How To Set Up and Date An Effective Returns Policy

If you run a retail business – whether it’s bricks and mortar or online – it’s essential you have a returns policy.

In fact, in a European-wide survey, it was revealed that 52% of shoppers typically return products they’re not satisfied with, while the same percentage check the returns policy before making a purchase. Meanwhile, in the UK, 42% of shoppers say they would not order from an online shop if the returns period is less than 30 days. Having a returns policy and making sure it meets consumer expectations is therefore very important when it comes to making sales.

However, anyone that runs a retail business will be fully aware of how time-consuming returns can be. That’s why it’s vital that yours is efficient from a business perspective, as well as attractive to customers.

Shaping your refund policy

It’s not enough to simply have a policy which enables shoppers to return goods in-store. You must shape that policy to meet shopper expectations and evolving shopping habits. Market researchers Appinio published figures in 2022 which revealed that 71% of UK customers wouldn’t shop online if they had to pay to return items.

Other findings show that only 67% of shoppers would be willing to travel to a store to return an online purchase in person, and 63% would be less likely to shop online if they had to pay return postage costs. Perhaps most strikingly, 94% of shoppers said that free returns are important to them when shopping online.

If you’re a retailer, then you may baulk at the thought of handling the cost of a comprehensive returns policy. However, the response when shops such as Zara put an end to free returns demonstrates how charging shoppers to make returns can evoke a negative response.

The cost of free returns

The message from online shoppers when it comes to scrapping free returns is precise – don’t do it. For many retailers, this is easier said than done, however, particularly in the fashion sector. According to retailer Boohoo, for example, the 94% collapse in profits which they experienced up to the end of February 2022 was largely down to the number of returns being made. In part, this is doubtless a reflection of changing shopping habits, with shoppers ordering multiple sizes and styles and returning what they don’t like, as well as wearing an item for a single event and then returning it. You, therefore, need to find the right balance between avoiding losses through large return volumes and making your store attractive to shoppers that value free returns.

The legal approach to a returns policy

The question of whether or not to offer free returns, and how to put together internal structures to deal with them efficiently, will vary from retailer to retailer. One thing which won’t change, however, is the legal position on offering returns. In simple terms, according to the UK governments own website, a full refund needs to be provided if an item is faulty, not as described or does not do what it’s supposed to do.

Many retailers, in an effort to attract more shoppers and differentiate their offers from other retailers, add to the requirement of this basic return. They do this by offering returns to shoppers who simply don’t like their item or extending return periods.

When you do not have to offer a refund

There are certain circumstances in which retailers do not have to offer a refund or return. It should be noted that items purchased at a sale price are still eligible for refunds.

A retailer doesn’t have to offer a refund if:

• The shopper knew that an item was faulty when they purchased it.

• The shopper damaged the item by trying to repair it or by having it repaired by someone else. In some circumstances, they may still have the right to a repair, a replacement or a partial refund.

• The shopper no longer wants the item, for reasons such as it being the wrong size or colour. This exemption doesn’t hold if the shopper purchased the item without seeing it.

For particular items, a refund only needs to be offered if the item is faulty.

These items include:

• Personalised items, such as made-to-measure furniture covers

• Perishable items, such as frozen food and flowers

• Newspapers and magazines

• CDs, DVDs and computer software which is still unwrapped

Online, mail and phone order sales

If you sell items online, over the phone or via mail order then customers have the right to cancel their order and ask for a refund even if the items in question are not faulty in any way. For the purposes of the legal position on a returns policy, retail of this kind is known as ‘distance selling.’

A returns policy for distance selling

As a retailer engaged in distance selling, you have a legal duty to offer a refund to shoppers if they inform you within 14 days of receiving the goods that they wish to cancel the order. Once the shopper has informed you of this decision, they have 14 days in which to return the goods. Once the goods have been returned, you have a legal duty to refund the customer within 14 days. In these circumstances, the customer does not have to provide a reason for wanting the refund.

