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There’s a right way of managing returns that ensures profitability

Versha Kamwal
November 20, 2020
7
mins read

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The ecommerce landscape is all about keeping your customers happy with innovative products, vigorous marketing, free shipping, real-time order tracking, fast delivery, and brilliant customer service. But what if the customer isn't happy and intends to return the product, after so many efforts you've put in.

Well, returns are a necessary evil in ecommerce— aggressively attacking profits, slashing conversion rates, bringing down customer loyalty, and ultimately threatening your business as a whole.

The ecommerce market unfolds limitless possibilities for retail businesses, but it comes with its own challenges. 95% of online shoppers say a positive return experience affects brand loyalty. It suggests that the customers want free and easy returns, but for a business, returns are costly.

How do returns affect profitability?

Returns can affect your business' profitability either negatively or positively—it's all about how you manage them.

When an item is returned, it not only means that you have to lose out on the revenue gained from that sale, but there are additional costs attached to it:

  • Cost of return shipping
  • Cost of conducting quality checks
  • Cost of refurbishment
  • Cost of repackaging and restocking

Factually, customers are twice as likely to make a purchase when free returns are offered.

For instance, Zappos claims that its most profitable customers are also the ones with the highest returns rate. An easy 365-day returns policy has boosted its sales by enhancing customer experience and their confidence in the brand.

According to research, for the leading brands, the return cost as a percentage of revenue is 2%. Whereas, for entry-level brands and SMBs (small and medium businesses) it is 48%.

What are the reasons which cause returns?

If you want to manage your ecommerce returns, the first thing you need to do is understand the reasons why customers make returns.

  • Damaged product: When delivered products are damaged, before or during the shipping process
  • Inaccurate description: When the delivered product doesn’t match the displayed description, either in style or size
  • Malfunctioning product: When the delivered product doesn’t work properly
  • Delayed delivery: When the product arrives too late that the customer doesn’t need it anymore
  • Change of mind: When the customers simply change their minds about the delivered products
most common reasons for returns
SalesCycle conducted a survey worldwide and compiled the most common reasons for returns

Tips to manage returns

Returns can be controlled by analysing and addressing the root causes. Here are some tips to reduce returns:

Tip #1: Showcase correct product information

  • Present adequate high-quality images
    If you display your products with pixelated or blurry images, customers may never know what exactly they are buying. There are more chances that your product doesn’t meet the customer's expectations upon delivery. To prevent this, you can include high-resolution images of your products from all profiles.

high-definition product images
Mango, a clothing brand displays its catalog via series of high-definition images
  • Curate informative descriptions
    Due to unavailability of correct or sufficient product description, customers may have many product-related queries. To avoid any confusion, you should have content-rich product descriptions, including its features, materials used, weight, size, and more.
Pepperfry boasts comprehensive and informative product descriptions
  • Give easy-to-read and accurate size charts
    Particularly for clothing or footwear brands, the returns rates are high due to incorrect size ordered by the customers. Moreover, there is a slight size variation from brand to brand. By providing an easy-to-read size chart, you can control returns which arise because of this sole reason.

easy-to-understand size chart for shoes
Puma's easy-to-understand size chart for shoes

Tip #2: Provide order tracking

  • Provide an estimated date of delivery
    If there are delays in product delivery, there are chances your customers might not need it. For example, a customer orders a dress for a wedding and receives it after the event. This defeats the purpose of the purchase. By providing the estimated date of delivery, you can set clear expectations with your customers.

estimated date of delivery before a customer makes a purchase
Amazon provides an estimated date of delivery before a customer makes a purchase

  • Provide real-time order tracking
    It allows customers to trust that their orders will arrive on time and it plays a vital role in enhancing customer experience by giving them the full visibility of their orders at every stage.

order tracking
Myntra's order tracking for keeping the customers well-informed

  • Notify in case of delays
    In case of a delay, notifications must be triggered to ensure prompt communication via text messages and emails to the customers.

