Ecommerce Returns: Expert Guide to Best Practices (2024) - Shopify South Africa (2024)

Ecommerce returns can be a disease—aggressively attacking profit margins, gutting conversion rates, and ultimately threatening your business.

Collectively, consumers returned products worth a staggering $743 billion in 2023—around 14.5% of total retail sales. The National Retail Federation estimates that these returns resulted in $400 billion in lost sales for U.S. retailers.

It paints a bleak portrait, especially for online retailers. But the real cost driver is this: Many customers buy with an explicit plan to immediately return some or all of their items.

In response, businesses are adding workers, increasing warehouse space, and establishing separate departments to handle reverse logistics. Returns are the new normal and are central to the customer experience. But they don’t have to be a plague.

In fact, how you deal with ecommerce store returns—before and after purchase—can differentiate your brand, create a competitive advantage, and even make you more profitable.

What is a return policy in ecommerce?

A return occurs when a customer sends back something they bought online. It can happen for a variety of reasons, like dissatisfaction with the product, getting the wrong thing, or being damaged. It usually involves the customer requesting a return, shipping the item back, and then getting a refund or exchange.

A return policy is a written set of rules that state what a store allows in terms of accepting returns. For example, Wayfair’s return policy is as follows:

• Returns can be made within 30 days of purchase
• The product must be undamaged, disassembled, and in its original packaging
• However, Wayfair also lists out items that are non-returnable no matter what

Having a return policy can help protect your business from too many returns, especially if products are used or damaged.

What is the average return rate for ecommerce?

The average return rate for ecommerce was 17.6% in 2023. This means that for every 100 products sold, nearly 18 are returned. Factors contributing to a high return rate can include customer dissatisfaction, incorrect sizing, or the product not matching its online description.

The state of ecommerce returns

Understanding what the state of ecommerce returns looked like in 2023 helps you get a grasp on what to expect in 2024. Keep this data in mind so you can plan for your upcoming returns.

Ecommerce return rates by industry

Ecommerce returns happen across all industries. It’s become a necessary evil for retailers.

However, we are seeing a large difference in returns via online purchases versus in-store purchases. The average retail return rate overall was 14.5% in 2023.

The average return rate just for online purchases is higher, though, at 17.6%, and the average return rate for brick-and-mortar stores is 10.02%. We also have to consider BORIS, or buy-online-return-in-store, returns. When counting those numbers, the in-store return rate jumps to 13.3%.

In addition, the National Retail Federation reports that for every $1 billion in sales, the average retailer incurs $145 million in merchandise returns. Plus, the expectation of fraud, even when a receipt is present, sits at 13.7%, a small decrease from 2022’s reported 14%.

The ecommerce categories that experience the most returns are:

• Clothing (25%)
• Vags, accessories, and shoes (18%)
• Food and beverages (13%)

Why do people return items?

When asked why they returned items, DealNews found that 65% of online shoppers said the item didn’t fit. Other reasons include:

• Item was damaged or defective (56%)
• Didn’t like the item (44%)
• Item didn’t match the description (31%)
• Found a better price somewhere else (13%)
• No longer needed the item (12%)
• Buyer’s remorse (11%)
• Ordered the wrong item (11%)

Ecommerce returns and the holiday season

Unsurprisingly, the number of returns mirrors peak ecommerce sales periods. The holiday season, for example, is the most popular time of year for online shopping. In 2023, holiday online sales were estimated to reach nearly $1 trillion.

Holiday return rates sat around 15.4%, a decrease from the 17.9% average we’ve seen in years past. Whether it’s gifts a friend doesn’t like or trying to reclaim some money they spent in a holiday-inspired splurge, it’s why ecommerce brands receive the most returns throughout December, January, and February.

The impact of returns on customer loyalty

When people do decide to return their online purchases, most retailers opt to refund the purchase price to a customer post-return. Some offer exchanges; others give a gift card to redeem on a future purchase.

Regardless of which refund type a retailer is offering, there are strong customer expectations to compete with. But put a foot wrong in this return experience and you’ll add a hurdle in your mission toward getting repeat customers.

