Creating an e-commerce returns policy is often a low priority for business owners. Many would rather avoid the subject all together. After all, returns put a dent in immediate profits and the logistics can be daunting. So they try to reduce the problem by making it as difficult as possible for customers to return products. Ironically, that tactic is guaranteed to lose you sales.

There is another far more effective approach. You could accept returns not only as the norm, but as an opportunity to build your business. While you still need to do what you can to reduce your return rate, a customer-centric returns policy has been proven to drive sales, making it easy for unhappy consumers to return items also helps you convert them into loyal, lifetime customers.

Put the customer at the centre of your e-commerce returns policy

Satisfied customers are the backbone of every successful business. They return to buy from you again and they’re excellent brand ambassadors. In our social-media driven age, this becomes even more important. When people love your brand (and when they don’t), it’s easy for them to spread the word to everyone they know.

Putting customers first when you draft your e-commerce returns policy has multiple benefits for your company. When you do, you:

1. Increase new customers numbers

Before they buy from you for the first time, most customers read your returns policy. They quickly get a sense of whether their experience with you is likely to be positive – or not. If you make it easy for them to return items, you build trust in your products and in your brand and when they feel safe, they’ll make that first purchase. Conversely, if your policy is too complicated and makes it difficult or penalises the customer, you literally drive them away and they won’t buy from you. A strong, customer-centric e-commerce returns policy translates directly into a promise of satisfaction for them and more sales for you.

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2. Earn more lifetime customers

First prize is always going to be a customer who is completely satisfied with their purchase. If you want your business to succeed, you’ll do everything you can to make that happen, first time, every time. However, if it occasionally doesn’t work out like that, all is not lost. An efficient and customer-focused returns process can transform their negative experience into a positive one, building the kind of trust and loyalty that converts them into a lifetime customer.

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3. Increase average order value (AOV)

When customers know they can return items, they feel safe to buy more from you at a time, increasing your average order value. They may buy a shirt in two different colours or sizes to see what suits or fits them best. Then, rather than following through on their intention to return one, they often end up keeping both or giving one away as a gift.

4. Increase sales

Sometimes people decide to order a product to try it out, or they’re simply not completely happy with it when it arrives. If you reduce the urgency to return it and give them enough time to ‘live with it’, they often decide to keep it after all. According to researchers at the University of Texas, Dallas, longer timeframes for returns reduce the number of items coming back.

5. Grow your brand by word of mouth

When customers have had a positive experience with your returns process, they don’t hesitate to tell others about it, either in person or online via reviews or social media. This free marketing attracts a continual flow of new customers, who are eager to experience your products and who already have some trust in your brand because of what they’ve heard from others. This organically builds your business over time with no extra effort on your part.

It can take time and thought to create a returns and refund policy that works for your customers and for you. The customer satisfaction and extra sales it generates are well worth it though, and the reputation you build for your company will put you ahead of your competitors.

Let’s look at what we need to consider when creating an e-commerce returns policy that will delight your customers and build your business.

Elements of a customer-centric e-commerce returns policy

Before you start writing your e-commerce returns policy, there are certain key aspects that you need to think through, clearly define and test from an operational and financial perspective. These will form the basis of the policy. If you’ve done your homework, you should then be able to write them up as simple, practical steps that your customers can easily follow.

1. Reasons – why might items be returned?

The reasons for returns are important because:

• The rules and process for returning might need to vary depending on the reason; and
• When you notice there’s a recurring reason, you can work on reducing the number of returns that are happening due to that issue.

Common reasons for returns you need to consider in terms of your returns policy include:

• Item arrived damaged
• Wrong product delivered
• Product is defective
• Product is not what the customer expected
• Delivery arrived too late
• Customer changed their mind

If there’s a chance the issue might be your fault or the fault of one of your service providers (as in the first five reasons above), you should ideally offer a free return and at least a refund or a free replacement. As extra compensation, you could even include a note of apology and a voucher (or discount) for their next purchase.

