If a customer makes a purchase from a retail store and he or she ends up wanting to return it, the process is usually fairly straightforward: Bring the item and receipt to the store, hand over the item and receipt, and get a refund. For customers' convenience, many brick-and-mortar retailers will even accept returns of purchases made from their online stores.
For e-commerce-only businesses, however, returns are often a little more complicated. How do you handle return shipping? Where do you store the unwanted merchandise if you don't have a warehouse? What if the customer wants to do an exchange and you don't have the product available? What if the refund takes several days to process and the customer gets impatient?
"With any small business, you want to do your best to make customers happy with your product," said Nicole Bandklayder, co-founder of online jewelry retailer Bijouxx Jewels. "[Returns and exchanges mean] we are under pressure to sell more so that we make up for the funds that were allocated toward our payroll and our costs."
Returns can put a financial strain on any type of business, but physical retailers typically don't have to deal with the added burden of shipping costs. [3 Big Challenges for Small E-Commerce Retailers (and How to Overcome Them)]
"The question of who pays the shipping costs for online returns has long been a point of contention in the e-commerce space," said Tom Caporaso, CEO of Clarus Marketing Group, which recently partnered with FedEx to launch a reduced-cost return-shipping program for consumers, called Return Saver. "A lot of people can't give [return shipping] away for free, not even many top 500 companies."
Given the hassle and costs associated with returns, it may be tempting to just say that you won't do it. A "no returns, period" policy isn't going to fly with customers who expect top-notch service and convenience, but e-commerce businesses may not have the ability to accept all returns, for any reason.
"When a company starts allowing people to return a product because they 'changed their mind' or 'don't like the product,' it can become a problem," Bandklayder told Business News Daily.
Bandklayder and Caporaso agreed that, to address these and other issues that may arise, the top priority for e-commerce businesses regarding returns should be to have a crystal-clear policy in place that's easy for customers to find, understand and reference.
"Write up a return policy that works for you, and make sure it is clear on your website," Bandklayder said. "Remember, this is your business — therefore, you make the rules when it comes to returns."
If you're in the early stages and need to focus on growing your business, Bandklayder recommended implementing an "exchanges only" policy, with no refunds unless the product arrives damaged. Once you've grown and have a larger cash flow, you may want to consider picking up the cost of return shipping for your customers.
"Free return shipping is great leverage when people are looking to make a purchase online," Caporaso said. "It comes at a cost, but [a good customer experience] justifies that cost."
Originally published on Business News Daily.