A Guide to Ecommerce Return Policies in 2021 [Infographic + Template]
October 23, 2019
A customer’s doorstep isn’t always your product’s final destination. With over $369 billion in sales lost to returns last year, online merchants can’t afford not to build a best-in-class ecommerce return policy.
As customer expectations evolve, retailers have to keep up, especially around holiday sales (and returns) season. In fact, UPS has dubbed the second and largest spike in returns as “National Returns Day,” which is expected to occur on January 2, 2020 with 1.9 million packaged returned to UPS alone. This is a 29% increase from last year.
Creating an ecommerce return policy may seem like a hassle — but it’s also a great opportunity to keep happy customers coming back for more.
Check out the infographic below to learn how your online store can master ecommerce returns, then keep reading for return policy examples and templates.
Why returns can make (or break) your business
Believe it or not, how you manage returns directly impacts sales and customer loyalty:
- 92% of shoppers say they will buy again if the returns process was easy
- 79% of consumers expect free return shipping, and 49% of online retailers offer it
- More than 60% of consumers review a return policy before making a purchase
It’s clear that returns can have a big impact on your bottom line, and for good reason: the nature of ecommerce makes a good return policy a must-have. Unlike brick-and-mortar retail, ecommerce often requires customers to make a purchase decision without ever having interacted with or experienced the product in person.
With that level of uncertainty in mind, it’s no surprise that half of shoppers review a retailer’s returns policy before buying — and that half of shoppers have returned something in the last year.
Much like a shipping policy, it’s critical to make your returns policy clear and straightforward. Transparency is an integral part of the ecommerce customer experience. There should be no hidden fees associated with returns, and if customers will be responsible for return shipping costs, which can help you reduce shipping costs, make sure that information is presented clearly.
Transparency is equally important once your customers’ returns are on their way back to you or your ecommerce fulfillment partner. Customers will inevitably have questions about the status of their return shipment and refund or exchange. We recommend giving your customers tracking information for their return shipment and/or automatic text alerts once their return has been received and refunded.
Fail to provide the ecommerce return policy that shoppers expect, and they won’t buy. Make the returns process a confusing hassle, and they won’t come back. But create a transparent, seamless policy and process, and you’ll see a boost in brand loyalty — and your bottom line.
State of ecommerce returns and 2020 stats
As online sales increase year over year, so do ecommerce return rates. Here is the current state of ecommerce returns:
1. Customers expect free returns
Like it’s done with two-day and same-day shipping, Amazon Prime has made free returns synonymous with ecommerce for many shoppers. 79% of customers won’t purchase from an online store that charges return shipping fees.
While free return shipping won’t make sense for every business’ margins, offering it may cause a big enough increase in sales that it essentially pays for itself. We recommend crunching some numbers to figure out just how many additional orders it will take to break even on free return shipping.
2. Refund speed matters
72% of online customers expect a refund credit within 5 days of returning merchandise.
Even in an otherwise smooth return process, waiting too long to credit a customer can hurt brand loyalty: 88% of customers would limit or stop shopping with a merchant that took too long to credit the refund. Ensuring a quick return and refund process will keep customers coming back to your store time and time again.
3. It pays to have a process
If you’re just starting out in ecommerce, it may be tempting to handle returns on an ad-hoc basis. However, as your business grows, investing in your returns process can pay dividends. Your process should make it extremely easy for your customers to make a return, which means making our process simple. 58% of customers say they want a hassle-free return policy, and 47% want an easy-to-print return label.
Penske found that businesses that invest in improving reverse logistics processes see a 12% increase in customer satisfaction and a 4% decrease in cost.
4 ways to proactively reduce returns
It’s clear that creating a great return policy is important for increasing sales and building customer loyalty. But with the average retailer spending 8.1% of total sales on reverse logistics, it can pay to reduce overall return volume as well.
1. Create clear product descriptions
With online shopping, what you see isn’t always what you get. That’s why 88% of shoppers characterize detailed product content as being extremely important to their purchasing decision.
Giving reliable info about your product upfront can also decrease returns. When what customers receive matches their expectations, they’ll be less likely to return that product. Make sure that the product pages on your website are descriptive and include high-quality, accurate product photos.
2. Increase return time window
Being lenient with return time limits (e.g., a 60-day vs. 30-day policy) can actually decrease returns by creating less urgency around returns for the customer.
3. Conduct regular quality testing
If your product page seems to reflect the product accurately, and you’re still getting a high rate or returned items, there may be an issue with the item itself. Assess the quality of the item, do product testing, and check in with your manufacturer to address any production or quality issues.
4. Identify trends in commonly returned items
You can also include a quick one-question survey in the returns process asking why a customer chose to return a certain product. If your returns process is easy to complete, customers will likely be happy to select a return reason from a list of preset options.
This can be particularly helpful in identifying a quality issue with a product, such as a fit issue with apparel. For example, if clothing items are being returned because they are too large, you may be able to identify a potential sizing issue with your manufacturer.
Gathering information on the return side can help you identify trends and issues with your products and make the necessary improvements to future inventory.
