Everything you Need to Know About Returns Management for D2C Brands
1) Overview of eCommerce returns management
Product returns or exchanges are among the most common and pervasive problems that occur in any eCommerce business. More than 30% of all sold products come back to their original sellers as returns.
If you are new to the retailing business, it is essential for you to understand that when you are in the process of scaling your direct-to-customer (D2C) brand, eCommerce returns and exchange will become an increasingly bothersome issue, which is why, you will need to have a proper returns management workflow in place.
Processing and managing eCommerce returns is a much more complicated process than shelving items into their positions before the customers make a purchase. However, if you have a good eCommerce returns management policy, then there's a huge possibility that those returns won’t make a significant impact on your overall business growth.
This is why to elevate your business and make it grow at an extremely large scale, you need to have a good understanding of returns management for D2C brands. In this article, we’ll take you through every little detail you need about returns management for D2C companies.
2) What is eCommerce returns management?
Returns management is a process used in both retail and e-commerce industries that involves managing returned items and collecting, evaluating, organizing, and restocking them. Once the returned items are collected, depending upon their condition, the seller may want to recycle them as whole or repair/refurbish their useful parts. They may even resell or destroy such items completely.
Further in the returns process, sellers also have to decide what action needs to be taken with respect to the customer who has returned the product. For example, should they offer such customers store credit, a complete refund, or a chance to get the item repaired.
As you may have already gathered, the process of quality control plays a crucial role when it comes to dealing with eCommerce returns. It is necessary to identify defects in the products which may have led to the customers returning them, and work on the adjustments (raw materials, production process, suppliers) on an immediate basis.
2.1) Food for thought
Did you know that in this day and age where eCommerce business owners make all efforts possible to boost customer loyalty, more than 70% buyers still don’t have enough flexibility when it comes to eCommerce returns? Only about 4% of the total retailers stick to their business models of doing “everything” they can to make the buyer’s shopping journey hassle-free.
3) Key terminology used in eCommerce Returns Management
To completely understand how returns management for D2C brands works, you should first know some of these common terms.
3.1) Returns policy
This is a set of rules provided by the retailer regarding product returns and exchange. This policy consists of various components about what the customer can expect if they return any products, like store credit, refund, exchange, warranty, etc.
3.2) Return center
This is a basic portal where customers can shop for a new product in exchange for the product they have returned, but only as per the policies pre-decided by the retailer.
3.3) Returns data
This data is generated between the buyers and the sellers during the initiation of the returns process. It contains all sorts of information that is required while returning or exchanging goods.
3.4) Return optimization
This indicates the amount of continuous improvement that is required when enhancing the return efficiency and still growing profits.
3.5) Reverse logistics
This covers the entire process of handling a returned item from the buyer to its seller (while maintaining its recovery value).
3.6) Product disposition
This covers fulfillment with a required set of conditions that gauges the condition of the returned goods so that they can further be graded. For instance, “new”, “damaged” or “dirty” goods.
4) What does the eCommerce returns management process look like?
The exact workflow of returns management for an item depends on whether it is bought online or in-store. Let us cover the steps that usually occur during the returns process.
4.1) Customer’s dissatisfaction
The customer receives the delivery of a product. He/she seems to be dissatisfied with it (because of miscellaneous reasons) and requests a refund or return. At this moment, he/she can initiate the exchange, refund or return through the proper channels.
4.2) Eligibility for return/exchange
Once the customer requests for a return or refund, the company can deny or accept the request as per their eCommerce returns policy. For this, the company asks its customer service department to look at its return policy and determine whether the product qualifies for a refund or an exchange or neither of those.
4.3) Pick up of the product from the delivery address
When the customer service staff approves the request from the end, the companies that handle the deliveries and pickups become active and start assigning respective agents for picking up the product from the address to which it was initially delivered.
4.4) Delivery of the product back to the origin
The delivery agent picks up the product from the customer and returns it to a warehouse or sorting facility. Here, the product is analyzed thoroughly for defects.
Once the returned orders are segregated properly, a returns management auditor goes through the returned items and tries to figure out why they were returned.
4.5) Restock and put back into inventory
If a returned product is in good condition, it is restocked, added to the inventory, and again made available for sales to potential customers.
5) Why is eCommerce Returns Management an important process?
Returns management for D2C brands is as important as the order fulfillment lifecycle; in fact, it is a slightly more critical process. Due to the constant rise in cross-channel buying and selling, direct home and direct store shipments, the effect of globalization and complex global sourcing, the occurrence of repetitive delivery errors has become more prevalent.
