How to Optimize Returns Management in E-commerce Business?

The global eCommerce market is huge, expected to total $5.55 trillion in 2022. This figure is expected to grow in the next few years, proving that eCommerce is a profitable option for online retailers. However, returns are also inevitable in the eCommerce business if your online sales are growing. You lose a customer with every returned product and gain a negative review. In addition to this, you are responsible for taking on the cost of the returned product, managing storage space for the returned item, and disposing of damaged items.

However, there is another side to it as well. Returns allow you to get customer feedback, streamline your internal operations and increase customer value. Almost 92% of online shoppers prefer repurchasing from a store that offers easy returns management. Therefore, having a customer-friendly, accurate, and dependable returns management process is crucial for any eCommerce or retail business.

This article will discuss returns optimization for your eCommerce business. So, stick around and continue reading!

What Is Returns Management?

Returns management, also referred to as reverse logistics, takes care of product return management for exchange or full refund. It also involves managing the item once it is returned. Major parts of the retail supply chain affected by returns fulfillment include warehousing, inventory management, and profitability. 

Difference Between Reverse Logistics and Returns Management

"Reverse logistics" refers to the entire process of managing products that move back from the customer to the seller, including returns, repairs, recycling, and reselling. "Returns management," on the other hand, is a part of reverse logistics that focuses specifically on handling customer returns—like receiving, inspecting, and deciding what to do with returned items, such as refunding, exchanging, or reselling them.

Returns management in retail and e-commerce is an important process that kicks off when a customer wants to return a product. It doesn't just end when the product is sent back—it involves the business receiving the item, checking it, organizing it properly, and then restocking it if it's in good condition. This process makes sure that both the customer’s experience is hassle-free and the business can efficiently plan how to handle customers returns without affecting inventory or sales.

E-commerce return management should be cost-effective for a business and hassle-free for customers. There are three main pillars to effective returns management, including:

• Speed
• Visibility
• Control

Speed:

You can speed up your returns process with returns management automation which refers to data collection and analysis through returns solution software. With returns management software, you can streamline your data reports and validate return material authorization (RMAs). Also, it helps in labeling shipments accurately, providing real-time shipment management. In this way, you can minimize the delivery delays.

Visibility

You can improve the visibility of your returns management process if the product information is collected before it is brought back to the receiving dock or returns processing center. For this reason, you can use web-based portals, carrier integration, and barcode identifiers.

Control

To gain more control over your workflow for return management process, you need to synchronize products' inbound and outbound movement. It can be done through quality assurance, regulatory compliance, reconciliation, and final disposition.

Customer Returns in 2021: Statistical Overview

To help you understand the overall impact of customer returns, we will analyze the key findings of a survey conducted by the National Retail Federation and Appriss Retail. The survey revealed that in 2021:

• Total customer returns accounted for approximately $761 billion in lost sales
• Retailers lost $218 billion to eCommerce returns
• Retailers incurred $166 million in merchandise returns for every $1 billion sales
• Retailers lost $10.30 to return fraud for every $100 in returned merchandise accepted

Benefits of returns management for your business include boosting customer satisfaction, cutting costs, and enhancing brand loyalty. It also provides valuable data insights for improving products and can even offer sustainability benefits by reusing or recycling returned items.

5 Useful Tips to Improve Your Returns Management Services

Returns management is a challenge for many eCommerce business owners as it consumes a huge chunk of their profit. However, you can reduce the returns and improve your management strategy by following the returns management best practices below.

• Understand the types of returns
• Have a clear-cut return policy
• Analyze your returns in detail
• Quick Q-commerce returns processing 
• Increase inventory management efficiency

1. Understand the Types of Returns

As a business owner, you should understand both types of returns: controllable and uncontrollable.

Controllable Returns: They can be avoided or controlled through improved logistics processes such as highlighting wrong or misleading product descriptions, delays in delivery services, transportation issues, and poor packaging.