Delay in delivery mail
Ferns N Petals proactively notifies customers about the delay in delivery

Tip #3: Ensure accurate order processing

  • Increase order picking accuracy
    One of the key elements involved to ensure accurate order processing is your order picking accuracy. To increase your picking accuracy:
  1. Make sure your warehouse layout is optimised for pickers
  2. Use smart automation such as conveyor belts, intelligent robots and scanners
  3. Have incentives or rewards for pickers with high accuracy

  • Use appropriate packaging
    Inaccurate order processing also applies to inappropriate materials used in the packaging of the product. For example, for shipping a glass sculpture, you need to ensure secure dunnage, i.e. right packaging of bubble wrap so that your customer doesn’t receive a damaged product.

Secure and appropriate packaging
  • Use correct shipping labels
    A small manual error, such as using an incorrect shipping label leads to inaccurate order processing. Make sure you use the correct shipping label so that the shipping provider can deliver the package accurately to your customers.

Tip #4: Frame an ideal returns policy

Keeping your customer happy while also keeping your long term goals aligned is challenging. Based on your margins, you can decide whether offering free returns is feasible for you. You can frame a returns policy that makes returns easy for both you and your customers.

  • Set a time frame for returns, for instance, returns valid for 30 days after purchase
  • Define the expected condition of returned products, for instance, if it has been used, broken or devalued
  • List return requirements, for instance returned product should be in original packaging
  • Specify the method of reimbursement. For instance, refunds can be made directly into the customer account or you can offer in-store credits
  • Keep the language of returns policy easy-to-understand and concise
  • Disclose any additional fees associated with returns
  • Make sure your returns policy is easy to find on your website
easy returns policy
Allbirds, a shoe brand showcasind its free and easy returns policy
easy returns policy
Outdoor voices, a sports apparel brand's easy returns and exchange policy

Tip #5: Optimise reverse logistics

The process of moving a product from its customer destination to the distribution centre in order to recapture its value by re-selling is called reverse logistics. You can optimise the entire process in five steps:

  • Formulate a quick and easy process for initiating a return
    Make sure that the procedure for making a return is fast and simple. You can also offer a printable return label to your customers so that they can use any packaging they have to ship the product back
  • Schedule return shipping of the product
    You can save on return shipping by aligning it with an upcoming scheduled delivery in the same or nearby location
  • Conduct quality checks
    When you receive the returned product, conduct quality checks to detect defects and damage of any kind
  • Refurbish the returned product
    If the returned is found to be defected or damaged in the quality check, repair and refurbish it
  • Restock the returned product
    After refurbishing the returned product, quickly restock the product for re-selling

Reverse logistics

How can Eshopbox help you manage returns to maintain profitability?

Eshopbox helps you manage returns effectively by ensuring revenue is recaptured in the following ways:

  • Automate your returns tracking
    Eshopbox’s powerful return inventory tracking helps you stay notified, and auto-sync your returns from multiple sales channels to the Eshopbox system. The streamlined process improves customer experience with easy and hassle-free return labels.

Eshopbox Automated returns tracking

  • Receive and revive returns
    Eshopbox’s customisable workflows enable you to manage reverse logistics efficiently. From identifying and inspecting the returned products for damages or pilferage to repackaging, relabeling and refurbishing for making products re-sellable. Eshopbox will ensure quick restocking of return items into your available inventory.
Eshopbox customisable returns workflows

  • Cover your losses
    Eshopbox’s auto-generated reports help you monitor and file claims, arrest leakages and reduce fallouts. You can ensure that every return is correctly accounted through automated reconciliation of returns with refunds. If the returned product is damaged, you can generate a Claim Filing Report (CFR). Moreover, through insightful reports, you can identify products with high return rates to formulate corrective measures.

Bottom line

A strong returns policy works in multiple directions. If you can handle the process quickly and efficiently, it might help you to reach your goals rapidly as well. External help will accelerate the process and amplify the results. It will not only help you to minimise your returns and the losses which come with returns, but also boost sales and build everlasting confidence of your customers in your brand.

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