Chapter 2

Returns Management Best Practice

Resources / Returns Management Best Practice

Your First Steps

Before we talk about each channel and how best to process returns on each one specifically, we want to first talk about something close to our hearts: the need for centralized data.

Receiving returned inventory should initiate actions across various departments in your business, which can be extremely complex if you’re using separate systems to manage your inventory and accounts.

When processing returned inventory, there are debits and credits everywhere in your accounting and many different workflows you need to ensure are streamlined and efficient.

If using a retail operations platform like Brightpearl, all your workflows can start to become more automated and seamless even as you grow and expand the business.

Therefore, your first port of call in establishing an effective returns process should be to assess the various technology solutions available to you with a particular focus on centralizing your data.

E-Commerce Returns

Establish and document an efficient goods in process

To ensure your staff are effective at bringing goods into your warehouse, you’ll need to share a well documented process with them.

Think about things like:

  • Should they put away now or later?

  • Will you have a specific quarantine location for returned inventory so that items can be assessed for resale at a later time?

  • If so, where is this location? And how should items be placed within it?

Establish and document your e-commerce returns management process

For each return journey, you will need to define your route to return and document the process for your staff. Think about where and how you accept returns. For example, do you offer a returns label in your packages, or do customers need to request returns?

You’ll also need to create a customer-facing returns policy and display this clearly on your website, packing notes and in emails, while also ensuring your customer service staff understand it thoroughly as well.

Share your returns policy with your customers

So that your staff won’t have to deal with common FAQs about your policies, you should endeavor to make your returns policy visible and easily accessible by customers, whether this be displaying it on your website, on the packing slip or in emails.

Your policy should identify whether you offer store credits, exchanges or refunds (both partial and full), and what you expect from your customers.

For instance:

  • Do they need to use the original packaging or their own?

  • Should they include the original packing note?

  • Do they need to return goods within a particular time frame?

  • Who is responsible for the costs of sending the item back?

For even more expert advice on how to write your e-commerce returns policy, take a look at this detailed guide from BigCommerce.

Brick & Mortar Returns

Establish and document in store returns and exchange processes

In store returns and exchanges need to be as efficient, if not more so than online refunds, as you have the added complexity of a customer waiting and expecting fast in person service.

So that both new and existing sales staff can service customers quickly, you should ensure that you have clearly documented workflows and that all staff are trained on those, with top-up training every 6-12 months.

Implement reliable point of sale technology

If you’re operating a brick and mortar store, pop-up shop, or trading at an event, your staff should have access to a reliable point of sale that has efficient retail returns management and exchanges functionality built-in, as well as integrations with your accounts, inventory and warehouse data.

This will ensure any in store returns and exchanges are efficient and hassle-free, while the associated processes are easy to learn for both permanent and temporary/seasonal staff.

For more tips about retail returns management, take a look at this blog from Retail Minded.

Wholesale Returns

Generally speaking, wholesale returns work in a similar way to that of e-commerce and retail returns, depending on whether you take online or phone orders, of course.
However, there is also one major difference depending on how your wholesale business operates: the use of EDI transactions for reverse logistics.

EDI stands for Electronic Data Interchange and combines systems and processes to give businesses the ability to exchange documents and transactions between trading partners in a standard electronic format.

EDI can be used in a variety of processes, including:

  • Invoices

  • Purchase orders (POs)

  • Credit adjustments

  • Purchase order acknowledgements (POAs)

  • Purchase order changes

  • Advanced ship notices (ASNs)

  • Reverse logistics / returns

  • … and more

If you’re a wholesale business that works (or plans to work) with larger suppliers, such as Target, Walmart and Tesco, then you’re likely to be required to implement an EDI solution to connect your systems with theirs. This could be a major change to your existing wholesale returns process, but is a necessary one if you want to work with these larger suppliers.

For more information about EDI and reverse logistics, check out this article by SPS Commerce.

Dropshipping Returns

Regarding dropshipping returns, there are a few things to bear in mind before you even start thinking about the returns process itself.

First, you’ll need to know and understand all your suppliers’ individual returns policies. Ask about things like:

  • How much do they charge for restocking fees?

