Returns management plays a central role in the customer journey. It not only influences your product range and pricing strategy, but also the customer experience after the purchase and therefore your success. So if you want your online store to remain competitive, you can hardly avoid the issue of returns handling. In this blog, you can find out what makes returns management successful, what tasks await you and why outsourcing can be worthwhile.
Contents:
What is returns management?
Returns management encompasses all activities and measures relating to the possibility of returning purchased goods and all downstream processing. Specifically, this refers to the management of information, financial data and the flow of goods between the customer and the retailer or supplier. Successful returns management is characterized by a well-organized logistics process and optimized IT structures.
1. Information control
For returns to be possible, they must be integrated into your store system. This includes functions such as the registration of returns by customers and communication with returns service providers. Many store systems offer standardized interfaces for this.
2. Goods flow control
The physical return process requires logistical planning. You need a returns address where returns are accepted, checked and prepared for sale again. The aim is to quickly unburden customers and quickly reintegrate the goods into the sales cycle.
3. Finance control
With the return, your customers expect a prompt refund. This usually takes place after the returns processing has been checked or as soon as the goods are put back into storage. This step is an interface between your electronic system and the physical process. Refunds also have a noticeable impact on your accounting expenses.
Why is returns management important?
Well thought-out and efficient returns management has a clear and lasting impact on your success, as it is a crucial aspect of trust and customer loyalty. In order to drive your success with returns, two features of your returns management are particularly important: customer friendliness and cost efficiency. According to Swiss Post’s Online Retailer Study 2022, around 84 percent of online shoppers surveyed will make a repeat purchase on a platform if the returns process is simple. At the same time, however, more than half of people check the returns conditions before placing an order. Customer-friendly returns management is therefore desired, noticed and rewarded by your customers. If you also set up your processes in a cost-efficient way, you can make real leaps in growth with your return performance and generate more profits.
Customer-friendly and efficient returns management is therefore a potential qualitative differentiator for your online store. And that is a decisive factor in today’s highly competitive e-commerce market.
Why are there returns?
The reasons for returns are very varied and also differ slightly depending on the sector. According to Swiss Post Ltd’s E-Commerce Sentiment Barometer 2023, 89 percent of consumers surveyed stated that they returned items because their expectations were not met. The sources of such unfulfilled expectations can be divided into four broad categories:
- Price: Discount campaigns can be a source of returns. If customers have just bought the product at full price, they sometimes return it and buy it again. Or they buy a product because it’s discounted and then realize that they don’t need it at all. Subsequent customs costs are another reason for returns.
- Product: Poor product quality, misleading or incorrect product descriptions or defects are understandable reasons for returns.
- Logistics: Something can also go wrong during the delivery process, which then triggers a return. This may be due to the delivery process taking too long or the product being damaged during transportation.
- Customer: Since customers lack physical contact with the product when shopping online, they often order several sizes and colors. As a result, some of the ordered goods will end up back with you as returns.
Tasks in returns management
The primary goals of your returns management should be cost efficiency, customer satisfaction and reducing your returns rate. To achieve this, you need a clear strategy. Your returns management sometimes has an impact on your product range and pricing and also influences the usability of your online store, your advertising messages and your logistics.
Communicate returns conditions clearly
A customer-friendly returns service is nothing if it is not communicated clearly and comprehensibly. Many customers check the conditions for returns before they make their first purchase and tend to prefer stores with clearly communicated and simple processes. So the better and easier you make your conditions for returns easier to find, the better. For example, it is a good idea to communicate the conditions directly on the product page or the homepage of your online store. You can take a closer look at zalando.ch as an example. On the other hand, avoid listing the conditions for your returns service only in the terms and conditions; your customers will rarely look there. In addition, refrain from writing lengthy novels; write briefly and clearly how long the deadline is, whether costs will be incurred and what the expected processing time until reimbursement is. For Switzerland, you can use the following benchmarks as a guide:
- Return period: In Switzerland, 14 or 30 days is the usual return period.
- Returns costs: Around 70 percent of stores charge a price for the returns service. For most, the costs lie between CHF 5.50 and CHF 9.70.
- Refund period: On average, customers in Switzerland receive their money back within 7 days.
Pricing
If you introduce returns management, the question of pricing arises. Do you offer returns free of charge or do you charge something for them? This decision can have an impact on your profitability. The Post Purchase Experience Study 2023 by MS Direct and the Zurich University of Applied Sciences (ZHAW) has shown that returns in Switzerland cost something in most cases. Charging a price for the returns service is therefore not a problem if you communicate the costs transparently. In addition, the price information can also lead to your customers shopping more conscientiously and thus prevent one or two returns.
Data collection & analysis:
Data is the key to increasing the efficiency of successful returns management and reducing the returns rate. Because once you have an overview of your customers’ purchasing behavior and the popularity of your products, it is easier to take measures when designing your product range. There are various ways to access the valuable returns data.
- Digital: Firstly, you can use the customer account for a digital returns registration. Your customers record the return digitally, state the reason and send the parcel back. If you link the returns offer to a customer account, you can also motivate customers who ordered as guests to create a customer account at a later date. This in turn opens up opportunities for downstream customer loyalty measures.
- Returns slip: A popular way to return goods is with a returns slip. You enclose a bill with your consignments on which the customer can record any returns and state the reasons. You then send this bill back with the parcel.
