How Does Returns Management Work? 

Returns are a core part of the eCommerce shopping experience, and as consumers get used to the convenience of eCommerce, businesses grapple with a dual challenge. They need to manage both customer expectations and the operational challenges caused by the returns process. 

Efficient returns management is no longer just a back-end operational concern; it’s a critical component of customer service, brand reputation, and financial health. Brands that can refine and optimize their returns processes gain a competitive edge by nurturing customer loyalty and optimizing profitability. Let’s dive into the returns management process and how it can help retailers win and keep customers. 

What is Returns Management?
Why Do Customers Make Returns?
How Can Retailers Reduce Returns in the First Place?
What Returns Challenges Do Retailers Face?
What Exactly Is Returns Fraud and Abuse?
How Can Retailers Help Customers Make Returns?
How Can Retailers Create Useful Returns Policies?
Transform Returns from Challenge to Advantage

Returns management is the process of handling returned products, from the initial customer return request through to inspecting goods, processing refunds, and restocking or otherwise reallocating the returned products. Effective returns management means happier customers, reduced costs, and successfully dispositioned goods. 

While the terms “returns management” and “reverse logistics” are often used interchangeably, they refer to distinct processes. Reverse logistics refers to the return of goods from consumers to a retailer’s supply chain. Returns management refers more to the creation of a seamless, positive customer experience across all the steps a return requires (e.g., initiation, label creation, refund processing). While reverse logistics encompasses specific operational and technical processes, returns management focuses more on the customer impact of, and overall satisfaction with, the returns process. 

The simplest definition of returns dispositioning is the process of deciding what to do with returned items. This impacts the financial recovery created by the return, so it’s important for retailers to carefully assess and define dispositioning strategies for their returned inventories. Optimally, they can disposition returns in ways that both reduce costs and potentially places items back into inventories. A few examples of returns dispositioning include restocking into existing inventories, refurbishment, donation, recycling, or safe disposal of the product. 

Customers choose to make returns for a variety of reasons—from sizing issues to buyer’s remorse.  
 

In the vast realm of eCommerce, product returns can be seen as a double-edged sword: a necessity for customer trust on one side, and a challenge for operational efficiency on the other. While it’s essential to streamline the returns process, a more effective strategy often lies in proactively reducing the number of returns in the first place. Here are some proactive steps businesses can adopt to reduce returns, enhancing both customer satisfaction and operational productivity. 

One of the most influential factors in online purchasing decisions is peer reviews and customer requests. When customers share their genuine experiences about a product, it offers prospective buyers a clearer picture of what to expect and provides businesses with valuable insights into product improvements. 
 

While reviews and Q&A sections offer unsolicited feedback, sometimes, a more directed approach is necessary to understand the root causes of returns. 

Customer support teams often serve as the front line when it comes to product returns. They hear firsthand the issues customers face and the reasons behind returns. 
 

Retailers face a variety of returns challenges, from high processing costs to restocking issues and even customer satisfaction issues.

One of the primary challenges in eCommerce returns is the cost of returns. Unlike in a brick-and-mortar scenario where a customer might simply walk back into the store, online returns involve several steps, each incurring a cost: 
 

The logistics behind handling returns can quickly become a nightmare, especially for businesses that operate on a large scale. 

At the heart of eCommerce is the customer. The way businesses handle returns can significantly impact customer perceptions, loyalty, and retention. 
 

Per a recent Radial and Two Boxes retailer survey, 44% of brands claim that the biggest returns pain point they face is returns fraud and abuse. Fraud methods grow more complex year over year, with retailers describing label tampering and fraudulent tracking as the top causes of fraud. Fraudsters may be growing more sophisticated, discarding simpler decoy and empty box returns for more complex tactics. 

Importantly, Radial’s research indicates a disconnect between how retailers and consumers view returns fraud and abuse. Shoppers find certain types of fraud acceptable, even normal, while retailers feel the pain of fraudulent returns. 

There are fundamental differences in how consumers define returns fraud and abuse. One big example: Consumers generally do not consider bracketing (purchasing multiple items in different styles and colors with the intent to return them) to be fraud. This is particularly true for younger shoppers. 

Additionally, 27% of consumers return items outside of published return windows, and over a quarter will return ineligible items. Again, these trends are weighted toward younger consumers. 

Retailers will need to leverage strategies designed to balance great customer experiences for loyal shoppers while identifying bad actors. Brands can enhance fraud detection and prevention processes by: 

Offering customers the ability to process their returns through self-service portals or in-store kiosks can expedite the return process. This not only enhances customer experience but also reduces manual intervention from the business side. 

At the crux of returns management lies the return policy itself. A straightforward, transparent policy serves as a foundation, setting clear expectations for both the customer and the business. Customers should be able to easily locate and understand the return policy without wading through jargon. This clarity enhances customer trust, making them more likely to commit to a purchase, knowing they’re backed by a fair returns framework. 

Retailers often refer to the operational aspects of returns management as “reverse logistics,” and there are a variety of ways to optimize the full process across supply chains. 

Automating the returns process can lead to significant operational efficiency. Systems can automatically generate return labels, track return shipments, and even initiate refunds once the return is processed. Implementing optimized workflows ensures that each step is handled seamlessly, reducing errors and increasing speed. 
 

Emerging technologies like AI and machine learning offer promising avenues to automate the customer returns process. By analyzing purchase and return data, these tools can predict which products are more likely to be returned and why. With these insights, businesses can address root causes, tweaking product designs, descriptions, or even marketing strategies. 

The eCommerce landscape, while brimming with opportunities, also presents unique challenges. That includes returns. An efficient returns management process not only safeguards retailers’ bottom lines but also fortifies customer trust through a positive returns experience. 
 

With Radial’s cutting-edge returns management solutions, we provide businesses with the tools to navigate this complex terrain with ease and efficiency. Embracing such solutions signifies a commitment to excellence, ensuring seamless operations and unparalleled customer satisfaction.

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