A Comprehensive Guide to Smooth Returns Management

It doesn’t matter whether you’re running an ecommerce superstore or a small boutique business — returns are an inevitable (and if managed poorly, an unpleasant) part of the customer experience.

Don’t just take our word for it though — the numbers speak for themselves: A 2020 study by IMRG found that 15% of all online orders are returned.

But here’s the thing — they don’t have to be a headache for you or your customers. Nail your returns process, and you’ll gain the ability to transform negative buying experiences into positive ones. Like some sort of sales-based sleight-of-hand, offering a fair and flexible returns policy can turn a customer’s frustration into trust, satisfaction, and confidence in your brand.

In this guide, we’ll cover everything you need to know about managing returns efficiently — minimising costs, keeping your customers content, and turning setbacks into opportunities.

What is returns management?

Also called reverse logistics, returns management is the process of handling returned products — whether they’re damaged, unwanted, or didn’t quite meet the customer’s expectations. This involves everything from the moment a customer initiates a return to the time the product is processed back into your inventory (or not, depending on the condition).

It’s not just about sending out replacements, though — returns management also involves refund processing, restocking, item inspection, and sometimes even repackaging and reselling returned goods.

Why is returns management important?

Returns are often seen as a loss: you lose the sale, and you have to deal with the logistics of getting the product back. But here’s the truth: a clear and customer-friendly returns policy can be a competitive advantage. It’s a crucial part of building trust with your customers.

A recent survey found that 40% of online shoppers would rather sit in rush-hour traffic than return an item online, so it’s up to you to make the process as friction-free as possible. Think about it — when you shop online, aren’t you more likely to click “buy” if you know you can return something easily if it doesn’t work out?

Research shows that companies with easy returns policies see higher conversion rates and customer satisfaction. In fact, 92% of consumers say they would buy again from a company if the returns process was straightforward.

A smooth returns process is also a golden opportunity to build customer loyalty. If a customer has a positive experience with a return — meaning it’s fast, simple, and hassle-free — they’re much more likely to come back and buy from you again. Not to mention, they’re more likely to spread the word about their good experience.

In short, reverse logistics is a crucial aspect of your overall inventory management process.

The hidden costs of poor returns management

Now, let’s talk about what happens when you don’t have a good reverse logistics system in place. Poor returns management can be a costly nightmare. For a start, slow processing, disorganised inventory systems, and unclear return policies can result in:

• Lost sales opportunities: If returned items aren’t restocked quickly, you’re losing potential sales on those items.
• Dissatisfied customers: Slow or cumbersome returns lead to unhappy customers, and unhappy customers leave bad reviews, take their business elsewhere, and tell others about their poor experiences.
• Increased costs: Inefficiencies in returns handling drive up costs — whether it’s due to extra shipping, restocking, or labour.

So, how do you avoid these pitfalls? By investing time and effort into creating an optimised, smooth returns process. And how do you do that? Well, we’re glad you asked…

How to create the ultimate returns management process

What does a great returns management process look like? And furthermore, how do you implement it?

Despite what you may think, returns don’t have to drain your profits or be a logistical headache. In fact, if they’re introduced correctly, they’ll actually save you money and strengthen your customer relationships. Just follow the tips below, and you’ll be well on your way.

Make it 100% transparent

The foundation of effective returns management is a clear and transparent returns policy. Make sure it's easy for customers to find and understand — nobody likes hunting through multiple pages to figure out how to return an item. According to the National Retail Federation, 96% of customers check the return policy before making a purchase, so don't underestimate how influential this can be in boosting sales.

Your policy should outline key information such as:

• The time frame for returns (e.g. 30 days, 60 days, etc.)
• The condition items can be returned in (unused, with tags, etc.)
• Ways the customer can return the item (via a store, post, etc.)
• Who pays for return shipping
• The refund or exchange process

Clarity is key. If your policy is vague or confusing, customers are likely to feel frustrated, and you’ll spend more time managing their inquiries and complaints.

Where possible, automate

Studies show that 54% of shoppers want the returns process to be as simple as possible. Frankly, we reckon that figure is even higher, but the point remains — it’s up to you to make things as slick as possible. One of the best ways to do this? Automation.