Get the returns experience right and customers will return to buy again. You’ll make future purchase decisions easier and increase customer lifetime value.

How to manage ecommerce returns

Having a clear cut process to manage returns can make them less costly to your business. Keep these options in mind to help you build a better, more efficient process.

Post the item back to your warehouse

This is the most popular returns process for ecommerce-only brands that don’t also have a brick-and-mortar store. When a customer wants to return an item they’ve bought online, they post it back to your warehouse or fulfillment center. From there, the merchandising department inspects the product and confirms it’s eligible for a refund.

Retailers can save time on manual returns with return management apps. They speed up the process, give customers a status of their return, and update your inventory management system automatically (more on that later).

Return items to store

If you have a retail store, consider allowing ecommerce customers to visit it to return their items. This is the BORIS process we mentioned earlier. The returned goods can then be inspected and put back on the shelf for future customers.

Not only are store returns more convenient, but enticing customers to enter a store could prevent future returns. If a customer is returning a t-shirt that doesn’t fit, for example, they’ll have the opportunity to try on other sizes during their visit. That gives them more confidence in future purchase decisions—both online and offline—because they know their size.

Outsource reverse logistics

Returns management is a lengthy process. But it’s one you don’t have to handle in-house. Third-party logistics (3PL) partners handle the entire order fulfillment process—including returns. A provider offering reverse logistics stores a retailer’s inventory in a third-party warehouse.

When customers return an item the 3PL has previously shipped, it arrives back at their warehouse. Their team inspects the item and processes a refund. The approved returned item is then put back on the shelf to be picked for another order.

Best software for handling ecommerce returns

Brands can handle ecommerce returns by using one of the many returns and exchange apps available in the Shopify App Store. These apps track and fulfill orders, get your products out the door, and protect your business from risky transactions.

Across all Shopify businesses, 65% of refunds are performed manually, the remaining 35% via apps. Here are five of the most popular.

Happy Returns

Happy Returns is an ecommerce returns management software used by retailers like Rothy’s, Everlane, and Andie. Sanaz Haji*zadeh, Happy Returns’ director of product management, says, “Happy Returns offers box-free returns for online merchants through a combination of software and reverse logistics—pioneering in-person, aggregated returns that can help dramatically reduce shipping costs and the impact on the planet.

“Happy Returns covers all aspects of post-purchase: from tracking orders as they are fulfilled to providing flexible return options for merchants, no matter where their warehouse and shoppers are located.”

In addition to its returns software, Happy Returns also provides online buy-and-return, in-store, and mail-return services for hundreds of leading merchants. It maintains a network of more than 2,600 Return Bar locations where online shoppers can drop off their returns in person.

“Every merchant should focus on selling and increasing revenue,” says Sanaz. “By using tools that automate the post-purchase process, they can reduce operational headaches. Of course, merchants can use one tool for each task, but combining them in one powerful tool makes it easier to gather data, manage their return policy, and keep everything seamless and on-brand.”

💡Get Happy Returns on the Shopify App Store

Loop

Loop is another customer returns management tool for Shopify Plus sites. Customers submitting a return are incentivized to exchange the item, rather than return it. They can exchange an item for another size or color in one click.

Should a customer still want a refund for their purchase, Loop helps retailers streamline their returns process. It uses data from a returns form and your returns policy to automatically approve or deny requests.

"We like Loop because it is incredibly user-friendly, so it’s super easy for customers to return items,” says Lanai Moliterno, founder of Sozy. “We like this because it makes us look good and lets the customer leave with a positive experience. Because of the way that it’s set up, it makes it easy to swap out returns for other products in our shop, which helps keep the customer and the money.”

💡Get Loop on the Shopify App Store

AfterShip

AfterShip has its own Shopify app to assist with any post-purchase needs, including returns. Its main goal is to help businesses improve post-purchase retention, offering features such as tracking, returns, warranties, and more.

Shopify merchants interested in using AfterShip can access it in the Shopify app store. While customers can take advantage of a number of great features, the returns management software offers a 50% reduction in returns processing time and a 50% increase in revenue retention by offering exchanges.