  • When should items be sent back to them?

  • Who pays for return shipping fees?

  • Will defective items incur a return shipping fee?

Once you have this information from all of your dropshippers, you’ll then need to match them to your own return policies.

However, always make sure you have a bit of wriggle room. As an example, if your suppliers have a 30 day return policy, then you should tell your customers to return items within 20 days to account for any delays or other issues in transit. This is especially important if you’ll be asking your customers to send the goods back to you rather than your supplier.
Alternatively, you may choose to ask customers to send items directly to the dropshipper, which will enable you to have a slightly longer return window than the 20 days we gave as an example.

Typically, this is how most dropshipping companies manage their returns process:

  1. Your customer requests a return from you.

  2. You’ll find out why your customer wants to return the item (if you don’t already know).

  3. You’ll request an RMA (Return Merchandise Authorization) number from your supplier.

  4. Your supplier approves the return.

  5. You update your customer on the status of their return and provide them with a return address and the RMA number (if they’re sending the item back to your supplier).

  6. The package arrives at your supplier’s warehouse.

  7. You should ask your supplier to update you once the item has arrived (you may need to chase them for an update).

  8. They’ll either send a refund to you or send a replacement item to the customer.

  9. You’ll either check that your customer has received the replacement item okay or you’ll send their refunded money back to them.

If you need to handle different types of returns such as dropshipping returns, e-commerce returns or physical store returns, then the best way to do it is to have a flexible retail operations platform in place that can manage all of them efficiently and seamlessly for you.

Is your returns process ready? Check out this returns readiness self-assessment below!

Take our self-assessment today to find out whether your business is capable of managing an increase in returns.

A Quick Note on Reducing Your Return Rates

Track All Return Reasons

There may be common reasons why you’re experiencing an increase in returns, such as supplier or quality issues, or mispicks. Therefore, you should keep track of all of the reasons for return, enabling you to identify common themes.

Return reasons should be logged against orders, as well as tracked financially — try using account codes for different returns reasons which will aid fast reporting and decision making. Ensure you have a documented process in place for monitoring and logging delays, issues and errors throughout your entire warehouse operation.

Analyze Your Warehouse Efficiency

Another way to reduce returns is by regularly reporting on the efficiency of your warehouse. The following reports and KPIs are ones you should analyze frequently:

  • Variance reports

  • Processing cost per order KPI

  • Time to ship KPI

  • Reasons for return

  • Supplier reports and history by supplier

  • Empty bin report

  • Expense controls

Monitor Your Serial Returners

As more and more retailers are adopting self-service returns to satisfy their customers, the issue of “serial returners” occurs more frequently, which can harm retailers’ business margins. In fact, this issue is so widespread that leading merchants, such as ASOS and Harrods, are actively cracking down on them.

Serial returners are the customers that regularly buy from you and return their products, resulting in extra time, effort and money in order to manage them.

Therefore, it’s recommended that you regularly monitor your returns and CRM data in order to establish possible cases of serial returners within your own business.

A good idea would be to flag these customers within your CRM system, so that your marketing team know to avoid sending them new offers and discounts, while your customer service team will be able to better see who they’re dealing with.

Find out more about serial returners and the effect they could have on your business in our special research report below.

Download our free report to find out whether retailers are planning to follow Amazon’s lead and cut off serial returners - and if shoppers will accept potential lifetime bans for ‘returning too much’.

Further Reading

Try Before You Buy: A Returns Tsunami for Retail

by Brightpearl

Are you ready for the returns tsunami?

by Brightpearl

Banned? A Returning Problem

by Brightpearl

E-commerce Returns: Policy, Rates, Best Practices & Statistics (2018 Holiday Ed.)

by Nick Winkler, Shopify Plus

How to Write and Promote a Return Policy Customers Love [Examples Inside]

by Sarah Chambers, BigCommerce

Reverse logistics planning for the retail supply chain

by Scott Bolduc, SPS Commerce

Creating Customer Friendly Store Policies

by Nicole Leinbach Reyhle, Retail Minded

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