A well-crafted workflow for returns management for D2C brands has a direct and evident impact on the company’s customer service level as well as its overall cost of work.
Nowadays customers have become more demanding of effective return policies when making online purchases, which directly impacts a brand’s margins. Enhancing returns management processes can thus have quite a positive effect on sales, customer retention, engagement with potential customers, and revenues.
A survey taken out by Endicia, a leader in shipping technology, revealed some interesting insights about regular U.S. customers:
- More than 36% of customers look for a convenient delivery process when shopping online.
- About 12% of the total customers demand swift returns and credits.
- 72% of consumers prefer shopping and spending more on eCommerce websites that offer easy and simple returns.
The same survey suggested that offering all the above-mentioned policies to customers can result in:
- Customer retention and increase in future purchases by 58% to 357%.
- Customer expenditure increases by as much as twice to over $1,000 on an eCommerce platform.
But to achieve these magnanimous results, it is essential that the retailers are ready to offer quick and free eCommerce returns along with an attractive customer-facing policy. Only then a company or a brand will be able to improve its revenues and grow at lightspeed.
6) Simple ways to improve returns
eCommerce stores have the tendency to neglect the physical processing cost of eCommerce returns, return shipping, storing the returned goods, and the loss of the value that needs to be handled when a product cannot be resold. Therefore, prioritizing a significant and effective returns management workflow can make a huge effect on the company's bottom line.
In order to learn an effective method to improve your returns policy, here are some pointers that might be extremely useful to you.
6.1) Understanding uncontrollable and controllable returns
At this point, one thing you might have understood is that product returns can take a toll on your business and even cost you some of your loyal customers. This makes it essential for you to do anything and everything to minimize its impact. That being said, there are two basic kinds of returns that a seller needs to deal with - uncontrollable and controllable.
Controllable eCommerce returns are the kind of returns that can be minimized or completely eliminated with time by implementing better logistics processes, like checks for poor packaging, slow deliveries, improper product descriptions, and general negligence.
In contrast, uncontrollable returns are the type in which the seller has no fault. For instance, a customer buys a product but changes his/her mind after ordering.
6.2) Understanding the cost of returns
Establishing customer satisfaction along with maintaining good returns management for D2C brands is extremely essential. And believe it or not, a customer truly loves when a business offers quick and free eCommerce returns.
Therefore, in every case, it is important to evaluate the extent to which returns are impacting your business goals. This will help you cover the cost of order tracking and reverse shipping. You should also learn how many hours of your business are spent on managing returns, irrespective of whether they are spent on taking calls or restocking items
6.3) Having a clear return policy
Having transparent return policies is a vital and integral part of any business’ efforts to ensure a stellar customer experience. Just like a rock-solid shipping policy, your eCommerce return policies should also be clear to the buyer.
You must always post your return policies on your official website and partner websites, and always attach a hardcopy whenever delivering a product. This practice puts you and the buyer on the same page and eliminates any kind of potential misunderstandings.
6.4) Always analyze your eCommerce returns
Every time a customer asks for a return, you get a chance to analyze your product and your customers' behavior. Try to understand, “what went wrong with the product”, and “why was it returned”? Make sure to provide a review/feedback section where the customers can leave their valuable comments, and improve your offerings accordingly.
eCommerce returns management brings an ever-lasting, ever-evolving chain of challenges for eCommerce retailers. But one thing that they always have to remember is that within these hidden challenges are opportunities that promise growth and higher revenues.
You don't need to invest in expensive and difficult-to-understand software in order to improve your returns or process them efficiently. All you need is a simple yet user-friendly software that requires features like real-time status tracking, quick returns processing, customizations with rules and eligibility, and refund management to make your returns process easy.
8.1) How can one manage eCommerce returns?
To manage your eCommerce returns, you’ll need to have an effective and clear return policy. Once that is done, make sure that the policy is accessible for all your buyers and that you’re able to communicate it clearly. In order to ensure that your returns are managed with ease, set up a proper returns process and automate it.
8.2) How can you minimize eCommerce returns?
The key to minimizing eCommerce returns is to properly communicate the value of the product to your customers while they are making up their minds to purchase it. This means you should always provide high-definition pictures, realistic and valuable descriptions, user guides, etc. Remember, the goal is to fulfill customers’ expectations.