💡Get AfterShip on the Shopify App Store

ReturnLogic

ReturnLogic is another returns management software that could be a great option for your ecommerce business. With automation tools to help make the process more efficient, ReturnLogic’s software has proven results, like a 30% decrease in returns and 15 minute decrease in return processing time.

ReturnLogic also has a returns management tool specific to Shopify businesses, enabling our customers to set up a seamless return policy that makes their customers happy.

Ecommerce returns best practices

Now we know the process for handling ecommerce returns and the options available to you, there are still things you can do to reduce the number of returns you’re handling. (That’s the end goal, after all. Fewer returns mean happier customers and more revenue.)

Here are six ecommerce returns best practices to boost efficiency and cut costs.

Create a comprehensive return policy

One way to make returns easier for your customers is by creating a comprehensive return policy that is easy to find. Your return policy should include information like:

• How long customers have to make a return
• The condition items must be in
• How and where customers can make a return
• Items that can be returned vs. exchanged
• What items can be exchanged for (full refund, store credit, etc.)

Utilize our return policy template to get started writing your own return policy. Make sure you link your return policy in the footer of your website as well as in prominent areas during the checkout process so that your customers can easily find it.

For example, Rothy’s highlights its return policy on each product page to increase conversions and prevent returns.

Make product information accurate and easy to find

It's standard practice to check that all public-facing content—including product descriptions—is accurate and detailed. If the product arrives differently than expected, there's a high chance it'll be returned.

To reduce returns and improve conversions, make sure the following information is included on every product page across your ecommerce site:

• Product weight and dimensions
• Materials used to make the product
• Size guides, including the size a model is wearing (if appropriate)
• Your return policy

Take Supplement Warehouse, for example. It ships 300 supplement packages daily through its warehouse, all of which are ordered through its ecommerce store. Its former marketing manager, Brian Anderson, explains that most people return their items because customers didn’t notice that their product contained a specific ingredient.

“Because we sell vitamins and supplements, many people order the product and wait until they have it in hand to review all of the ingredients,” says Brian. “Some are allergic, or their doctor tells them not to take it, so they end up returning it. We have made sure that all product labels are large and visible on product pages. This makes it easier for potential customers to read the label before they purchase."

Automation helps solve most of these issues. Use plug-ins like Low Stock Alert to see when items are running low. This prevents you from selling an item that isn’t available—and shipping the wrong item in its place.

According to Josh Wayne, VP of commerce products at TrueCommerce, “A lot of brands try to manage all their product information manually, and with ecommerce channels growing so rapidly, it’s just not feasible to avoid mistakes that way.

“What ends up happening is, a customer orders a product, and when it arrives, it’s the wrong color or size or compatibility, because there was incorrect or missing information online. It’s an immediate return, and can also result in low ratings and reviews, which impact future sales,” Wayne adds.

Use 3D/AR on your ecommerce website

Shopping in-store naturally has some advantages over shopping online. Amongst the biggest is the ability to see, try on, and interact with products before a customer decides to buy them.

Augmented reality (AR) technology helps online shoppers experience the same thing. Retailers can use it to show what their products look like when they are tried on, in a customer's home, or next to an item they own for a size comparison.

Gunner Kennels, for example, uses augmented reality and 3D technology in its ecommerce store. It knew it would be difficult for customers to see the size of a dog crate and whether their pet would fit inside it—which would inevitably lead to returns.

With the help of Shopify Plus, Gunner Kennels developed 3D models of its crates. “With this technology, buyers can now use their device to place the crate right next to their dogs to confirm sizing, decreasing our return rate by 5%,” says Macey Benton, VP of marketing at Gunner Kennels. “We would like to use this feature on future products and other accessories moving forward.”

The retailers’ investment in 3D and AR technology paid dividends:

• Return rate reduced by 5%
• Cart conversion rate increased by 3%
• Order conversion rate increased by 40%

📚Learn more:Augmented Reality in Ecommerce: How AR, VR, and 3D Are Changing Online Shopping

Pack and ship items securely

It's easy to think that once an item has left your warehouse, it's off your plate. The truth is that some items are returned because they arrived faulty or damaged. But you wouldn't ship them in that state. Something went wrong in transit.

