“As a business practice, it’s expensive. As advertising, it’s cheap,”
once said Leon Leonwood Bean, the owner of an American clothing retail company.
What Bean was referring to is ecommerce return policy, which is absolutely essential for any online store. On average, the ecommerce industry sees 15-30% of returns annually. Fashion as well as fashion and beauty niches top the list of most frequently returned online products.
In the era of online shopping, ecommerce return policy becomes the matter of both necessity and business manners.
On the one hand, customers expect the e-retailer to step in their shoes and offer the possibility to try as many products as possible (especially as 30% of shoppers deliberately over-purchase to subsequently return unwanted items). On the other hand, handling exchanges and refunds is a major headache for retailers who, more often than not, lose money on high return rates.
The solution to this dilemma is in this article. We’ll explain what a standard ecommerce return policy includes, which aspects of return policies attract customers most, and how to choose the right return strategy without any negative impact on your online business.
Take note: Amazon, eBay, Etsy, or any other marketplace have their own return policies. You might want to consult them before writing an ecommerce return policy of your own.
E-retailers mostly consider only their needs while handling returns and refunds. But they can’t neglect the customers’ expectations and behavioral patterns while making a purchase. Here are a few key stats & trends that are lately dictating ecommerce return policies.
According to 2019 Dotcom Distribution eCommerce Study, 93% of the survey participants said a free return policy is important when making a purchase. Apparently, customers will think twice before making a purchase and coming back to your e-store if they have to deal with frustrating return shipping fees. This fact may put extra burden on your shoulders as an e-retailor, but it’s a great marketing move for your business.
Free return and exchange policy is a retention marketing opportunity, so try not to miss out on it.
Researchers at the University of Texas-Dallas discovered that more leniency on time limits is associated with a reduction — not an increase — in returns. The reason lies in the psychology of buyer behavior: customer have enough time to sleep on the return and exchange idea and, thus, feel less pressure from the retailor. There’s also a well-known “endowment effect”: customers get attached to what they own.
“That would say that the longer a customer has a product in their hands, the more attached they feel to it,”
explains one of the authors of the study, Ryan Freling.
According to Metapack’s Guide to Returns, 50% of 18-44 year olds say that a lack of choice of returns channels has resulted in them abandoning an online purchase. In other words, about half of all online shoppers will not complete their purchase unless they have a range of options to allow them to return an item as quickly and easily as possible.
Some of the most convenient returns channels include the post or a collection service. The convenience ranking for using them has not changed much over time, so you can consider including these channels in your return policy.
SaleCycle gives a number of reasons why the customers return online purchases, with the most common being an item damaged or broken. A product not matching the catalog description is the second most common reason.
What does it mean for you as an e-retailer? First, you should find reliable delivery services who will handle the customers’ orders adequately. Second, you must never lie. No matter how much you wish to sell your product, tell the truth in the product description. Even if it means explaining the story behind a stain on that furniture piece or a tiny tiny scratch on a refurbished iPhone.
Having considered all the popular trends in ecommerce returns, it’s time to create a policy. Here are a few key points you should take into account while writing it.
As much as you’d like to retain your customers with the free return policy, it may not always work. To choose the right ecommerce refund policy, you should take into account the size of your business and the business niche you’re playing in.
Low-priced items. If you’re playing on the low end of the market, you’re most probably have a small markup on your products and can’t sustain many free returns. Offer your customers in-store credit or next-purchase bonuses to minimize the costs of running your business and retain customers.
High-priced items. Ecommerce business owners selling expensive items, like jewelry, might seriously consider a free return policy. High price itself is a deferring aspect of any purchase, so adding extra fees for return shipping can scare off your customers. If your profit margins are low and you still can’t afford to lose on refund, you may require customers to pay for the inbound shipping.
Newly launched SMEs. For new stores with mid-priced products, it is recommended to offer a basic return policy, like allow returns for unused goods. You might add a return shipping or handling fee, but strive to be generous in your refund policy as your business scales.
Well-established businesses. Those ecommerce stores which already invest in marketing and whose sales are stable should make their return policy customer-centric. Offer dynamic fees depending on the sold items or provide shipping labels. Don’t shout out about the free returns policy, though, so that your customers don’t abuse it. A simple ad banner on top of your website might be just enough.
The ecommerce return policy is an important document, but remember that you’ll be talking to ordinary people, not to lawyers. About 56% of online shoppers will restrain from making a purchase if there’s too much hassle about it or if they don’t understand it.
So write your refund policy in simple language. Try to avoid phrasings like “you must” or “we are not responsible for.” And, for god’s sake, use keywords (for Google bots to understand your policy too).
The timeframe during which a customer may return a product all depends on you. Even so, there are a few legal regulations and common practices which protect the consumer in that regard. In the US, for instance, retailers must accept all returns on defective item and should be guided by a 3-day FTC’s “Cooling-Off Rule”. In the EU, ecommerce customers “have the right to cancel and return [their] order[s] within 14 days, for any reason and with no justification.”
As a rule of thumb, an item can be returned in 15-30 days after purchase, although some businesses opt for 90 days.
Nearly 69% of online shoppers may read (often or sometimes) the online product returns policy before completing a purchase. So flaunt your return policy. Place it on your website’s landing page or on the purchase order page – everything to answer any questions on refunds before your customer even asks them.
If you eventually decide that the customer pays the shipping, notify them about it and add an easy-to-print return shipping label. If you choose to provide a free shipping option, arrange a collection service. Or direct your customer to return purchase in a physical store.
Whatever option you choose, you’ll need to settle all the shipping-related bureaucracy and, most importantly, give your customer clear instructions on how to return a product.
Copying and pasting an ecommerce return policy is a bad business practice, but no one bans you from looking for inspiration from your competitors. Here are a few successful return policies – and reasons why they work – that may give you some ideas.
Why it works: Apart from offering free shipping & returns, the retailer gives a generous 365-day window for returns. The reason is simple: Zappos most loyal customers buy several items from the e-store knowing that they will return the shoes that won’t fit. Those same customers have the highest AOV and, thus, bring the most revenue to the retailer. Thus, a customer-centric return policy allows Zappos to be sitting pretty.
Why it works: Casper’s return policy looks like a marketing strategy. Shipping and returning large items, like mattresses, may be problematic, and Casper addresses the customer’s fear of unnecessary hassle. Before returning a mattress, the retailer gives 100 nights for the customers to actually sleep on it and “take note of how [their] sleep improves along the way.” This return policy also perfectly illustrates the “endowment effect” mentioned in trend #2 above.
Why it works: Matchesfashion offers a 28-day free shipping & return policy with a collectible service. The items should be unworn and in the original packing, obviously. Nothing special at the first glance. But what makes it stand out is the visual representation. Matchesfashion return & refund policy takes the customer through every step of the return process in pictures. As a result, customers are well-informed and proceed to return an item from the comfort of their home.
Free return shipping policy is in trend. It meets customers’ expectations and is as a great marketing move for a business.
But if you find it too risky for your profit margins, there are many other ways to get your way around handling returns. The most important thing is that you write your return policy with your target audience in mind.
Keep it simple. Avoid ambiguity. Be flexible with your customers and take responsibility for your mistakes (read “faulty items”).
Wondering how to interact with your customer during a return or an exchange request? Try upselling or cross-selling to them!
When a customer comes to your e-store again (especially if they’re unsatisfied), you can show them new products they didn’t purchase the first time or offer them an improved version of the same item.