How to control the cost of your returns
Outsourcing your Shopify fulfillment to a company that can reliably deliver your customers orders is key to building a successful online business
And offering an easy to use returns process goes to the heart of building trust and confidence with your customers
But the cost of returns can run away if you're not careful. To avoid leaking profit, you need to make sure that your business model has factored in all the costs of returns as part of your overall service.
Otherwise, you'll see that offering returns to your customers is more an expense to your business rather than an asset.
Returns a part of running an online retaining business because the first time customers actually see your product is after they bought it. So you must appreciate the need for customers to change their mind and not think of this as an annoying add-on cost.
Creating and enforcing an easy to use robust returns policy is essential if you want your business to be successful.
Customers return products for all sorts of reasons.
Let’s first understand the many reasons why customers return their products.
If you sell clothes online, many shoppers will deliberately buy multiple sizes and variations with the sole intention of keeping what they like and retaining what they don't.
Damaged products - items delivered to your customer damaged prior to or during the shipping process.
Orders not delivered - Sometimes orders never reached the customer due to poor shipping company or an incomplete address.
Faulty products - items arrive on time but do not work properly.
Exchanges - customers like the product but wants to swap it for a more suitable item due to size, power, colour, etc
Not as described - Customers were expecting something different.
Change their mind - The customer simply changed their mind about the product
Whatever the reason you need to factor in the cost of some of your orders being returned into your business because returns are part of selling online.
If you outsource the order fulfilment, then obviously the cost of returns caused by poor delivery or products damaged during shipping or obviously down to your fulfilment company, but all the other causes of costs that you will need to bear.
So how can your business afford the cost of returns?
Returns are part of selling online, so you need to make sure you account for a percentage of orders being returned and calculate all the associated costs. But what percentage should that be?
Well, the first port of call is to look at your order history and see the level of returns that you've had to get a feel for the percentage.
But if this is a new venture and you don't have any order history, then just start with an intelligent guess.
Bear in mind that fashion is going to be higher other than more everyday products like Shelves or Housewares.
And then look at the cost of returning each one of those. Remember to include shipping costs both ways, plus the processing costs (i.e. receiving the return and placing back on the shelf), payment fees and the cost of the product if it has gone missing or has been damaged.
Be realistic: don’t kid yourself about the costs to be incurred. In the same way you budget for utility costs, salaries, shipping fees from suppliers etc, you must also include a realistic percentage of orders being returned. Because these are real costs to your business although you don’t know yet when they will be incurred.
Are there ways of reducing the cost of Returns?
Well one way would be not to offer free returns! But unless you sell personalised handmade goods or an expensive made-to-order item you are unlikely to get away with this approach. Your customers will simply go to one of your competitors who do offer free returns.
The most effective way to reduce the cost of Returns to your business is to be as open and honest with your customers BEFORE they purchase.
For example, provide lots of information so they know exactly what to expect when their order arrives.
Use lots of images or even videos illustrating your product.
If relevant, show your product in use e.g. a trimmer used for cutting a hedge
Provide real customer reviews and compare your products to your competitors so your differences are clear and understood.
How do you make a returns policy an asset rather than a cost to your business?
So we’re clear, offering a returns process is not an option for your business. It is a given.
Therefore, a Returns policy is part of your customer service. So make it easy to use and simple to understand.
You can offer free returns but within a specific period. Typically a 30 day period is acceptable.
Ensure all your customer service staff are trained on how to handle a Returns request and never argue with a customer. A customer should never feel guilty when asking for their money back.
Make sure that your returns policy is prominent typically at the bottom of your homepage so they can see it. Also provide a link within the checkout process.
Explain in your policy when a customer can expect their Return or refund to be processed.
Make it really easy for your customers to process a Return. For example, allow them to print despatch labels from your website an if possible/affordable arrange collection of the parcel.
In summary
Returns are an essential and valuable part of selling online.
The costs for Returns must be incorporated into your business budget in the same way that costs of warehousing staff, the product itself, shipping fees, insurance etc
Having a clear Returns policy will lower the risk for your customers and it provides a level of trust and confidence that your customers will want before they buy from your business.
Make sure you sell a good quality product and if, for whatever reason, your customer is not happy with it, they can return it for either a replacement or get their money back with as minimal fuss as possible.
In this age of social media you can never afford to fall out with an customer, because negative comments are very tricky to remove.
Keep your customers happy and make sure that if a customer makes a purchase and decides they no longer want it, you make it as easy and as friendly as possible for them to return the product.
And do all this with a big smile!