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January Returns: How to Handle Reverse Logistics (for Online Business Owners)

January 14th, 2021Small Business Resources

Do you dread customer returns, or do reverse transactions excite you? Understandably, most business owners love the thrill of sales — and prefer not to think about how to undo a deal.

But in these unique times, when consumers are changing spending habits, 95% say that a good returns experience convinces them to shop with you again. Ace these so-called reverse logistics, and reap the benefits of better customer retention. Here’s how.

Write a detailed, on-brand return and exchange policy

A good experience begins with a smart, all-encompassing — but still tight — policy. Before jumping into exactly how to craft one, consider the reasons why a good return and exchange policy is so beneficial to your business.

First, it increases your business’s credibility as a reliable establishment. Researchers at Narvar found that 49% of consumers look at an online store’s return policy when deciding to buy.

A thorough and crystal-clear return policy also prevents time-sucking waffling on your part. The clearer your policy, the faster you’ll be able to make decisions. And your customers can make quicker decisions, too.

Finally, a good policy scales your communications. Imagine having your team reply to every customer who wanted to know whether their return window had passed or where to get a return shipping label. It would take a whole team just to answer questions! The policy you write solves this.

Here’s how to get started.

Make it clear and comprehensive

For a successful reverse logistics operation, your small business’s return policy needs to cover all scenarios. Start with the most basic, common, obvious answers:

  • Do you offer returns on physical merchandise? What about digital products?
  • In what case(s) do you accept a return?
  • What do you offer when a customer isn’t satisfied with their purchase? A refund, a replacement item, other goods, or a store credit?

Once you’ve covered the main points, move into more specific details:

  • By what date must customers initiate a return?
  • What condition must the item(s) be in to justify a return?
  • How do they start that process?
  • What costs are involved, and who will cover them?
  • What will happen next? What can they expect?

Source: Dan Burton via Unsplash

Finally, keep your brand’s tone of voice in mind as you craft your return and exchange policy. If your product descriptions are quirky, snarky, or clever, then carry over just a small portion of that personality into your returns experience. That said, now’s not the time to roast your customer. Mix your wit with genuine “we’re in this together” empathy for the perfect tone. One Funny Mother does this well. Check out their return policy as an example.

Nailed it: Examples of return policies done right

It’s often easier to understand a concept when you can see it demonstrated in the wild. Here are a few brands that have used the reverse-logistics policy tips to influence brand loyalty.

Sleep Number Mattresses: This brand’s generous return policy encourages users to try their product for at least 30 days. But then it goes on to give users up to 100 days to make a final decision. Best of all, Sleep Number’s phrasing makes these complex time frames crystal clear to customers.

Dinovite: Similarly, pet nutrition supplier Dinovite urges customers to use their product for 90 days before deciding whether to request a refund.

Athleta: Generous return windows aren’t the only way to build loyalty. Athleta differentiates their products by urging customers to exercise in their apparel (even through a mud run) before sending it back. They call it their GIVE-IT-A-WORKOUT GUARANTEE. “If it doesn’t perform,” the brand says, “Return it for FREE.”

Hyphen Mattresses: For an example of a policy that gives great instructions on how to initiate a return/exchange, look no further than Hyphen, another mattress company. Their reverse-logistics policy packs all the details customers need into one tight, clear, thorough sentence.

Home Science Tools: Remember the importance of specifying who will pay for what? An example of this done well is Home Science Tools, whose policy specifies details like “at our expense” and “20% restocking fee.”

GameStop: This retailer’s policy has every customary element for a solid return policy. Sadly, though, GameStop’s wording misses the opportunity to connect with customers on any level. For a company whose creative, fun, storified product descriptions include gamer lingo, the return policy should include one or two gaming buzzwords.

Learn how online exchanges compare with in-store returns

In 2020, many brick-and-mortar businesses either extended their offerings to include online shopping or switched to entirely online offerings. Learning the differences between the two returns processes — in-store and online — is just as important as learning how to sell across both channels.

Where they overlap (and work together)

The main commonality between in-store and online returns is that both give you, the business owner, an opportunity to learn more about and connect more deeply with your customer. Both types of returns allow you to collect data that you wouldn’t otherwise have. The more information you have, the easier it is to analyze trends and optimization. Not to mention the more power you have to connect on a personal level with customers.

Source: CardMapr via Unsplash

A good customer management system (CRM) can help you do this at scale. Free tools like Zoho or HubSpot let your customers talk with one representative today and continue that same conversation with another employee tomorrow — seamlessly. Your CRM also equips your online returns to complement your in-store returns by allowing customizable scenarios. For example, a customer can initiate a return online and then switch to bringing the item back in-store without confusing your customer service team.

A word of warning, though: Beware the dangers of data misuse or mishandling. Be sure your transaction information is super secure. Trust only business services and products that employ the highest forms of data security so you don’t compromise your customer’s faith in your brand.

How they differ

There are many differences between online and in-store returns.

For starters, e-commerce returns are more common. But that’s OK because frequent returners are 45% more profitable than other customers.

Source: Markus Spiske via Unsplash

Another difference is that your online customers will see your return policy at different times when shopping on site as opposed to in-store shoppers. For example, instead of on cash-register signage, shoppers will see the return policy on a checkout page as they review their digital cart, and again on their email confirmation instead of the physical receipt. And perhaps they’ll see it one more time on the bottom of product pages as they go back to peek at the items they’re considering buying for others.