How any online business can offer a competitive return policy
Handling returns in-house can be costly and time-consuming, especially for a quickly-scaling ecommerce business. To stay competitive, many direct-to-consumer merchants choose to outsource logistics to a third-party logistics (3PL) company. Here’s why.
Staffing and scale
Working with a 3PL means your customers’ returns can be handled by a designated staff to receive, assess, and process each item. 3PL staff and operations leverage years of industry experience, knowledge, and best practices to manage returns at scale.
3PL companies help ecommerce brands scale by automating inventory management, order fulfillment, and, of course, returns. This can include providing customers with prepaid return labels, sharing return tracking information, and even supporting integrations that will automatically text return and refund updates to customers.
For apparel companies, the returns management process can require several extra steps, from pressing each shirt to in-depth quality assessment to determine if an item has been worn. Apparel companies should consider working with a specialized apparel 3PL, as many 3PLs will not be able to accommodate these requirements.
Peak season preparation
Return volume during peak shopping season is often more than ecommerce businesses are prepared to handle in-house. Outsourcing to a third-party logistics provider helps keep merchants from falling behind every time there’s a holiday or sales event. This can translate to time and cost savings year-round.
A 3PL can also help merchants create a customer experience that encourages brand loyalty and repeat buyers. This is especially vital during busy shopping times when new customers are forming their first impressions about a merchant or brand.
4 holiday return strategies
With a prediction of $124.1 billion in ecommerce sales this holiday season, businesses are set to see a huge influx in orders. Unfortunately, more orders means a greater number of returns during the first few weeks in January.
In fact, 5 million packages are returned to retailers in the first week of January alone.
How can you get ahead of the inevitable influx of returns and create a great holiday return strategy?
1. Be proactive
Before the new year, make sure you have a straightforward returns process in place and that it’s clearly communicated across your website. If you outsource retail fulfillment to a 3PL, work with them to figure out if and how they manage returns for their clients.
Your 3PL should be able to help automate the returns process in a quick and cost-effective way, including providing your customers with a shipping return label and tracking information once their return is shipped. If your product requires a more complex quality inspection before it can be restocked or discarded, consider having returns shipped directly from your customer to you.
2. Extend your return window
If you typically only offer 30 days (or fewer) for returns, consider extending your window for holiday returns. If you don’t, you risk alienating early shoppers who are buying gifts well in advance of the holidays.
For example, Amazon’s holiday return deadline is January 31 for orders shipped between November 1 and December 31. This gives gift recipients ample time to return unwanted items.
3. Create a gift return policy
How do you currently handle the authorization of returns? Do you require an original packing slip? If so, this can hinder the return process for gift recipients — especially if they don’t want the gift giver to know they’re returning their gift!
Consider letting customers choose a gift option at checkout. Refrain from including packing slips that list prices, or even include a gift receipt with instructions on how to return gifts. Make sure that you clarify your gift refund policy, as well; most merchants (including Amazon) allow gifts to be returned for a gift card, minus any return shipping and restocking fees.
4. Automate the return process
With the huge influx of returns after the holidays, automating the return process can make an otherwise overwhelming workload more manageable. One way to do this is by working with a 3PL to automate the reverse logistics process.
“For reverse logistics, we have also been leveraging ShipBob’s Returns API to automate and streamline our routine RMA processes. Having ShipBob handle our returns has been a huge help in reducing our daily workload, and the ability to drive this process via API is wonderful.”
You can also automate the customer-facing half of the equation. Whether you keep fulfillment in-house or outsource it, technologies like Returnly allow ecommerce merchants to create a fully hosted, brandable, self-service returns portal.
Returnly integrates with both Shopify to streamline the returns process for merchants and customers alike by automatically processing returns and refunds.
3 return policy examples that sell
Different return policies work for different businesses’ customers and needs. Here are a few return policy examples from a variety of ShipBob clients.
1. Brummell Co.
Why it works: Brummell’s return policy for its premium socks simplifies the process into five easy steps. They let customers know what exactly is required for a return, as well as what to expect in terms of processing time.
2. Rebel Girls
Why it works: Rebel Girls clearly explains return cutoffs and requirements for different situations, as well as shares contact information to answer any customer questions. They also offer free returns in the case of fulfillment errors, showing a dedication to customer support.
Why it works: This example is a little different — rather than their return policy, BAKblade automates the return process for customers. Through the portal shown, customers can easily start the return process from BAKblade’s website.
Return policy FAQs
Check out these frequently asked questions about how returns work for online stores and the implications of different policies.
What is the risk of offering no return policy?
This depends on the industry and product. If your product costs less to purchase than it does to return, customers aren’t likely to send it back.
That said, with nearly half of all ecommerce shoppers checking return policies before purchasing online, you could miss out on half of potential customers by failing to offer a return policy. For those selling product categories with higher return rates, such as apparel or footwear, the risk of losing sales is even higher.
How should small businesses approach their return policy?
Small businesses should make sure that they create a return policy and process that works for their business model and margins. For example, while it’s true that Amazon has made free returns more of a norm, you shouldn’t offer free returns if they’ll hurt your margins.
