Strategies to Convert Returns Management From a Drain to a Profit Center

Return Policy Best Practices
With product returns inevitable, retailers must shift their focus from what returns are costing them to what they can gain from the process — namely, customer loyalty. Martinez presented the following best practices to help make your returns policy a source of strength.

Make your policy visible. Include your company's returns policy on all outbound packages that you send, Martinez said, as well as prominently display it on your website. Then run tests to find the optimum places to post this information — i.e., which creates the least amount of returns.

Determine a balance between customer satisfaction and profitability. While very few retailers are currently making money off of returns, you can build customer loyalty with a liberal returns policy. Of course, that may mean eating some more of the costs yourself.

Martinez cited Zappos.com as an example of a company that's set itself apart in its marketplace because of its returns policy. Zappos.com takes all returns, no matter the reason, and picks up 100 percent of the costs. Consequently, it has a 35 percent return rate. But the trade-off is its extremely high customer loyalty and retention rates, which in part have led the company's skyrocketing growth.

Require return merchandise authorization (RMAs) forms. Without capturing the information contained in these forms — including product(s) being returned, customer who's returning it, why they're returning it, when they bought it, whether they want credit for their purchase or a replacement product, etc. — you're blind, Martinez said. Once you have this information, communicate it with your marketing team and suppliers.

Identify your top reasons for returns, then target solutions. If you find there's a high percentage of returns because the wrong size or color of the product was shipped, for example, investigate whether a new pick/pack system would be a wise investment. Likewise, if you see buyer's remorse is a problem, consider a shipping carrier that can deliver products more quickly. If you're frequently hearing from customers that items in-person look different than what's featured online or in your catalog, seek to improve the quality of your photography (e.g., various angles, zoom-ins).