Return it or Keep it? Which Policy is Right for Your Business

As the retail landscape continues to evolve, the significance of a well-structured return policy becomes increasingly evident. A recent report from the National Retail Federation showed the rate of returns increased 14.5 percent last year, a total of $743 billion in merchandise. Online retailers specifically experienced a notable uptick in returns in 2023, with an increase of more than 17 percent. Because of this, finding the middle ground between meeting customer expectations and safeguarding the bottom line is a constant challenge for retailers.

Here are tips for retailers making return policy decisions that can ensure financial sustainability while placing customer satisfaction at the forefront:

1. Should customers keep it or send it back? Striking the right balance.

Deciding when a product merits a return is fundamental to crafting a successful return policy. Retailers need to define clear guidelines on product eligibility and conditions for returns, such as accepting returns with no questions asked within a 30-day window, returns up to a year unopened, or that the buyer will/will not need to cover the return shipping fees — in whole or in part. Establishing this equilibrium is crucial to supporting customers without compromising the overall profitability of the business.

2. Understand the power of free returns.

The allure of free return shipping remains a compelling strategy in the fiercely competitive retail environment. It attracts customers, builds trust, and encourages them to purchase without the fear of being out of pocket if the product falls short of expectations. While the financial implications should be weighed carefully, implementing free returns under specific conditions can mitigate potential abuse and foster a positive customer experience.

3. Leverage innovative technology for seamless returns.

Embracing technology is imperative for streamlining the year-round return process. User-friendly online return portals and mobile applications enhance the customer experience by simplifying the initiation and tracking of returns. Automation and integration with inventory systems reduce employees' workloads and minimize errors, ensuring a smoother operational flow.

4. Test customized return windows.

Another consideration, time efficiency, is critical throughout the year, especially during the holiday season when extending the standard return window will help strengthen customer loyalty. Retailers should carefully deliberate the duration to accommodate customers without placing unnecessary strain on inventory management. Offering flexibility in return windows demonstrates a commitment to customer satisfaction without compromising logistical operations.

5. Build customer loyalty through hassle-free returns.

A straightforward, customer-centric return policy and process is a potent tool to transform potentially negative experiences into positive ones. Proactively addressing customer concerns retains existing customers and generates positive word-of-mouth, contributing to sustained success beyond individual transactions.

6. Use data analytics to predict and prevent returns.

Harnessing the power of data analytics empowers retailers to identify patterns and trends related to returns. Analyzing past return data allows for the proactive addressing of common issues, improvement of product descriptions, and reduction of the likelihood of returns. Predictive analytics aids in inventory planning, ensuring popular items are adequately stocked and minimizing the need for excessive returns due to unavailability.

7. Ensure clear communication.

Transparent communication is paramount in managing customer expectations and preventing misunderstandings. Retailers should communicate their return policy on their website, in-store, and during checkout. Detailed information about the return process, including eligibility criteria, timeframes and associated costs, helps set realistic expectations and fosters customer trust.

Embracing these considerations to craft a deliberate return policy not only protects the end result for the retailer but also contributes to a positive shopping experience that keeps customers coming back, ensuring lasting success in the ever-evolving world of retail.

Liam Gerada is CEO and co-founder of Krepling, an e-commerce channel management platform.