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Costly Returns Management Mistakes to Avoid

08/03/2022 | 01:45 PM | 8 Min Read

No matter how excellent your products are or how diligently your staff helps the customers find the right products for their needs, returns are inevitable. Whether it is an unwanted gift, a skirt that's the wrong fit, extra supplies that weren't needed for a DIY project — the list goes on and on. Anyone from a loyal, long-time customer to a first-time shopper can make a return at your retail location. 

While it's important to do what you can to minimize returns, especially from unsatisfied or frustrated customers, the real way to secure a customer's repeat business is to make the returns process as pleasant as possible. Fast, painless, and friendly returns processes make customers feel more welcome. 

If done correctly, a great return experience can even delight and encourage a customer to come back. Done poorly, you can do lasting damage to your business. . According to Ris News, bad return experiences make 72% of customers leave a negative review and ensure that 42% of your shoppers won't return. Let's take a closer look at returns to see:

  • How returns affect your business
  • Some of the costliest errors in common returns management processes
  • How to improve your returns management for better internal and customer-facing results

How Do Returns Affect Your Business?

There are three main areas in which returns can affect your business: customer relationships, costs, and inventory management.

First, how you process returns can drastically impact your brand reputation for customer service and customer satisfaction. Is your return policy clear and simple, or is it complex and often leaves customers feeling frustrated? Is your policy fair (i.e., does it accommodate likely errors your customers may make and invite them to exchange the product or make a purchase in the future)?

Next, what are the costs of your returns policies? If you manage a brick-and-mortar retail location, allowing for exchanges and returns is simple. You can exchange the product for a better fit in stock at your store or you can give the shopper store credit so they can quickly make another purchase. These options have relatively low overhead. Depending on the condition of the returned product, however, you may have to write it off rather than resell it to another shopper.

However, if you have an online store, someone needs to pay for the return shipping; in today's marketplace, that cost will typically fall to you. Free returns are a common policy because they remove customer frustration regarding shipping costs. But they can quickly eat into your profits. You also can't facilitate product exchanges as easily, meaning that most returns will be for a refund rather than an equivalent product.

A better returns management process can help alleviate some of these concerns. Depending on your business, you may offer free returns for certain products or situations. Alternatively, you may offer in-store credit for returned goods so that revenue isn't lost. Friendly service can also make strict or limited returns policies more palatable. 

Lastly, improved returns management also addresses the third area where returns affect your business: inventory management. With the right policies and processes, both your online and brick-and-mortar locations can track returned goods, determine what to do with them, and avoid unnecessary storage or shipping costs. 

4 Costly Returns Management Mistakes

Returns can be costly, there’s no way around it. While you can minimize the costs, you can't entirely eliminate them. Some returns management mistakes, however, can be entirely eliminated and save your business money. Four significant mistakes in returns management are:

1. Isolating Returns From the Business

Since you know some number of returns are inevitable, make sure they're a metric your business is actively tracking. Revenue teams need to know how many returns your stores are processing, what items are being returned most frequently, and the costs associated with this.

Since eCommerce businesses see return rates between 15% and 30%, your financial team needs these numbers to forecast revenue and expenses. Similarly, your marketing teams need to know so they can revise marketing messages to minimize confusion or focus on different buyer personas. Your support teams also need to be ready to handle the most common returns issues. 

Build returns into every business process instead of leaving it for operations to handle without adequate support.

2. Viewing Returns Only as a Customer Issue

While your returns process can make or break a customer relationship, that's not the full extent of their impact. Returned goods drastically affect you internally by impacting your inventory management processes. The goods need to be adequately tracked in your systems so you can monitor their movement, mark them as clearance when necessary, and avoid overordering that same good. Your inventory management processes should specifically address how to handle returned products both during and after the return transaction itself.

Pro tip: Most POS will automatically return inventory to availability when a return transaction is performed, this can overstate your inventory quantities both in-store and online. Transferring returned inventory into a dedicated location in your point of sale as part of daily close will help avoid overstated inventory and allows your team to properly judge the condition of items before making them available for sale again.  

3. Not Using a Streamlined Return System for Online and In-Store Returns

A properly managed returns policy is good for business. Your team must maintain the same rules regarding exchanges, returns, damaged products, and the actual refund. These processes must be consistent across both in-store and online channels (even if the individual steps have to change to fit the medium). If it's not consistent, simple, and fast, customers will be frustrated.  To achieve a great experience, your in-store and online platforms must be fully integrated, not just for good inventory management but transaction visibility. Many shoppers buy online and return in-store (BORIS). If purchases and returns aren’t visible and reportable across platforms, it may seem like your online channels have understated return rates and some otherwise successful store locations have unacceptably high returns rates. Not only is that unfair and inaccurate, but it can cause your leadership teams to make poor decisions that impact revenue negatively. 

Different tools help you optimize the process across all channels. Our Accumula software is built to help you access online transactions on in-store systems to avoid BORIS-related confusion. Tools like Returnly and Loop Returns can also help you minimize revenue loss from online returns by offering online exchanges.

4. Not Incorporating Return Data

Finally, ignoring data about returns is extremely costly. Your business can gain a tremendous amount of insight by knowing what products customers are returning, why they return them, and what parts of your returns processes help salvage the customer relationship. Your system should offer:

  • A “chain of custody” that includes reportability on the sale channel and the return channel
  • Daily reports and sell-through reports
  • Detailed inventory reports across locations
  • Product metrics across all channels

Not only will these insights help you improve processes, but they also give your finance team the information they need regarding expenses, profits, and inventory.

Protect Your Business From Costly Return Processes With Accumula

A better returns management process is an excellent investment in your customer experiences, your inventory management processes, and your business. At Accumula, we specialize in creating inventory and omnichannel operations management software so you can gain insight into every element of your retail locations. Get started today by browsing our pricing and see how Accumula can optimize both in-store and online sales, returns, and exchanges.

 

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