The best way for online sellers to deal with returns is to reduce their numbers and to have a system in place for those that are unavoidable. That advice comes from logistics expert Brendan Heegan, who said merchants and retailers need to have a well-organized game plan for addressing all areas of the returns process starting with strategies to avoid returns in the first place.
Heegan is CEO of Boxzooka, a fulfillment and logistics service for online merchants and brands. Managing the cost of returns is a major challenge for merchants, and they should track those expenses, he said.
One way to avoid returns is to provide detailed product information. “For example, making product sizing information obvious and easy to understand helps consumers order the right fit” – for example, in referencing a product photo, the merchant might disclose, “The model is 5’7″ and wearing a size 6.”
Heegan said most online retailers have a returns page on their website that lists all the rules about returning products – he provided examples of some common restrictions:
- Returns not allowed under a certain value ($50).
- Returns not allowed after (30 days).
- RMA processes required (fill out a Return Materials Authorization)
- Utilize our third party partner for returns (Happy Returns, Returnly…)
At some level, Heegan said, making the returns process more cumbersome is a methodology for limiting returns. “Obviously, this is not a great customer experience, but it can be effective just the same.”
For example, he said, not including a return label – or making the consumer have to process an RMA to print a return label – can be deterrents. However, he said, encouraging exchanges can reduce straight returns while resulting in a better effect on lifetime value.
Should merchants charge restocking fees? That depends on several factors, Heegan said. “Restocking fees help offset the cost of returns, and sometimes discourage consumers from sending the merchandise back to the retailer. Most 3PLs have restocking charges to process a return and get the merchandise available to be re-sold. Typically, the higher the average price point, the less often there is a restocking charge.”
When returns are unavoidable, how do merchants communicate to their customers the best way to return goods to ensure proper packaging and appropriate shipping?
“There are numerous techniques for making the returns process obvious for clients. Utilizing the original shipping envelope or carton and including return labels are helpful for returns processing operations,” he said. “Having every item well identified with a bar code, SKU number and protective packaging are good practices.”
Heegan also said merchants’ returns strategies must vary by type of product. For example, skin care products and underwear may fall into the category of “do not return” due to hygiene issues, he said. Retailers may implement a returns program for those types of products that include a store credit or exchange without incurring the costs for returns shipping.
As for large retailers, Heegan said today’s omnichannel returns options may have restrictions by product category. “For instance, the “Return to Store” option may be the only method for electronics and oversize items.”
With clients across the spectrum of direct-to-consumer brands, marketplace sellers, and major retailers, Boxzooka has integrated returns-processing across those channels for its specific client needs, including integrations with third-party returns processors.
So when does a seller know when they should fulfill orders themselves, when they should consider Amazon FBA, and when they should consider an independent fulfillment service?
The answers are unique to each seller, Heegan said. Some considerations relate to “following the money,” so to speak. “Sellers know where their expenses and margins come from and balancing the sales channels requires that financial analysis. In most startup businesses that fulfill themselves there is a threshold where outsourcing to a 3PL becomes cost effective.
“Similarly with Amazon, an online retailer can get more reach (eyeballs) on that platform rather than going direct on their own website – and there is a cost to utilizing FBA.”
While merchants think about logistics services primarily for fulfillment (getting packages out the door to customers), Heegan said making it returns seamless is a specialty of Boxzooka.
While there were indications of some slowing of consumer spending during the 2022 holidays, ecommerce activity was surprisingly high given inflation, Heegan said. “This would extrapolate to having a similar volume of returns as the previous years. Much of this data is coming to light right now.”