According to research, 89% of American shoppers would return to an online store if they had a positive experience with its returns process. A seamless, hassle-free returns process can help increase customer loyalty, reduce return-related costs, and boost your bottom line.
For any business focusing on growth, managing returned inventory should be a strategic priority, not an afterthought. But how can you improve your returns process without sacrificing margins?
In this guide, we’ll break down different types of returns processes, their pros and cons, and how to streamline your operations for optimal efficiency, especially when handling returned inventory in your warehouse.
What is the Returns Process and Why is it Crucial?
The returns process refers to the steps a customer takes to send back a product they no longer want or need, and the steps your business takes to manage that returned inventory. A well-optimized returns process ensures that you can quickly and efficiently manage returns without disrupting your operations or damaging customer relationships. It can also provide you with key insights into your products and customer preferences, allowing for better business decisions.
A solid inventory return process also allows you to handle returned goods more effectively, ensuring they are restocked, refurbished, or appropriately written off based on their condition.
Types of Returns Processes You Can Implement
1. Authorized Returns: Personalized Customer Service
With an authorized return process, customers need to contact your customer service team—via phone or email—before returning a product. This method allows for more control over the returns process.
Pros of Authorized Returns:
- Personalized service: You can interact with your customer, resolve their issues, and even upsell or cross-sell additional products.
- Proactive inventory management: Your team gets an early view of returns, allowing them to prepare for incoming products.
- Customer satisfaction: A personalized approach can boost customer satisfaction and encourage future purchases.
Cons of Authorized Returns:
- Increased workload: More man hours are needed for handling customer calls, issuing return instructions, and managing the overall process.
- High volume challenges: For businesses dealing with high return rates (e.g., 25%-50% in apparel), this can require dedicated staff.
2. Automatic (Blind) Returns: Streamlined for Speed
An automatic or “blind” returns process is when customers initiate their returns on their own. This method is often facilitated by including return slips and prepaid shipping labels in the original shipment or allowing customers to print return slips directly from your website.
Pros of Automatic Returns:
- Less staff involvement: Your team does not need to manage the return until the item arrives back at the warehouse, saving valuable time.
- Customer-friendly: A hassle-free returns process can lead to happier customers who are more likely to return for future purchases.
Cons of Automatic Returns:
- Higher return rates: The ease of the process may encourage more returns, especially for less satisfied customers.
- Inventory visibility delay: You won’t know what inventory is being returned until it arrives back at your warehouse, potentially impacting inventory planning.
Managing Returned Inventory: Best Practices
Once returned products arrive back in your warehouse, the real work begins. Handling the returned inventory efficiently is crucial to maintaining profitability and operational smoothness. Here are the essential steps for managing returned goods:
1. Product Handling: Deciding What to Do with Returned Goods
Once a returned product is received, your warehouse team needs to assess its condition to determine the best course of action.
- Resale-ready items: These products can be restocked for resale, provided they are in good condition.
- Items requiring repair: Some products might be defective and need refurbishment before being resold.
- Return to vendor: If the product cannot be resold or repaired, it may need to be sent back to the supplier or vendor.
2. Inventory Management: Updating Your Systems
Your inventory management system needs to be updated immediately after receiving returned goods. This ensures accurate stock levels across all channels (e.g., e-commerce stores, marketplaces, physical locations). Additionally:
- Inventory increase: Restocked items should be added back to your inventory levels.
- Write-offs: If items are damaged or unsellable, write-offs need to be processed.
3. Customer Service: Addressing Customer Needs
Once the product has been assessed, your customer service team should take action depending on what the customer requires:
- Refund: If the customer is entitled to a refund, ensure payment is issued promptly.
- Replacement: For customers who prefer a replacement or alternative product, initiate a new pick in the warehouse.
- Credit: If a customer opts for store credit, log the transaction and issue the appropriate balance.
Accounting for Returns: Financial Impact and Considerations
Returned inventory has significant implications for your accounting and financial reporting. Each part of the return process needs to be accurately reflected in your financial system, and this is where an integrated system like Brightpearl can be incredibly valuable. Key accounting tasks include:
- Inventory asset recording: Returned items must be added back to your balance sheet as assets.
- Write-offs: If the item is not resellable, recording it as a write-off in your income statement.
- Refunds: Recording refunds to customers and reconciling them with bank transactions.
- Credits: Tracking customer credits as liabilities on your balance sheet.
- Income adjustments: Reversing the original sale entry and the cost of goods sold on your income statement.
- Sales tax adjustments: Ensuring that any sales tax collected is reversed and accounted for properly.
Key Tips for Optimizing Your Return Process
A well-optimized return process doesn’t just improve operational efficiency—it also enhances customer satisfaction, which can lead to increased customer retention and loyalty. Here are five expert tips for optimizing your return process:
- Clear Return Policies: Ensure your return policy is clear, easy to understand, and accessible on all platforms. A confusing or hard-to-find return policy can frustrate customers and discourage repeat purchases.
- Automate Where Possible: Consider integrating automated solutions, like return labels included in shipments or on your website, to reduce manual labor and enhance customer experience.
- Track Return Data: Use data to identify patterns in your return process. Are customers frequently returning products due to sizing issues? Use this information to improve your product descriptions or offer better sizing guides.
- Offer Store Credit or Gift Cards: Encourage customers to continue shopping with you by offering store credit or gift cards instead of cash refunds. This keeps the revenue within your business and provides customers with a reason to return.
- Invest in Integrated Software: Using an integrated POS system or inventory management software ensures that return data, inventory updates, and financial records are automatically synchronized across all platforms. This makes managing returned inventory more efficient and accurate.
Streamline Your Returns Process for Long-Term Success
Optimizing your returns process is crucial for maintaining a smooth operation, ensuring customer satisfaction, and reducing unnecessary costs. Whether you choose an authorized or automatic returns method, or adopt a streamlined inventory return process, the key is consistency and efficiency.
By implementing these practices, you’ll be well on your way to creating a returns process that not only improves your bottom line but also builds lasting customer loyalty. Use integrated systems like Brightpearl to automate workflows, reduce manual errors, and keep your operations running smoothly as you scale.
Make sure to evaluate your current return process and make the necessary adjustments to optimize it for better customer experience and business success.