Granted, your delivery carrier plays a big role in this. But there are steps you can take to minimize the chances of an item becoming broken or faulty through shipping—and therefore, being returned:

• Inspect every item of clothing before it’s dispatched to a customer
• Use protective material, such as bubble wrap, in a delicate package
• Add Fragile labels to parcels with easily breakable items inside (like glass)
• Use the correct parcel size so items don’t jolt around in transit

Make your return process sustainable

Most companies’ return processes don’t meet sustainability standards. In fact, the transport of goods and people is among the top contributors to global carbon emissions.

Preventing the likelihood of returns help to reduce your ecommerce brand’s carbon footprint. The fewer packages that come your way, the less fuel and resources you use.

Unfortunately, you’ll still deal with returns. Make sure your ecommerce return policy is more sustainable by ditching the prepackaged free-return labels in your parcels. Printing those labels—even for customers who don’t need them—is wasteful. Instead, ask customers to go online and print their own labels when needed.

Keep customers informed about the status of their return

For ecommerce businesses, brand perception and reputation are everything. Just one tweet like this can influence another customer’s decision to purchase from you or a competitor:

The most important question to ask when assessing your reverse logistics process is whether or not you’re designing and optimizing the experience for the customer or for your business—ideally, it’s a mix of both.

When in doubt, default to the customer. First, keep them up to speed on the returns process while in the flow, either by email or, preferably, via Facebook Messenger or SMS. If your OMS facilitates this, incredible. Second, get feedback and ratings on the returns process itself—that’s where you’ll find gold nuggets to set yourself apart from the competition.

Find a shipping carrier that supplies tracking information. Most offer tracking numbers for customers to see the location of their returned parcel. Once it arrives at your warehouse, send the customer an automated message to confirm you’ve got it. Give them an ETA on how long they should expect to wait for a refund.

Protect your business against ecommerce return fraud

Fraudulent return requests cause the biggest losses for 15% of all retailers, which is why return fraud has become more of a priority for retailers.

It’s crucial to separate the types of returners and track them automatically. A tool like Shopify Flow can help. Establish refund thresholds based on per-order dollar values or the number of returned items. Second, use that threshold to automatically:

• Tag customers for identification and segmentation
• Notify your customer service team via email or Slack to investigate
• Add those customers as a segment within an onsite personalization tool to exclude them from free shipping and/or full-refund offers
• Exclude them from free shipping at checkout by creating a shipping script based on one or more of your customer tags

Some retailers—including Amazon and ASOS—are reportedly updating their returns policy to blacklist serial returners. While extreme, such actions are often necessitated by the first type of habitual returner.

If blacklisting customers isn’t an option for your ecommerce business, there are other things you can do to prevent return fraud:

• Choose a delivery carrier that supplies tracking numbers or proof of delivery. For example, a photo inside a customer’s open doorway.
• Substitute exchanges or store credit for cash refunds. There’s less incentive for someone to try and return a stolen item if they’re getting a like-for-like back.
• Offer a longer exchange window than you do for a refund. This ensures your customer still has ample time to return but makes an exchange more likely.
• Ditch free return shipping to make it harder for fraudsters to push their luck with return fraud.
• Only process returns if the item comes with a receipt or proof of purchase. This prevents people from returning stolen merchandise or items purchased from another retailer. You’ll also see the exact amount they paid for the item to process a refund.
• Don’t accept returned items of clothing without the original tag or protective seal. This prevents wardrobing: when a customer wears an item and returns it as if it were new.

Ecommerce returns are inevitable, but manageable

With over 17% of all online purchases eventually diverting back toward the retailer’s warehouse, ecommerce returns aren’t something you can ignore.

Do everything you can to prevent returns—from writing accurate product descriptions to picking and packing items securely.

Remember that a small number of returns is inevitable. When it happens, keep customers informed about the status of their return. Choose sustainable options. Prevent return fraud by offering online store credit instead of cash refunds. Consider outsourcing reverse logistics if it’s becoming too time-consuming to handle in-house.

The returns process might be the final part in a first-time customer’s journey with you. But it’s still just as important as the first part.

Looking for a returns management platform that works seamlessly with your Shopify Plus site? Check out our partners.