What to Consider When Creating a Returns and Exchange Policy

This article is for educational purposes and does not constitute legal, financial or tax advice. For specific advice applicable to your business, please contact a professional.

Returns are a normal and expected part of running a retail business, but if it seems like the volume of returns you’re getting has increased recently, you may well be right. The increase in consumer returns appears to be directly linked to the growth in ecommerce vs traditional retail.

Returns and ecommerce

The nature of ecommerce creates issues that do not occur in the real world, or at least not to the same extent. For example, in 2020, according to Statista, the most common reason for ecommerce customers in the UK to return an item was that it didn’t fit. The other two top reasons were that it wasn’t as described and that it looked different in person.

While retailers often factor returns into their yearly forecasting, it doesn’t change the fact that handling returns can be costly. This creates a conundrum for UK-based sellers. On the one hand, there are only limited circumstances in which retailers have to accept returns at all. In most of these cases, it is the customer’s responsibility to pay the costs of returns.

On the other hand, going above and beyond the statutory minimum is a very reassuring signal to customers. In this context, your best customers are likely to be the ones who generate the most returns. This means that your returns process can become an opportunity for you to deepen your relationship with them.

In-store returns are also a great way to meet and convert an online buyer, especially if they received the item as a gift and are unfamiliar with your store. The key is to make the process customer-centric, with flexible policies that help build relationships and customer loyalty.

How to write a returns policy

To improve customer confidence, make it easy to return your goods. A comprehensive and transparent policy establishes rules and timelines for returning or exchanging unwanted products. Additionally, familiarise yourself with the law on returns and refunds before drafting your policy. While your returns policy reflects the type of products you sell, consider including the following information:

Items accepted for returns

Decide what items can be returned, what items can be exchanged, and the condition required. For example, decide whether to accept returns of items only in original condition, such as in the sealed box or with tags attached.

Decide whether to require a receipt for returns and exchange without a receipt. Also identify items considered ‘final sale’, such as something custom-made, personalised or deeply discounted for liquidation.

The window for returns

Consider extending the statutory minimum and allowing returns up to 30, 60 or 90 days from the date of purchase. Or offer a combination, such as returns within 30 days, and exchanges or store credit within 60 days. You can also have unique timelines for holidays.

Many retailers extend the deadline for returns and exchanges until after the holiday season, to account for gift-giving. Some retailers also opt to have open-ended return policies, letting customers return or exchange products for extended periods of time, or with no deadline at all. The most important thing is that you are upfront and transparent about when they can make returns.

Type of refund

Decide how to compensate customers for the returns and the documentation needed, such as a receipt or an order number. Assuming you’re taking payment by means other than cash, check the rules for the relevant payment scheme(s) to see if they have any specific requirements.

For example, some schemes will insist that any refunds must be processed through their network. Even if they don’t, it’s generally advisable to refund the original form of payment. This protects you against the customers then charging back the transaction. Decide whether to charge restocking fees.

If you don’t want to offer a refund, you can exchange the returns for the same item, such as a different size or colour, or you can give the customers store credit.

The process for completing the returns

Your business operations will impact your returns policy, including whether you’re brick-and-mortar only, online only or a combination of both. You may accept items in your store or ship them to your ecommerce warehouse.

The returns policy should state who pays for shipping if returns are accepted by shipping. You can also encourage exchanges by paying for return shipping when the customers swap the product instead of asking for a refund. Some retailers include return labels in their packaging to make returns quicker and easier for customers.

How to implement a returns policy

Once you’ve created a concise and comprehensive returns policy, ensure it’s implemented consistently across your company. Also check that it is clearly and consistently communicated to your customers; for example, put a sign behind your checkout or have one laminated to your counter.

Add a returns page to your website and include the process in your FAQ section. Include your policy on your online ordering pages for customers to view before checking out. Print your policy at the bottom of your receipt and include it in your email order confirmation. By publishing your policy in various areas, this reduces the risk of confusion and avoids disappointment later that can negatively impact the customer experience.

Consider your returns policy as part of your overall customer service training. Make sure your associates understand how to accept returns. Some retailers only allow managers to process returns, which can help reduce returns fraud. However, during busy seasons you may want to ensure that having this manager-only policy doesn’t slow down business, inconveniencing your shoppers and leaving a negative impression.

Choose a retail POS system that allows you to process returns and exchanges efficiently. Choose software that adds the product back to your inventory if the item is saleable. If the item is damaged, however, have the option to skip the restocking process so you don’t inadvertently sell an item online that isn’t available for delivery.

Common return questions and issues

Consider collecting information from customers and asking for the reason for the return. Common questions you might ask are:

  • Was the item too big or small?
  • Did they not like the item?
  • Did they find the product at another retailer for a different price?
  • Was the item damaged?
  • Did your warehouse ship the wrong product?

Capturing this information can provide some insight into your product selection and operations. Damaged or incorrect items could indicate problems in your warehouse, either in receiving inventory from your vendors or in your shipping processes.

If you see many items returned for improper fit, this could indicate a need for better sizing charts. Review your returns data when you order inventory in the future, to ensure that you’re offering products your customers like.

Returns and exchanges can be viewed as a sales opportunity, especially during the holidays when customers may be new to your store. The easier you make it, the greater the chance you encourage customers to return to your store to make more purchases in the future.