Returns are a necessary part of any ecommerce business. Business 2 Community reports that customers return 30 percent of all online orders while they return only 8.89 percent from brick and mortar stores. It’s especially true when the buyer is sending a gift. While you can’t do anything about hurt feelings, a company that handles returns well with a clear policy can keep customers loyal even when they have trouble. Here are some things to keep in mind when you’re handling ecommerce returns.
A Policy for Handling eCommerce Returns
Businesses used to see returns as only a problem. It costs money to sell something and then take it back. Increasingly, however, businesses see their returns policy as a way to attract and retain customers. According to a survey by Red Stag Fulfillment, 66 percent of customers check an online retailer’s return policy before they buy anything. They want to know how much of a hassle it will be to return something if they buy, and they’re more likely to take the leap when it’s easy.
What do you need for a good returns policy? Your policy should be:
- Clear: Confusing policies drive customers away and they mean more phone calls, costing you more money.
- Convenient: A convenient process will increase customer satisfaction so they’ll buy from you again. Pre-printed return labels are great for this.
- Generous: It’s a good idea to have a time limit for your return policies, but customers love it when you give them a short extension.
Make sure that you clearly state what you’re willing to do for a return. Focus on the details so customers know exactly what to expect. Clearly state at what times you give refunds, exchanges, store credit or charge restocking fees. These details can be the difference between a satisfied customer and an angry one.
Have A Return Merchandise Authorization (RMA) Procedure
Nothing bogs down a business like reinventing the wheel. If you have three different staff members setting up returns in three different ways, everyone will get confused, and it will be harder to see what went wrong when something does. It’s especially important for eCommerce, because you’re probably creating your RMA online. Here are some important things every RMA procedure, and tech solution, should do:
- Gatekeeping: Even the most generous return policy has limits, and your procedure should ensure that only the right items are returned.
- Information capture: Capture the information about why the item is being returned which can give valuable insight into your customers.
- Automation: You don’t want to tie up employees when computers can do the work for you.
- Workflow: Create a standardized workflow and process for every return. It allows you to analyze your process and change it to increase efficiency or customer service.
- Data: Without understanding what’s happening in your returns process, you won’t detect problems or be able to increase efficiency. Make sure your process produces enough data to analyze.
Returns and Accounting Issues
Handling returns can create all sorts of accounting and tax problems. Sales tax is a complicated prospect for ecommerce businesses. You have to figure out whether you collect tax, the tax rate, and any exceptions, like tax holidays, for each state in which you have nexus. If you’re doing free returns, taxes aren’t a huge problem. When you refund the cost of the item, you also refund the sales tax.
It becomes more complex when you charge a restocking fee, and each state has different rules. Here are some examples:
- Massachusetts refunds all sales tax even when you have a restocking fee. However, there is no refund at all if the return happens more than 90 days after the purchase.
- Washington charges sales tax on restocking fees separately.
- Colorado keeps the whole sales tax if the business charges a restocking fee.
While restocking fees can help you recoup some of the cost of a return that is not your fault, it can make tax reporting a complicated mess. If you charge restocking fees, make sure you are on top of every state’s regulations in which you have a presence.
Returns can be a hassle for ecommerce businesses, and they cost a lot of money. They can also come with complicated tax problems, too. But customers expect, even demand, easy convenient returns policies from their online retailers. Without one, you may save some money, but you might lose customers in the long run. A good plan for returns can help limit the cost while making sure your customers keep coming back.
