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Run an E-commerce Business? Make Sure You Have a Good Return Policy

Jennifer Post

For ecommerce businesses, returns can often be a little more complicated than they are at a brick-and-mortar store. 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 an exchange and you don't have the product available? What if the refund takes several days to process and the customer gets impatient?

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 ecommerce businesses may not be able 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," said Nicole Bandklayder Pomije, co-founder and CMO of online jewelry retailer Bijouxx Jewels.

To address these and other issues that may arise, the top priority for ecommerce businesses regarding returns should be to have a crystal-clear policy in place that's easy for customers to find, understand and reference. [Learn the basics of shipping for your ecommerce business.]

Crafting a return policy that works

One of the first things that retailers should understand when creating a return policy is the most common reasons their products are returned, and what constitutes a reasonable window for returning items, said Krishna Iyer, director of strategic alliances for ShipStation. Customers should instantly know which products they can return, whether they get a full refund or store credit, how long they have to make a return and if return shipping is free, etc.

"For example, if your products are often bought as gifts for others, the standard 30-day return period may not be enough time. Many retailers consider the holiday season return window to go until late March," Iyer said.

Iyer added that your return policy should be in an easy to access place on both the homepage and product pages.

"Not only is visibility important, but also the clarity of the policy," Iyer said.

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. While it may at first appear to be a big cost to retailers, Iyer said that retailers can't afford not to offer free returns shipping.

"Not offering free return shipping is one of the biggest mistakes that online retailers are currently making," Iyer said. "Retailers need to ask themselves how quickly they need the product back and if their carrier agreement has stipulations for returns. Once the retailer determines the most cost-effective, convenient way to receive returned products, customers should then be provided with clear instructions for the packaging of the return, how to receive the shipping label and the correct drop-off method."

Balancing business needs with customer expectations

Using friends and family as "test subjects" is a good way to understand the consumer's point of view and gather feedback that they may not see themselves. The deeper awareness of customers' expectations for returns can lead to more sales, as well.

"It is critical for online retailers to know the differences between their return policy and the policies of their partner marketplaces," Iyer told Business News Daily. "Make sure your customers know what returns process they should follow no matter where they buy your product from. Placing clear returns instructions on both your website and all partner marketplaces where your products are sold will help to ensure a good customer returns experience."

Bandklayder Pomije agreed that with any small business, you want to do your best to make customers happy with your product: "[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," she said.

If you're in the early stages and need to focus on growing your business, Bandklayder Pomije 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.

"Write up a return policy that works for you," Bandklayder Pomije told Business News Daily. "Remember, this is your business – therefore, you make the rules when it comes to returns."

Additional reporting by Nicole Fallon. Some source interviews were conducted for a previous version of this article.

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Jennifer Post
Business News Daily Contributing Writer
Jennifer Post is a professional writer with published works focusing on small business topics including marketing, financing, and how-to guides. She has also published articles on business formation, business software, public relations and human resources. Her work has also appeared in Fundera and The Motley Fool.