills contributing to environmental pollution.
  • Many returned goods are sold as damaged goods hence affecting the price. However, research shows that 48% of the returned products can be resold at actual prices.
  • Another recent survey published in CBNC estimates about 70% of high-quality apparel returned products are to be restocked and resold, according to Moore.
  • Consumer electronics and garden products that initially had a seal and it isn't there anymore are refurbished, repackaged, and wiped of data. Only 30% of the returned products can return to stock immediately.
  • According to Optoro, products of about 6 billion pounds end up in landfill yearly. These items include returned baby items, many of which are thrown away to avert liability issues. Thrown-away products may have something as simple as a sweater from the previous season.
  • A recent study by Optoro indicates that returned goods that are not liquidated are incinerated or thrown into landfills. The value of these goods Optoro estimates to be 5.8 billion pounds annually.
  • A recent survey by Martin Placek on Statista shows that the most returned purchased items in the United States in 2021 depict clothing at the top with 88%. Among the most returned products are shoes at 44% and electronics at 43%. These data are supported by Power Reviews as well.

Top Reasons Why Products Are Returned and Solutions

[a]. Unfit Size

  • Product size is an important reason why apparel and shoes are returned at 70%. Unfitting shoes and clothes are not useful to customers. The incorrect size of a pair of shoes and the unfitting clothing are useless and, therefore, must be prioritized. Merchants often make errors while packaging, sending the wrong product to customers. To maintain customers' trust, it becomes crucial to return the product for a refund or exchange the outfit with the correct one.

Solution

Have a detailed size chart

  • A retailer must have a detailed chart on the product pages to ensure customers get the right item. Also, consider extending the size chart to an online store to ensure the most precise measures. Other best practices include providing easy return steps online and providing a page where customers submit reasons why they return products.

[b]. Damaged/ Defective Products

  • Damaged products account for 65% of item returns. Customers are usually upset when an item reaches them in faulty conditions, and they will return them. Defective goods are another challenge and should be inspected and removed from the retailer's inventory.

Solution

Inspect the packaging and delivery process

  • Inspect the packaging material and improve the protection products if feedback suggests more goods be damaged. Offer customers a simple and clear way to report any damages online and ensure they enjoy the comfort of the customer service center. Further, let the customer know you are willing and will fix the problem to encourage a customer satisfaction guarantee.

[c]. Wrong Product Description Information

  • Wrong product descriptions account for 49% of all product returns. While purchasing products, the customer depends on the product description, product page images, videos, and illustrations. Studies show that although high-quality photos and a clear overview are good ideas for customers, it isn't always convincing in a fitness store.
  • Pattern, taste, color, and material are ways a product can be kept away from an image. The more product description misleads the customers, the less trust one will attract from potential customers. Any misleading information about any item would be the basis of the product being returned by the customer, harming the brand's image.

Solution

Be precise with descriptions

  • The description should be written to give the brand a spotlight without exaggeration. Remember, the customers would feel deceived if the purchased product did not meet the description. Offer several photographs and videos of the item for the customer to know what they expect upon successful buying.

4. Top Third-Party Returns Management Companies.

[a]. ShipWizard

  • Location: 3580 W. Prospect Road, Ste 102 Fort Lauderdale, FL 33309
  • ShipWizard was founded as a small customer contact service in 1974. ShipWizard is family-owned and operated, and it has grown to be one of the go-to choices for fulfillment services for brands and companies. ShipWizard offers fulfillment services options such as reverse logistics, mail services, and eCommerce fulfillment. ShipWizard works closely with its customers to streamline sales and returns processes, increase customer loyalty, and grow their business.
  • Merchandise and product returns can account for 30% of the business transaction as they are a natural part of retail business and eCommerce companies. ShipWizard works closely with retail operations in brick-and-mortar businesses to make sure reverse logistics processes are covered from end to end and comprehensive. ShipWizard specializes in returns management through their custom smart solutions.
  • ShipWizard manages the entire product returns process from the customer to the retail business and processes the item accordingly. Through the ShipWizard sorting process, retail businesses get every bit of the remaining value of every item returned. ShipWizard looks for alternative routes for returned items, including secondary market sellers and reaching out to recyclers.

[b]. ShipBob

  • Location: ShipBob HQ address 120 N Racine Ave. Suite 100 Chicago, IL 60607
  • ShipBob was founded by Divey Gulati and Dhruv Saxena in 2014, and ShipBob has become one of America’s fastest-growing tech companies. One of their key goals is to provide fulfillment services to merchants to focus on growing their business and providing an exceptional client experience.
  • A robust returns management procedure is well worth the expense since it can break or make future sales. According to ShipBob, 12% of businesses that invest in improving their product return processes have increased customer satisfaction and a 4% cost decrease.
  • Many retail businesses and brands partner with third-party logistics companies such as ShipBob to better manage their returns. The ShipBob fulfillment solution manages or lets one manage returns for themselves. Also, ShipBob’s fulfillment solution integrates with eCommerce platforms to streamline their returns process.
  • ShipBob lets businesses choose how they want each returned product handled by the ShipBobs team. Retail businesses can choose to dispose, restock, or quarantine returned items at (stock-keeping unit) SKU level. Also, retail businesses get shipping discounts when they partner with ShipBob.
  • ShipBob’s target sub-industries are apparel, which provides a comprehensive set of fulfillment services to assist you in developing a winning apparel logistics strategy, including robust data, flexible fulfillment, and analytics.