An extremely customer-driven company might go a step further and offer a refund or replacement, no questions asked, even just if the customer has changed their mind (as in the last reason). This can generate a lot of goodwill and boost your long-term sales but it’s also expensive, so think it through carefully before going that route.

2. Limitations – what conditions do you need to put in place?

These might include:

• Within what timeframes should the customer return an item, for example, 14, 30 or 90 days? To simplify this, use the return shipping date to determine this, rather than when you actually receive the product back at your warehouse.
• As per the University of Texas-Dallas study mentioned above, longer timeframes often tend to reduce returns, but it’s a good idea to draw the line somewhere or you may end up having to take returns years later. Your timeframe may also depend on the products you sell, for example, consumables like food may have a shorter return window.
• What needs to be included with the return, for example, the original packaging or original invoice?
• Are there conditions under which you won’t accept a return? For example, will you take a product back if it was bought on sale or has been used, or if it’s a certain type of item, like underwear?

An extremely lenient returns policy will put very few limitations in place and give customers the maximum amount of time possible. You need to make sure this works for your business though.

An example of a very lenient policy:

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3. Refund or exchange – will you offer customers what they expect?

To make this decision:

• Think about your customer segments – what will they expect? For example, if your customers usually shop at stores like Woolworths, they will be used to refunds with no questions asked.
• Take into account the products that you sell. If it’s high value, your customers will have high expectations, and they may not be happy with store credit if the product they bought doesn’t work (store credit is simply a later exchange).
• Consider the logistics and financial implications of both refunds and exchanges for your business. How will the customer return the product? What will it cost you if you’re paying for return shipping? Can you re-sell the product if it’s returned?

The more lenient you can make your policy, the happier customers will be.

4. Returns process – what steps should be followed by customers and by your business for returns?

The Texas-Dallas study also showed that making it easier to return items results in slightly more purchases up front. So:

• If you can provide multi-channel returns, do so. For example, if they bought online can they return to your brick-and-mortar store, or vice versa? Bear in mind that you’ll need to include that in your processes.
• Tell the customer exactly what they need to do to return a product, step by step. Do they need to contact your customer service team by phone or email, or can they use an app or fill in a form on your e-commerce site? The less effort on their part, the better.
• What process should they follow for special situations, for example, what if they are returning a gift, part of a bundle or a product that was bought with a voucher?
• If you have international customers, make sure you cater for them in the process too. Also consider that you will be paying more for international shipping, and you need to make sure you can get a refund to them in another country.

These two examples show the customer how to return their items in a clear and easy way:

The customer is only one part of the equation:

• You need to decide where that returned product should be shipped to – directly back to the supplier or to your warehouse?
• What happens to it then? Does it get discarded, returned to the warehouse shelf or returned to the supplier by you?
• How is that recorded in your inventory management system?
• To answer these questions, you’ll need to consider what you sell, the reason for the return and how your inventory is managed and stored.
• Consider an integrated online returns management portal, like AfterShip’s Return Centre, which automates the process both for customers and for your team. Or ask us to design an app for you.

5. Costs – what expenses are involved in returns and who pays them?

These will include shipping fees and any other expenses for dealing with the returned products and updating the inventory. Consider:

• Who pays for return shipping? And for shipping the replacement to the customer? Does this vary according to the reason for the return or replacement? For example, what if the customer bought the wrong size, or multiple sizes and is now returning some, or they simply changed their mind about the product?
• Is it even worth shipping a damaged product back to your warehouse? This may depend on the value of the product.
• If there is a return or re-stocking fee, how does the customer pay for that? Does it get deducted from their refund or do they need to pay it in? What is the paper trail for that fee, both for the customer and on your system?

The less chance there is that the customer will have to pay for returns, the more likely they are to buy from you. To find what works for your business though, you’ll need to balance the extra sales with the cost of the returns process to you.

