Online product returns are an unavoidable part of selling online.
Brick-and-mortar stores aren't surviving the same in the e-commerce market, which means returning items you purchased online is not the same as those you purchased in-store.
The cost that e-tailers absorb from online product returns is on the rise, with projections that e-commerce product returns will cost retailers $550 billion annually by 2020.
Even though returns are part of selling online, knowing how to write an e-commerce return policy in a certain manner can help you reduce unnecessary returns, improve consumer confidence, boost long-term loyalty and retention, and can even help generate more second-chance sales.
A return policy is a statement from a retail merchant stating their rules that allow customers to return or exchange unwanted or defective merchandise.
Here’s what you need to know.
Most shoppers make a purchase online with a strong intent to own the product they’re buying. But if they end up having to send it back, a vast majority of them want returns to be fast, easy, and free.
Sixty-two percent of shoppers polled in a recent survey stated that they would “buy again” from a brand that offers free return shipping with no restocking fees. What’s more, the same study also found that 90% of shoppers “highly valued” free returns.
Undeniably, consumers want buying and returning online to be just as easy as shopping at a brick and mortar store. A well-written return policy includes these three tenants:
Part of learning how to write a return policy also means understanding the most recent e-commerce return statistics. Knowing how these numbers factor in can help you compose a more robust policy that helps improve the customer journey and retention.
Here are some useful e-commerce returns statistics you can use to improve your policy:
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Now that you have a better understanding of e-commerce product returns, the associated statistics, and the consumer mindset, it’s time to take the next step to get your return policy in order. Foremost, you’ll need to decide on what you can offer in your return policy, how such an offering would impact your bottom line, and whether it’s viable to your baseline operating cost.
For example, smaller mom-and-pop e-commerce businesses usually can’t afford to offer completely free returns. In these instances, you may have to charge a small fee for return shipping or restocking. But even if you do have to charge a fee, which can deter repeat buying and retention, by making the process smooth and easy, you still stand to gain repeat business by customers who are in love with your brand, products, selection, and pricing.
Since your operational costs, profit, and loss statements are signature to you, and are unlike any other business, it’s imperative that you deduce what your business can afford to offer. It’s important to understand that returns shouldn’t be considered an immediate loss, even if you eat it on return shipping cost, and even if you repackage that item for resale. This is because when thinking about product returns, you also want to consider the lifetime value of each customer that’s making the return.
Part of writing an e-commerce return policy also involves understanding how abusive returners compare to average customers. If you’re wondering how common abusive returners are — the ones that could potentially cost your business an arm and a leg — a recent study by Sloan Review can help you better decide.
The study collected seven years' worth of data from more than 100 participating retailers, assessing the habits of more than 1 million shoppers over 75 million transactions and $2.9 billion sales resulting in $466 million in returns. An accuracy model of 99.6% found that just 0.40% of returners are abusive or fraudulent, with legitimate returners having an average relationship with e-tailers of 4.4 years, and an average return rate of just 23%.
With these facts about e-commerce returns in mind, you can craft a more agile and consumer-centric return policy that helps you keep these customers longer. Given that your average loyal customer stays with you for 4.4 years and returns less than 25% of the time, it may make more sense to offer hassle-free returns and to ditch the fees outright just to improve consumer confidence across the board, and also to encourage prospective customers to become shoppers at your store in the long-term.
Between 10% and 33% of products purchased online are returned, yet 90% to 94% of consumers make online purchases with no intent to return.
A national poll conducted by NPR further determines that 91% of American shoppers “rarely ever” return a purchase they make online. Meanwhile, 94% said they “rarely ever” make a purchase intending to later return it.
This means that most purchases coming through any given e-commerce website won’t result in a return that often. What’s more, it means that when you’re assessing risk versus reward while crafting your return policy, you can take solace in knowing that some studies find lower return rates than others do.
When considering how easy returns increase sales, a Science Daily report sheds some light. In a short-term study that followed several leading online retailers over a six month period covering millions of transactions, it was found that sales in groups that charged for returns generated just $1.22 million as compared to sales in the control group that made returns fast, easy and free, which generated $1.8 million in sales. The discrepancy between these control groups clearly defines the profitability of offering hassle-free returns with no return shipping or restocking fees.
Now that we’ve mentally ingested the most pertinent facts about e-commerce returns, here are some tips you can use to write a winning return policy that encourages customer retention and loyalty.
Look at some of the leading return policies online: Online stores like Zappos, L.L. Bean, Kohl’s, and Target offer some of the most liberal and best-worded return policy available. They’re a great starting point that you can use to write your return policy.
Offer customers assurance that returns are easy: More than 60% of customers read your return policy before making a purchase. Giving them the confidence that returns are easy and streamlined is critical.
Make sure their satisfaction is your number one goal: Customer satisfaction begins before the purchase, and part of it involves the wording of your return policy.
Make it clear, concise, easy to read, and easy to understand: When it comes to return policies, the shorter the better. As you can see from the images above, these leading retailers rely on a winning return policy that’s delivered in as few words as possible. Follow their lead by making yours short, sweet, and to the point as well.
Consider automating your return policy: Macy’s online return policy consists of two short sentences: “Free Returns: If you're not completely happy with your macys.com purchase, ship it back to us for free! It’s easy!” The return policy then leads the consumer to a fully automated online product return system that allows them to simply enter a few details about their purchase to generate a prepaid shipping label and send the product back.
Returns may be a pain point that never goes away, but that doesn’t mean they have to be hard for you or your customers. As the information above reflects, writing a winning return policy isn’t hard and makes sense for your bottom line in the long run. Naturally, it’s up to you. But if you choose to make returns hard, don’t be surprised when customers don’t come back for future purchases.
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