According to Harvard Business Review, consumers return about 16.5 percent of the merchandise that they buy. Collectively, those returns reduce businesses’ revenue by over $800 million per year. A 16.5 percent return rate is potentially ruinous for almost any business, but it’s especially damaging in e-commerce because online sales often have extremely small profit margins due to the high level of competition. Would your e-commerce business survive if its revenue was reduced by 16.5 percent? To ensure your success, you need to prevent those returns before they happen. Here’s how to reduce returns in e-commerce.
Have a Clear Return Policy
The best way to reduce product returns is by having a policy that clearly outlines what’s returnable and what isn’t. It’s standard procedure to offer a refund for a product that’s unopened, for instance, as long as the customer pays the return shipping charge. An unopened product can still be resold to another customer at its full retail price.
Opened products, however, are often a different story. Suppose, for instance, that you sell products like vapes. If a customer tries a device and doesn’t like the flavor, it’s unfeasible for them to expect a refund because there’s no way you can sell the same product to someone else. It’s going straight to the recycling bin as a total loss. That’s why vape shops like Vape Shop Wholesale clearly state in their return policies that opened products with no defects aren’t returnable.
Mistakes do unfortunately happen in e-commerce from time to time, and you’ll have to eat those if you want to maintain a good relationship with your customers. Your return policy should state that you’ll accept returns – at your expense – if a customer receives a product that’s incorrect, damaged or defective. We’ll talk about how to avoid those situations next.
Package Your Orders Well
Have you ever received a weekly Subscribe and Save shipment from Amazon that had a huge number of heavy items packed in a single box? Have you ever opened one of those boxes to discover that one or all of the items were damaged as a result? That’s an extremely annoying situation, but the good news for you is that Amazon eats the cost of the damaged products and makes things right.
That system works for Amazon because their revenue is absolutely enormous. It doesn’t work for ordinary e-commerce businesses, though, because a damaged product is a total loss. If you have enough of those losses, you’ll go out of business. Make sure they don’t happen by packaging orders very well. High-quality boxes and packing materials will add to your fulfillment costs, but that’s nothing compared to the cost of refunding entire orders because the products weren’t received in usable condition.
Sell Reliable Products
Customers don’t just return products because they’re damaged; they also return them because they’re defective or don’t work as advertised. It’s a very bad idea to import a random product from an overseas distributor and throw it on your e-commerce site without testing it yourself first. Evaluate the product as a consumer and compare the marketing language to the way the product actually performs in real life.
- Does it work as advertised?
- Does it continue to work after you’ve used it for a while? Is it likely to last through the duration of the factory warranty?
- Does it look the same in person as it does in the pictures?
- If it’s a clothing item, is it true to size?
If you can’t say “yes” to those questions, the product has a high return risk. One of the best ways to reduce returns in e-commerce is by selling products that you’d be happy to use yourself.
Perfect Your Fulfillment Process
Product damage is one of the top reasons for product returns, and damage doesn’t just happen because of carrier mishandling or low-quality shipping materials. Damage can also happen because an order wasn’t packaged correctly in the first place.
- Make sure that you have a consistent and streamlined fulfillment process and that all orders are sent out with the proper protection.
- Train your fulfillment personnel well to ensure that all customers will have the same experience regardless of who packed their orders.
- Consider adding an extra layer of accountability by having employees sign or number the invoices before closing the shipping boxes.
Remember that it’s very worthwhile to ensure that your order fulfillment personnel are happy and perform at peak efficiency. A good salary for a warehouse worker is a worthwhile expense that can play a major role in preventing losses due to returns.
Vet Your Distributors Carefully
Product dissatisfaction is a major reason for returns in e-commerce. As we described above, dissatisfaction often happens because of a mismatch between how a product is advertised and how it actually performs in the real world. Receiving counterfeit or fake products, however, is another major source of dissatisfaction. Fake products are even worse than defective ones in a way, because they can potentially do serious harm to your business’s reputation.
Imagine what would happen if word got out on Reddit that a product offered on your e-commerce site is actually fake. Could you survive the loss of consumer confidence that would result from that? You might think that counterfeit goods are only sold by street peddlers and not by reliable e-commerce businesses like yours, but it’s not that simple. Collectively, the counterfeit goods sold worldwide each year are worth an estimated $2 trillion. The world’s biggest e-commerce businesses have people working day and night to keep fake products off of their platforms.
To avoid counterfeit goods being sold on your e-commerce site, you need to vet your suppliers carefully. Your goal should always be to get as close to the original manufacturers as possible. That doesn’t just ensure authenticity – it also keeps your wholesale prices low. Every time another middleman is added to the supply chain, the price goes up. If you can’t source your products directly from the manufacturers, ask them what distributors they recommend.