For some businesses, it may not make sense to offer returns at all. For example, if your product is perishable, accepting returns can create more issues than it solves — and customers are unlikely to expect you to do so in the first place.
What’s an average ecommerce return rate?
While brick-and-mortar return rates average between 8 and 10%, ecommerce return rates come in at more than double that at 20%. Products that require a certain fit, like apparel and footwear, will have an understandably higher return rate than a one-size-fits-all product.
During the holiday shopping season, the ecommerce return rate can jump as high as 30% during the holiday shopping season.
How can I prevent return fraud?
Return fraud refers to a customer gaining financially from the return process, resulting in your business losing profits or inventory. There are many different types of return fraud, such as “wardrobing,” which refers to customers purchasing an item, using it, and then returning it used.
The nature of ecommerce makes it harder to spot and prevent return fraud than in brick-and-mortar stores. Some signs of ecommerce return fraud are excessive loss of inventory, an above-average increase in the number of returns, and shrinking margins because of returns.
To prevent ecommerce return fraud, experts recommend requiring proof of purchase when accepting returns, as well as only refunding to the original payment method (or even just to store credit).
Being able to track shipments to your customers can also help prevent fraud. In the case of a chargeback by a customer, you’ll have proof that the order was delivered. Working with a 3PL that provides transparent ecommerce order tracking can make sure you always have this info on-hand.
Should I offer in-person returns?
If you have a brick-and-mortar store, consider allowing customers to buy online and return in store (often referred to as BORIS). This works best if you offer the same inventory in-store and online. you have a larger product selection on your online store than in-person, you will have to choose between shipping some in-store returns back to your fulfillment center or having one-off products for sale in your physical store.
What is a standard return policy?
Every business must tailor their return policy to fit their logistics capabilities, customer expectations, and product offering. A standard return policy for handmade, customized artwork will be completely different from a policy for mass-market apparel.
Check out the template below to learn what is included in a standard return policy, and how to craft one for your business.
What is a “try before you buy” model?
Some online apparel and accessory brands allow shoppers to “try before they buy.” This method helps customers try products before they purchase them — the exact same way they do in physical stores. Beware, though: your return policy must be crystal clear and you must have the right framework in place to handle a higher volume of returns. This is best handled by a specialized apparel 3PL.
How can customer returns be reduced?
There are several ways to reduce your returns rate. One way is to describe your product well, including product details, photos, and more. This will make sure that your customer has the best sense of what he/she is ordering. Another way is to use past returns data and identify what product or SKU has a higher returns rate than others. For instance, if you offer a shirt in several different colors and one color tends be returned more often, consider discontinuing it to lower your overall returns rate.
Are customers legally entitled to a refund?
According to FindLaw.com, while merchants are not required to accept returns, there are laws that require the disclosure of a refund and return policy, and it must be easily found on your online store for it be valid. In the US, every state has their own law that addresses consumer refunds. For instance, merchants based in California are required to post their refund policy unless they offer full cash refund, exchange, or store credit with seven days of the purchase date. It’s also worth noting that there is no federal law that requires a merchant to refund money. Check your state laws to ensure your returns policy complies.
What is RMA (return merchandise authorization) in ecommerce?
A RMA system is the strategy and technology put in place to mange your returns. It usually consists of a digital form that the customer submits to request a refund. From there, a shipping label is automatically generated so the customer can easily send back the order. By implementing an RMA system, you’re able to easily track returns and put resellable items back into your inventory in a timely manner.
What percentage of online sales are returned?
About 15 to 40 percent of online purchases are returned. Taking the time to understand why customers return items can help reduce your overall returns rate. For instance, if you sell apparel, some online shoppers may order a few different sizes to try on at home and return what didn’t fit. Be sure to create a proper returns policy based on the type of products you sell to protect you from taking a hit from too many returns in the long run.
Ecommerce return policy template
There is no one-size-fits-all return policy, but here is a general ecommerce return policy template to get you started. Everything in brackets can be updated to fit your brand’s store.
If you have more specific requirements for returns, such as only accepting damaged products or requiring merchant authorization, you’ll want to state those clearly throughout the policy.
Thank you for shopping with [Business Name]. If you are not satisfied with your purchase, you have [X] days from your order date to make a return.
To be eligible for a return, an item must be unused and in the same condition that you received it. Your return [needs/does not need] to include the original packing slip to be accepted.
You [will/will not] be responsible for covering return shipping costs. To print a return shipping label, please [click here/email us/fill out the form below].
You will receive a refund in the form of [a credit to your original payment method/a gift card] within [X] days of us receiving your return. Shipping costs for the original order [are/are not] refundable. The cost of return shipping [will/will not] be deducted from your refund.
As ecommerce continues to grow, returns are also on the rise. Ecommerce merchants must be prepared — from shipping and logistics to creating a return policy that meets expectations and encourages customers to buy.
Want to learn more about making returns a competitive advantage for your business? Download our webinar, “5 Steps to Build Loyalty Through Online Returns,” to learn how to create a streamlined and straightforward return process across all the places you sell online.
Download the webinar recording to watch the entire presentation.