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How to Know If You Have a Profitable Returns Policy

How to Tell if You Have a Profitable Ecommerce Returns Policy

Ecommerce retailers must have a return policy to properly run their business. Without it, shoppers lack the confidence to make a purchase and spend time worrying about what will happen if they’re unsatisfied with the product when it arrives.

But, anyone can slap on a returns policy to their ecommerce storefront. How do you ensure that the one you’re using is profitable for your business?

Without a profitable returns policy and an optimized returns management system, you risk returns eating away at your bottom line.

In this article, we discuss how to create a returns policy for your Shopify store, provide tips on how to make it profitable, and even run through a few examples of what some good returns policies look like.

By the end of this article, you’ll be an expert on how to create a profitable ecommerce returns policy.

5 Steps for Creating a Returns Policy on Shopify

Steps for Creating a Return Policy on Shopify — It’s important for your policy to be well-written and easy to understand. This helps build trust with your customers and encourages them to make the purchase.

As one of the most popular platforms for ecommerce retail, let’s focus on how to create a returns policy for your Shopify storefront.

It’s important for your policy to be well-written and easy to understand. This helps build trust with your customers and encourages them to make the purchase.

In order to communicate your returns policy properly, you need to be sure about the parameters you’d like to set for your customers:

STEP 1:

Determine the Time Frame for Returns

How long do your customers have from the time of the original purchase to initiate a return? While you may think having a smaller returns window will help reduce the number of returns, choosing the right returns window for your brand is a bit more complicated than that.

You want to choose a time frame that is long enough that customers feel they have an adequate amount of time to make a logical decision about the product but not so long that customers abuse your returns policy to commit returns fraud.

STEP 2:

Specify the Conditions for a Return

What condition does the product need to be in in order for the return to be accepted?

Some retailers say products must be returned in their original packaging, others say that product returns will be accepted under any condition, while some don’t ask for the product back at all!

There’s no right answer here, but there are a few things to consider when deciding what’s right for your business:

Cost of Shipping: When a product is returned, a carrier needs to come to pick up that product from the customer’s location and bring it back to the warehouse. The costs of transportation typically land on the retailer.
Cost of Repackaging: Returned products can be resold depending on the condition of the product. Although fewer than half of all returned goods can be resold, products that are eligible for resell still have the cost of repackaging and restocking to consider.
Environmental Impact: Items that aren’t restocked typically end up in landfills. The more products that end up in the trash instead of in consumers’ homes, the bigger the negative impact your business has on the environment.

STEP 3:

Explain the Process to Your Customers

Your customers shouldn’t be confused about how the returns process goes. Spell out what the customer should expect once they initiate a return.

Be sure to include these factors in your returns policy:

What return types are accepted for this product (refund, exchange, store credit, warranty, etc.)
What is the returns window?
What are the conditions for a return to be accepted?
Should they expect any time or processing delays?
How long will it take for the return to be processed?

STEP 4:

Clarify the Shipping Process

What are the logistical steps for the customer to complete the return?

Will someone be picking the product up at their house or will they need to drop it off at a specified location? Does the product need to be packed when it’s dropped off? Will the customer need to print a shipping label or can they use a printerless QR code?

Spell out your shipping policy and the steps to make the process as simple as possible for the customer to complete. The easier you make it for them, the more satisfied they’ll be with the post-purchase experience .

STEP 5:

Include a Return Confirmation & Contact Information

The last step to creating a return policy on Shopify is to be sure to include a confirmation message for customers who initiate a return and contact information in case they have any further questions or concerns.

Again, you want your customers to see that you care about their experience, so you don’t want them to feel in the dark about what’s happening with their return.

The door should always be open for them to be able to communicate with you about their return until the RMA is completely processed.

Then, you could use this touchpoint as an opportunity to upsell or cross-sell other products they may find interesting.

How to Tell if Your Ecommerce Returns Policy is Profitable

Now that you have a return policy on your Shopify storefront. That’s great! But, you still need to be able to tell whether or not your return policy is profitable for your ecommerce business.

There are a few factors you could be looking at to analyze whether your return policy is profitable:

Look at Your Return Rate: Your return rate is the percentage of items that you sold that were later returned by customers. A high return rate may mean that your customers are not satisfied with your products. It also could mean that your return policy is too loose and needs to be adjusted in order to prevent returns fraud.
Check Your Cost of Returns: Collecting returns data can help give you an idea of how much each return is costing you. If your return costs are outpacing your profit margins, this is a good indication that your return policy needs adjusting. With returns outpacing sales for 91% of retailers, this is the case for most ecommerce businesses.
Monitor Your Customer Feedback: Negative reviews related to your return policy let you know if it’s getting in the way of your relationship with your customers. You should be adjusting your return policy if you notice a pattern of feedback pertaining to your policy return window, rules, clarity, and how it’s communicated to customers.
Benchmark Your Performance Against Competitors: Compare your return policy to those of your competitors. Are they similar? Which one offers a better experience for their customers? If your return policy isn’t as customer-friendly as your competitors, you may lose out on customers who choose to shop with them instead.

Examples of the Best Ecommerce Returns Policies

How to Tell if Your Ecommerce Returns Policy is Profitable — There are a few factors you could be looking at to analyze whether your return policy is profitable:

Now that you know how to create a returns policy on Shopify and how to ensure that it’s profitable, let’s look at some examples of good ecommerce returns policies:

Gymshark – This fitness apparel retailer offers a 90-day return policy for all items in their original, unworn condition. Customers can receive a full refund or exchange for a different size or style.
Kettle & Fire – This bone broth company offers a 365-day return policy for their products, even if they have been opened and used. They also offer free return shipping and a full refund for any reason.
Allbirds – This sustainable shoe company offers a 30-day return policy for their shoes, which can be worn and tested during that time. They offer free return shipping and a full refund, as long as the shoes are in their original condition.
Rothy’s – This eco-friendly shoe company offers a 30-day return policy for their shoes, with free return shipping and a full refund or exchange offered for any reason.
MVMT – This watch and accessories retailer offers a 60-day return policy for their products, with free return shipping and a full refund or exchange available for any reason. They also offer a lifetime warranty for their products.

Each of these policies offers something different to their customers. However, overall, these Shopify stores offer generous return policies that prioritize customer satisfaction and provide peace of mind for online purchases.

Manage Your Returns for a Profitable Ecommerce Business

At ReturnLogic, we believe returns are a necessary evil in running an ecommerce business.

While traditionally, it’s been seen as a negative factor that hurts retail profits, upgrading your return policy to be customer-centric will boost customer loyalty and turn returns into a profitable part of your business.

Now that you’re an expert on how to create a profitable return policy on Shopify, learn how to optimize your returns management to leverage returns data and make insightful decisions across your business by booking a demo with us today!