6. Refund process – what can the customer expect in terms of their refund?

Customers feel safer when they know exactly what will happen once they’ve returned something. Tell them:

• How long will it take for the return to be processed?
• When can they expect their money back?
• Exactly how much will they get? Is it a full refund, or has a returns fee been deducted?
• How will they get that money, for example, back in their credit card or on their store card, or in the form of a voucher?

Obviously the faster and more efficient your returns process is, the more satisfied your customer will be. Completing the process within a week (or two at most) is good practice.

For example, Amazon tells you exactly where and when you will get your refund, depending on how you paid:

7. Extra information – what else do you need to include in your policy?

There might be specific information that pertains to your business, but at a minimum:

• Give the customer as many ways as possible to contact you, including phone numbers, email addresses and social media channels.
• Create a list of frequently asked questions (FAQ) for anything that hasn’t already been addressed – or in case customers prefer to go straight to your FAQs, rather than reading through the whole returns policy. FAQs could be a distinct part of your policy, part of your general FAQ page or appear completely separately on your website.

Remember that your customer service team also needs to understand every detail of your policy and how to apply it consistently. You could even create a separate manual to help them guide customers through the process. Empower them as much as possible to make decisions that are good both for your business and for customers, for example, to know under what circumstances they can make an exception to the rules.

Here is an interesting podcast about returns by Cape Talk

Best practice to follow as you create your e-commerce returns policy

Once you have a good idea of the elements you want to include and you’ve tested your return and refund processes, it’s almost time to start writing your policy. Before you do:

1. Make sure you’ve crunched the numbers

As customer-centric as it might be, your returns policy has to work for you too or you’ll soon be out of business:

• Double check the cost to you of every aspect of the process, from shipping the return and the replacement product, to extra packaging and any discount vouchers you might offer if the issue was on your side, through to staff costs in managing the process.
• Identify the point at which the extra sales you’ll get from a very lenient policy are worth the cost to you of that leniency.

Now you’re finally ready to start writing, bear these things in mind:

2. Make it simple, conversational and user-friendly

Cover all the information you need to:

• Talk them through the process step by step.
• Use clear, simple language and short sentences.
• Come across in a professional but warm and friendly tone – be human.
• Avoid blaming words or commands like “You must”.
• Make it SEO-friendly by using relevant keywords.
• Consider including customer reviews of the process to further reassure potential buyers.

The tone of this example from Function of Beauty is exactly right:

3. Get creative

Nobody wants to wade through long, boring blocks of text:

• Make your policy interesting to read with creative design elements – even colour and different fonts help.
• Wherever you can, use graphics to explain your easy returns process. They’re much easier to read and understand than long sentences.

For example:

Once you’ve completed the copy and design of your policy, it’s time to load it on your e-commerce site. Very importantly:

4. Make your policy very easy to find

If a customer can’t quickly see your policy wherever they are, they may not buy from you:

• Display links to the policy, plus the main points (especially if you offer free returns), in several prominent places.
• Use icons, banners and carousels on your home and product pages, in the menu and page footers, throughout checkout and in their confirmation email.

And finally:

5. Keep the customer informed

Customers worry about their return getting lost. So once a return has been requested:

• Thank the customer for the return, letting them know that it is in process.
• Explain when they can expect their refund or replacement.
• Tell them when the process is completed and exactly what has been done.

Need a few examples?

As always, we hope that you can use this information in your business. To help you further, here are a few returns policies from well known South African companies:

And if you are interested, here are 2 sample return policies that you can adjust for your business. Please note that we are not lawyers and that we do suggest that your lawyer amend these templates for your specific business and according to the South African laws mentioned above:

The bottom line…

Returns are a fact of life these days. It’s up to you whether you consider them to be a thorn in your side, or an opportunity to build goodwill, boost your sales and protect your company. Either way, aim to be as customer-centric as possible and make sure your policies and procedures are crystal clear both to customers and to your team. Then there’s no reason your business can’t thrive in spite of (or even because of) your rate of return.