Uncontrollable Returns: These types of returns cannot be predicted, and thus you cannot do anything to prevent them. For example, a buyer bought an item as a gift, but the receiver didn't like it, or the buyer had a change of heart, so they decided to return it. The seller is not responsible for such returns; therefore, they are uncontrollable returns.

You can only improve your returns management policies when you understand the difference between controllable and uncontrollable returns. Controllable returns can be avoided through detailed product descriptions with images or by using different transportation methods and packing materials. Similarly, upgrading your inventory management system can also help prevent controllable returns.

However, when it comes to uncontrollable returns, there is no way to prevent them except by reducing the time in which a customer can return a product.

2. Have a Clear-Cut Return Policy

Any eCommerce business must have a clear and easy-to-understand returns policy. As customer experience depends on your returns policy, it should be easily accessible and published on your website. It helps the customer understand your terms regarding returns and allows your staff to manage the requests accordingly.
The clarity in your returns policy also has a direct impact on your operational costs. Every product that is returned generates additional costs and causes operational inefficiencies. Hence, you can significantly reduce costs by preventing returns.

3. Analyze Your Returns in Detail

Why are you getting product returns?

This question can set your mind in the right direction when optimizing the returns management system.

Understanding the reason behind returns is critical to improving your product or service quality. According to a survey conducted by Chargeback highlights, some common reasons for product returns are:

• Defective product – 24%
• Didn't like the product – 25%
• Wrong product – 5%
• Product not needed – 18%
• The product does not fit – 10%
• The product did not match the description – 9%
• Other reasons – 9%

As a business owner, you should consider returns as an opportunity to improve your product and understand the market trends and customer personas. Advanced returns management technology can help you aggregate your customer feedback and analyze it across different variables.

Through this in-depth analysis, you can identify the factors causing returns and what can be done to fix the problem.

4. Quick Processing of Returns

The retailers or merchants who take too long for processing returns face the risk of losing customers and getting negative feedback on social media platforms. As a result, their reputation in the market is ruined, and they bear losses.

Different surveys and studies have shown that people avoid retailers who do not process returns or refunds quickly. Therefore, utilize modern returns management software that speeds up the whole process. Package management software like PackageX Receive can help you manage your returns effectively.

Moreover, you can also educate the staff handling returns for you. For instance, if damage while shipping is causing product returns, your team can try different experiments to improve packaging and prevent damage.

5. Invest in Inventory Management

Since many customers adopt the "try and return" method, you need to manage your inventory properly. It is possible if you invest in cutting-edge inventory management software and technology.

Product returns disrupt your inventory cycle, and a lack of an efficient reverse logistics process can cause several inventory errors, affecting your supply chain. Therefore, you should use advanced reverse logistics management software that makes your scanning process error-free and automatically updates your inventory. In this way, you can process your returns and refunds quickly.

Wrapping Up

E-commerce businesses can't prevent returns completely. However, there are ways to optimize returns management and make it more profitable. The key is to view them as an opportunity to improve your product and deliver a superior experience to the customer. You should develop and implement the right returns management solution that allows you to convert your customer returns into a profitable endeavor.

FAQs

What are the steps involved in return processing?

The returns management process involves five key steps:

• Return Request: The customer initiates the return.
• Business Approval: The business reviews and approves the return.
• Reverse Logistics: The product is shipped back to the business.
• Inspection: The returned item is checked for condition.
• Restocking: If the product is in good shape, it's restocked in the warehouse

These steps make handling returns smoother for both customers and businesses.

How do I get the most out of returns management? 

To get the most out of returns management, here are some basic return management strategies:

• Enhance the Customer Experience: To keep customers happy, make the return process as smooth and hassle-free as possible. Ensure customers receive their refunds quickly to build trust and satisfaction.
• Write Clear Return Policies: Have straightforward, easy-to-understand return policies so customers know exactly what to expect.
• Analyze Your Returns: Regularly review your returns data to spot trends and areas for improvement.
• Understand the Cost of Returns: Know the financial impact of returns so you can manage costs effectively.
• Automate Returns for Efficiency: Automate validation and tracking to streamline returns, saving time and reducing errors.