Crafting your returns policy: key elements to consider

When you accept returns from your customers, you most likely have the expectation that the items that your customers send back should be in the same condition as when they purchased them.

But, if you’ve ever ended up inspecting returns to discover half-used cosmetics, stained rugs, or muddy shoes, you know that’s not always the case.

In our customer-first culture, shoppers often have the expectation that if they don’t like a product, they can get a refund on it — no matter how much they’ve used or damaged it in the meantime.

As a merchant, it’s on you to determine how flexible your returns and refunds policy for ecommerce should be. While a generous, no-questions-asked returns policy will sweeten the deal for customers who are considering a purchase, this type of ultra-flexible policy also means that your brand will be eating the shipping and restocking fees associated with every return that can’t be resold.

That’s why simply having a returns policy isn’t enough – you also need to define clear returns eligibility rules and policies. These guidelines should outline what items are eligible for return, and under what conditions returns will be accepted. Creating clear expectations and workflows around your returns process can help you prevent return abuse and protect your brand’s profit margin, while still prioritizing customer satisfaction at every step.

How do you determine product return eligibility rules?

Your product return eligibility rules should be customized based on your business, but such policies generally encompass a few different factors, such as:

• Which products are eligible for returns?
  Most merchants don’t set the same return and refund policy for all of their products. For instance, products that are listed as final sale items are not eligible for returns at all. Items that are customized also may not be eligible. Make sure that your shoppers understand each item’s specific return policy when they make the purchase, so you can avoid future misunderstandings.
  
• How long does the customer have to return the product?
  What is your return window for return-eligible products? For most shops, that window tends to range between 14 or 30 days, though we recommend offering an even longer period of time for product returns to increase customer satisfaction — after all, research has found that the majority of returns happen within the first two weeks, no matter how long your return window is.
  
• What condition should the product be in to be eligible for a refund?
  For most brands, it’s important that customers are sending back products in like-new condition — which means with tags still attached, or still inside their original packaging. For some, however, taking a more lax attitude to return condition serves as a marketing advantage: Brands like Allbirds, for instance, offer generous return policies that allow customers to get refunds on shoes for up to 30 days, even if they’ve worn them out in the wild. They know that these products can’t be resold, but they consider the financial loss worthwhile for the boost in brand equity and customer satisfaction.
  
• How is the customer’s money refunded?
  When a customer processes a return, how should they expect to be refunded, and how quickly? Some shops may offer different criteria for when a customer is entitled to a cash refund, versus when they may only be eligible for store credit. As for timing, some brands issue a refund as soon as the package is scanned in for delivery, while others wait until they’ve had the chance to physically inspect the product on arrival at their warehouse. Make sure that these terms are clear on your returns and refunds policy page, so that customers understand what to expect once they decide to ship back an item.
  
• Who covers the cost of return shipping?
  Many retailers will cover the cost of return shipping in the interest of creating an end-to-end delightful customer experience — but that free perk is becoming less common, with around 40% of retailers now charging for return shipping costs, up from 31% in 2022. Charging for return shipping can provide a disincentive for customers to engage in bracketing and other forms of returns abuse, where they’ll buy products they don’t intend to keep. Some merchants choose a tiered strategy, where they’ll charge a return fee for products they’re refunding, but offer free return shipping when the customer selects an instant exchange or store credit instead.

Setting up a streamlined returns process

As we’ve seen, return policies aren’t a one-size-fits-all event. So how can you ensure that your customers get the right resolution based on their unique needs and circumstances?

Using an online returns management platform like Loop can help. With Loop, every time a customer submits a return request, they’re directed to a self-service portal where they can choose which eligible item(s) they’d like to return, and share their reason for returning them.

If the product isn’t eligible for a return based on your standard returns policy, they won’t receive a return authorization — in that case, they’ll need to get manual approval from your customer support team to send the item back, so you’ll have discretion to determine whether you want to bend the rules or not.

But if they are returning an eligible product within the return window, they’ll then be guided through automated workflows based on their reasons for making the return request. For instance, if a customer is returning a product because it’s the wrong size, Loop can ask them if they’d like to purchase the same item in the next size up or down. If they simply didn’t like the product, Loop can incentivize them to choose store credit over a cash refund by offering them “bonus credit” that they can apply towards any item in the store — helping your brand retain more revenue through exchanges and upsells that would otherwise be lost to refunds.

Even when a customer does choose a refund, Loop simplifies the returns process on both sides. Customers are able to choose between taking the item to a nearby drop-off center or scheduling an at-home pickup. Once the item is scanned in, Loop’s dynamic routing enables you to choose the most sustainable and cost-effective reverse logistics path for the product. If the item is likely to be resold, it can be routed back to your warehouse for restocking; if not, it can be routed to a third-party reseller, a recycling plant, or a donation center instead. Alternatively, you might simply process the refund while allowing the customer to keep the item, saving your brand money on reverse shipping and restocking fees.

Determining the right returns eligibility rules — and then sticking to them — can be a complicated process. But using a best-in-class returns solution like Loop can help you streamline the process by setting up conditions and automating workflows to ensure that every customer gets the right resolution, effortlessly.

Want to see how Loop can help you optimize your return process?