Think of how Amazon handles returns. They’ve built a system where customers can generate their own return labels, schedule pickups, and track the status of their return — all from their account. Some might call it lazy. We call it efficient.

You can implement similar features with user-friendly returns portals, where customers can initiate returns with just a few clicks. Automating notifications and updates about their return status can also keep them informed and reduce anxiety, which goes a long way in fostering goodwill.

Invest in quality control

A significant number of returns happen due to damaged or defective products. According to Statista, 27% of returns are a result of receiving damaged items. Having robust quality control processes in place helps you minimise this issue and reduce return rates.

Consider implementing random spot-checks on items before they’re shipped out to ensure that customers receive the product they expect. Not only will this reduce return rates, but it will also elevate the customer experience and help you avoid the cost of managing unnecessary returns.

Track and analyse return data

One area often overlooked in returns management is the treasure trove of data that comes with it. By tracking why customers are returning items, you can uncover valuable insights.

Is a particular product seeing a higher-than-usual return rate? Maybe there’s an issue with the product description or sizing. Are customers frequently citing damaged goods as the reason for the return? You may have a packaging issue on your hands.

With this data, you can adjust your operations to prevent future returns, streamline product listings, and improve quality control. Moreover, McKinsey reports that companies using data to inform their decision-making processes see 23 times more likelihood of customer acquisition and retention.

Offer flexible return options

Flexible return options are one of the best ways to stand out from your competition. For example, offering in-store returns for online purchases can drive foot traffic to your physical locations. Even if the customer is returning something, they may decide to browse, and potentially buy, other items.

Moreover, giving customers multiple return methods (such as return by mail, in-store, or even drop-off at a third-party location) helps make the process convenient for them. The more flexible and customer-centric your options, the better for the customer and for your business.

Use returns to gather feedback

Instead of treating returns as a purely logistical issue, use them as an opportunity to gather feedback. When customers initiate a return, ask them why they’re returning the item and whether they have suggestions for improvement. This direct feedback can be invaluable in helping you refine your product offerings and service.

Better yet, asking for feedback shows customers that you care about their experience, which can foster loyalty even when a return transaction isn’t ideal. And with 96% of customers reporting they’ll abandon a business with poor customer service, even something as small as a personalised follow-up email post-return can work wonders.

Re-sell or recycle returned products

Here’s an eye-watering statistic for you: Over $400 billion worth of merchandise is returned every year in the U.S. alone. So, rather than letting that inventory sit around, why not put it to good use and recover your costs by repurposing or reselling it?

You might also explore refurbishing products and selling them at a discount. And for items that can’t be resold, think about recycling options to minimise waste — something that customers, especially eco-conscious ones, will appreciate.

How third-party logistics (3PL) can help

If all of this sounds like a lot to manage, that’s because it is. Returns management is a complex process, but the good news is that you don’t have to handle it all in-house. Partnering with a third-party logistics (3PL) provider like us can significantly streamline your returns process and free up your time to focus on growing your business.

The benefits of using a 3PL for returns management

• Expertise in handling returns: A 3PL provider specialises in logistics, including returns management. They have the infrastructure, technology, and manpower to handle the entire returns process efficiently. From receiving and inspecting returned goods to processing refunds and restocking items, a 3PL can handle all the moving parts seamlessly.
• Cost efficiency: Managing returns in-house can be expensive, especially as your business scales. A 3PL can help you reduce overhead costs by leveraging their existing resources. Whether it’s through economies of scale, optimised warehouse management, or negotiated shipping rates, a 3PL can save you lots of money.
• Faster turnaround: A 3PL’s expertise and systems are designed to process returns quickly, meaning you can restock returned items faster, minimise inventory disruptions, and get products back into customers’ hands sooner.
• Better customer experience: A 3PL can also improve the customer experience by providing a smoother, more efficient returns process. At Pro3PL, for example, we offer tracking systems that allow customers to follow their return from start to finish, providing peace of mind through transparency.

Whether you choose to manage returns in-house or partner with a third-party logistics provider, investing in a smooth, transparent, and customer-friendly returns process just makes sense. And if you’re wondering which 3PL to join forces with, why not get in touch with our team? We’ll assess your needs and provide you with a custom quote. If we think we can help, we’ll take things from there.