Basic processing procedure
The aim of returns processing is to check and resell returned goods. The basic processing process includes the steps of returns receipt, inspection, preparation, refund and restocking. The verification process is the most time-consuming part and requires the returns to be unpacked and compared with the returns in the system or the returns bill. Finally, the check is recorded digitally so that reimbursement can be arranged quickly. If the registration does not match the effective return, it is considered a clarification case. In this case, it is up to you to take measures to clarify the situation. If everything is in order, the goods can be made ready for dispatch and put back into storage. To ensure that these processes run smoothly and quickly, it is worth defining precise processes in advance. Returns service providers such as MS Direct can take this work off your hands and offer ready-to-use, optimized processes right from the start.
Extended processing process
Alternatively, the basic manufacturing process can be extended to include quality control and return finishing. This makes particular sense for more expensive fashion items and premium brands in order to maintain the product quality or fulfill the brand promise. These processes are time-consuming and require a lot of human resources.
- Quality inspection: During this inspection, the return is also carefully checked for damage and signs of wear and tear and then classified according to a predefined system. Depending on the quality level, a different predefined process follows, ranging from direct repackaging to elaborate finishing and disposal of the goods.
- Refinement: During refinement, items are made fit for resale according to a predefined process. This can range from washing and ironing clothes to cleaning with special agents and appliances. You alone decide how and when articles are prepared.
Reading tip: Learn more about professional and efficient returns processing.
Resale, recycling, destruction
In most cases, returns can be put back on sale. At MS Direct, for example, the proportion of returns that are destroyed is less than 1 percent. In all cases where this is not possible, however, you should be prepared. Can the goods be recycled or donated? Or does it even have to be destroyed? Certain returns can also be sold at a reduced price via outlets. Relief organizations are also happy to accept clothes in good condition.
Returns in cross-border business
If you ship to countries with customs borders and offer a returns service, you face another hurdle when designing a customer-friendly process. If your customers have to send their parcel across the border, this is usually more expensive and also more time-consuming due to customs measures. In addition, the delivery time is longer and so is the period in which the customer waits for repayment. It is therefore recommended that you process returns or have them processed in the destination country. This results in lower costs for customers and a shorter waiting time for reimbursement.
Reduce returns rate
Reducing your returns rate is an important part of returns management and at the same time an important lever for the further development of customer-friendly processes. Because with the right measures, you can save yourself and your customers a lot of effort and money. To avoid returns, you need to support your customers in their purchasing decision to the extent that they feel as secure as possible. You can achieve this, for example, with
- detailed and easy-to-understand product descriptions
- Measurement charts and fit tools to find the right product size (for dresses)
- clear and truthful product images, 3D images or virtual try-on tools
- visible customer ratings
- Information on the return rate of the product
- monetary incentives for orders without returns.
Returns management and sustainability
When people think of returns management in connection with sustainability, they often think of the additional transportation routes and CO2 emissions. But this is actually not as problematic as you might think. If a truck that collects parcels also delivers the returns in the same breath, it is even more efficient in terms of CO2 emissions per parcel. If you want to optimize your returns management for sustainability, the best place to start is with your general logistics.
Shipping options
Even the choice of carrier can have an impact on the sustainability of your returns management. This is because certain service providers already offer climate-compensated or CO2-neutral shipping. Other providers, such as Quickpac, rely on a 100% electric fleet for deliveries.
Packaging
Shipping packaging offers you three ways to make your returns management more sustainable. You can reduce and reuse packaging materials and opt for recyclable solutions.
- Reduction: Companies that pay attention to sustainability usually no longer use standardized boxes. Instead, they use machines that cut cardboard boxes to size, variable-height boxes or telescopic boxes. The advantages are obvious: such boxes often no longer require any filling material and they increase the loading efficiency of vans. Alternatively, there are also retailers who send their products in the original box and do not use any additional cardboard packaging at all.
- Reuse: Use shipping material that can be used more than once. Your customers will thank you if they can use the box they receive for their return. As an alternative to cardboard, you can also use sustainable mailing bags.
- Recycling: Instead of plastic or cardboard, you can also opt for organic packaging or reusable packaging. In the long term, reusable mailing bags are often more sustainable than cardboard packaging.
Reading tip: Find out more about how you can save emissions with clever packaging or sustainable shipping solutions.
Polluter pays principle
In Switzerland, the federal government was instructed in 2023 to examine the application of the polluter pays principle for returns in online retail. The Swiss government is now examining what legislative changes would be necessary, for example to introduce financial incentives such as an incentive tax in the form of an early returns fee. This request was made because Switzerland has an average return rate of 28 percent, making it one of the top countries in Europe, where only 14 percent of goods are returned on average.
Outsourcing returns management
Returns service providers such as MS Direct have acquired expertise in the processing and finishing of various products over the years and therefore have ready-to-use, highly efficient processes, optimized infrastructure, specialized personnel and modern equipment at their disposal. In addition to the basic processing of returns, a wide range of additional services can also be booked with us so that all customer requirements for the returns process are covered. MS Direct takes over, among other things
- the entry of incoming goods
- the quantitative inspection of returns
- the repackaging
- restocking or shipping to the central warehouse
You can view the status of your returns at any time via the customer portal. Optionally, you can also book
- Qualifications
- Refurbishment measures
in addition. Cleaning, polishing, washing, ironing, etc. are carried out at the customer’s request. We simply solve clarification cases electronically with a photo and description of the defect in our clarification case tool. And last but not least, we also take care of the disposal and recycling of damaged goods.
Online stores that work with a returns service provider therefore benefit from the extensive expertise and efficient, customer-friendly processing procedures. This saves time and money on the one hand and increases customer satisfaction thanks to fast refunds on the other. And in the meantime, you can take care of your core business without stress.
Can we support you with your returns management? We would also be happy to set up an efficient and customer-friendly returns process for you and work with you to ensure more satisfied customers.