Perhaps most unnerving of all the differences between on-site and online returns is that people feel more comfortable using social channels to contact brands after an e-commerce purchase. After all, they’re only one mobile app or browser tab away from a public forum where they’re guaranteed a voice. Customers use social to praise return policies, ask questions, and even try to initiate returns on social.

Source: Twitter

The public forum gives small businesses a chance to show off their customer care. Another perk is that online communications allow retailers to reconnect in a natural way later. In-store returns, on the other hand, are a one-and-done experience.

Finally, online returns are different in many ways. They can be automated and even outsourced. Programs that offer event-based triggers and scheduled actions greatly diminish the human involvement needed in each digital return interaction. For more on how to implement the latest technology, check out the short guide compiled by reverse-logistics experts at Cerasis. And to learn exactly what’s involved in outsourcing your returns and exchanges (especially as you scale), check out OptimoRoute’s helpful analysis of options.

Set up and execute successful returns and exchanges

Now you have everything you need to handle returns at scale. As you know by now, the first step is not to wait for disgruntled customers to come to you. No, the first step is to instruct and equip customers to initiate a return without your intervention. This information — again — should appear in your policy, in confirmation emails, and in delivery notifications.

The next step is to give people exactly what they need to send items back. When customers contact you to inquire about or initiate a return, reply within minutes. Employ a chatbot or auto-emailer if necessary, but be sure they receive — at the very least — an acknowledgment of their message and a note saying they’ll be helped shortly.

Next, create a return label for your customer using your fulfillment tool’s reverse logistics feature. (If you’re not using an order fulfillment service provider yet, look into affordable options like ShipBob or Oberlo).

Now, communicate clear and accurate expectations on timing — make sure the customer understands the policy.

Want to go above and beyond? Include an instructional video so customers feel you’re truly walking them through the process. Recommend smart packaging options as an optional but nice touch. Say, for example, “Some customers find old shoe boxes work well, but a small bubble envelope works, too.”

Consider providing a link for them to locate the nearest shipment drop (with hours of operation).

Receive and check the returned merch

Dedicate a location in your small business to receive and inspect items. Include a time slot on your (or a helper’s) calendar devoted to this task. When items arrive, examine them and compare the interaction and goods against your policy. If the exchange fulfills all conditions, incentivize shoppers to accept store credit so that the revenue can stay in your account. For those who prefer (and qualify for) a payout, initiate a refund quickly.

As your small business scales, you’ll want to look into buying and implementing an RMA app like ReverseLogix or Kechie to help you automate and expand your capabilities.

Communicate throughout (and remind customers of) the good experience

Ping your customer on the same channel they began the conversation to update them throughout the process. Acknowledge that you understand the purchase didn’t work out (and reaffirm your commitment to their happiness). Again, your messaging should speak to exactly what’s happening at each stage:

  • A status update upon receipt of the return parcel: “We’ve received your …”
  • Info on your decision of how to handle the return: a full refund offer, store credit, or restocking fee waived, etc.
  • Confirmation of the reverse transaction: “Your card has been credited for …”
  • A follow-up a few days later with similar items, a CSAT survey, a discount code, and/or a personal note thanking them again for shopping with you (and inviting them back)

Naturally, no one enjoys returns. Neither you nor your customer goes into a deal expecting to reverse it. So instead of focusing on your own inconvenience, express empathy toward your customer, and assure them that their happiness is your priority.

Organize your bookkeeping processes for profitable reverse logistics

Congratulations. You’re ready to turn your reverse-logistics operation into a customer-retention machine.

Well, you’re almost ready.

The last, and perhaps most important, step is to organize your bookkeeping. Returns and exchanges already cost the business precious time and energy. Don’t let them throw a wrench in your tidy ledger and, consequently, sap more resources. Update your bookkeeping processes now.

Instead of two journal entries, each return now necessitates four:

  • Credit to purchases or accounts receivable for the original sale
  • Debit from inventory or current (not fixed) assets — again, for the original sale
  • Credit to inventory (or assets) for the return
  • Debit from sales, purchases, or accounts receivable (AR) — again, for the return

Logging these reverse transactions and their many details can be double the work of conventional sales. Or they can be automated away with Neat.

Download Neat and connect your financial institution to stream transactions and match their records to their actual events (like returns). Doing so cuts down on the time it takes you to do the work. It also eliminates the need to do it all over again correctly once you realize (oops!) there was a human error involved in your work. Plus, Neat is simple. There’s no lengthy learning curve or accounting knowledge needed to use it.

Don’t spend more than you need to by letting your transactions get disorganized. Let Neat help.

Reverse logistics as customer retention: A perfect way to delight customers

If you’ve recently made the switch to or begun scaling an e-commerce business, then you’ve experienced a lot of changes. One big change you’re juggling is the reality that 30% of online purchases are returned, while only around 9% of brick-and-mortar store purchases are brought or sent back.

Don’t let the difference zap your excitement. Update your systems and processes now, starting with your bookkeeping, and in no time, you’ll see returns and exchanges as the growth opportunity they are.

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