[c]. Optoro

  • Location: 1001 G Street NW, Suite 1200, Washington, DC 20001
  • Optoro is a leading technology platform company for reverse logistics and retail returns. Optoro helps retailers turn returns to profit by utilizing data science and automation to determine the most efficient path for returned items. These services improve repurchase and recovery rates, minimize inefficiencies, and reduce environmental waste, allowing merchants to focus on the customer experience.
  • Optoro's objective is to make retail more environmentally friendly by eliminating all trash from returns. According to Optoro, more than 15% of retail products are returned or never sold yearly. These cost retailers a lot of money and create tons of unnecessary waste.
  • After a thorough search extended to Optoro’s social media, such as LinkedIn, Instagram, Facebook, and Twitter, information on categories of returns operated by Optoro was unavailable. However, we found that Optoro helps top retailers such as IKEA, American Eagle, Target, Staples, and Best Buy to turn returns.

[d]. Prepshipping

  • Location: Atlanta, GA, United States 500 Northside Cir NW #S12
  • Prepshipping was established in 2019 in the USA.
  • Prepshipping provides automatic return and order management. Prepshipping performs product sorting, repackaging, merging, and packaging operations. The company also manages all logistics of retail businesses on their behalf, tracks orders instantly with their integrated systems, and ships to the customers within 24 hours.
  • After exploring all credible sources and comprehensive research on social media such as Twitter, LinkedIn, Facebook, and Instagram, information on categories operated by Prepshipping was unavailable. However, we found that Prepshipping offers fast and secure inventory opportunities by integrating with eCommerce platforms such as eBay, Amazon, Shopify, and Magento.

[e]. Happy Returns

  • Location: 12200 W Olympic Blvd, Ste 145, Los Angeles, California, 90064, United States
  • Happy Returns was founded in 2015 in Santa Monica-based
  • Happy Return software allows businesses to automate, raise loyalty, and increase exchange rates based on returns and inventory. Happy Return saves businesses 40% on return shipping since they allow shoppers to return items without packaging and have their refunds initiated immediately. Fees are removed for merchants who use PayPal as a payment method.
  • After a thorough search extended to Happy Returns’ social media, such as Facebook, Instagram, and Twitter, information regarding its target sub-industries was unavailable. However, we found that Happy Returns provides return services for online retailers by establishing Return Bars which customers use to send back items.

[f]. WSI

  • Location: 1160 Mayflower Drive Appleton, WI 54913-9656
  • WSI is a third-party logistics company providing return logistics, fulfillment, warehousing, technology, transportation, and related services. WSI delivers trustworthy, fully integrated logistics solutions to customers, allowing them to focus on running their retail businesses. WSI serves multiple sub-retail industries such as consumer products, packaging, paper, chemical, and electronics.
  • With the rise of e-commerce, customers expect retail businesses to process orders quickly and easily. They also expect retail businesses to accept and process returns conveniently. WSI leverages the strength of its third-party logistics expertise and national network of carriers to help retail businesses get returned items.

Research Strategy

The research team relied on the most credible and reputable sources, such as Reverse Logix, CNBC, Statista, and Deck Commerce, to provide information on the return management process. After a thorough search across several sources, we found most of the information readily available in the public domain. However, information regarding the percentage and value of return goods that are refurbished and resold, and resold as salvage was unavailable. For the robustness of the study, we extended our search and found the top reasons why goods are returned and possible solutions from Avada and Power Reviews.

On the best practices for managing the return process, we relied on Edgar Dunn, the Fulfillment Lab, and Customer Think, among other reliable sources, to provide the best practices and descriptions of each. We also provided reasons why each tactic is considered best and examples used.

The research team also provided a step-by-step breakdown of the processes required to handle returned products, defining the strategy and importance. For this part, we explored sources such as Optimo Route and Megastore.

Further, we provided data points surrounding the percentages and values of return products that are thrown out and resold as new. However, even after a thorough search, some top third parties that offer management, their social media, such as LinkedIn, Facebook, and Twitter, information on the goods sold as salvage and relished and resold was unavailable.

Finally, the research team provided top third-party return management companies based on expert recommendations from various sources. We described each company, headquarters location, target- sub-industries available, and the year each company was founded. On this part, we relied on valuable sources such as Ship Wizard, Ship Bob, Optoro, Prepshipping, Happy Returns, and WSI.

Dive deeper

Only the project owner can select the next research question.
Need related research? Let's launch your next project!
Sources
Sources