Proof of purchase

If you’re providing a refund or replacement for a customer, then you have the right to ask them to provide proof of purchase. In many cases, this will be a sales receipt, but it could also take the form of a bank statement or the packaging for the item.

Exchanges and faulty items

If a customer has accepted an item but, at a later date, discovers some kind of fault, you may need to repair or replace it for them. The shopper still has the right to reject the item in question, even if you have repaired or replaced it. The definition(s) used for a shopper having accepted an item are as follows:

• They told you that they accepted it, having had sufficient time to inspect the item after receiving it

• They altered the item in some way

You have a legal duty to repair or replace any item a shopper returns within six months unless you are able to prove that it wasn’t faulty when it was purchased. If a customer asks for a repair or replacement after a six-month period, you have the right to ask them to prove that it was faulty upon purchase.

Things that must be included in your returns policy

Bearing in mind the statutory rights which you have to offer shoppers, it may seem tempting to not bother with a returns policy at all. The statistics quoted above demonstrate the danger of this approach, however, since many shoppers will base their decision to purchase from you on the basis of your returns policy. This is particularly true if you opt to offer a more generous returns policy, in which case you will be in a position to impose more conditions on refunds. These conditions may include:

• The customer must provide an original till receipt

• The goods need to be returned, unused and in the original packaging

• There is a specific deadline for returns to be made

• Rather than a refund, you will offer a credit note or an exchange of the goods

These conditions can’t be imposed on a shopper who has a legal right to return their items. You should take great care to ensure that any written returns policy doesn’t mislead customers in terms of what their legal rights are. The safest route is to state this in the clearest possible terms, i.e. including the phrase ‘This returns policy is offered in addition to your statutory rights under the Consumer Rights Act 2015.

As explained, the returns policy will differ depending on whether the goods are sold face to face or via ‘distance selling’. If you sell items face to face, then the following would comprise an effective returns policy:

Legal rights

The law states that when you purchase items from a retailer you have particular rights as a consumer. These include the right to ask for a refund/replacement/repair/compensation if the items in question are faulty or not as originally described.

Our returns policy

We offer rights in addition to those outlined in the law. If you change your mind about the items you purchased, then you can return them within 14 days provided they are unused and you can provide an original till receipt. If you do so we will offer an exchange or a credit note.

Distance selling returns policy

If you’re engaged in distance selling, such as selling items via your website or away from your business premises (i.e. if you sell to customers in their own homes), then, as detailed above, the shopper will have additional legal rights in terms of returns. These will need to be reflected in your returns policy, which should be drawn up to include:

• A summary of the legal rights if goods are faulty or not as described

• Details of consumer rights for returning items without giving a reason, generally within 14 days of the items being delivered

• Any additional rights you wish to offer shoppers, such as extending the statutory 14 day cancellation period

• The condition which returned items need to be in – some retailers stipulate items being in original packaging, for example.

• If you sell online, you need to explain whether return shipping is offered free of charge or will need to be paid by the customer

Do customers need a warranty?

Although you may choose to offer a warranty or an extended warranty, this won’t impact the legal rights of shoppers to ask for free repairs or replacements.

Policies across the UK

If you’re putting a returns policy together for the first time, or rewriting an existing policy, it’s recommended that you look at some of the more popular returns policies offered by leading UK retailers. The publication Retail Week conducted a survey of the 20 largest UK retailers and found the following:

• The average time limit on returns was 30 days, which was offered by 35% of retailers

• 30% of retailers offered returns within 28 days

• The most generous time-frame was offered by Aldi, which gives shoppers 60 days to make a return

• The least generous was Sports Direct, which has a limit of just 14 days

How to process refunds with Square

Having a fair return and exchange policy is a way of attracting customers and building long-term customer loyalty. If you partner with Square, the process of handling returns is simplified and streamlined, whether you offer returns and refunds at the point of sale or through your online store. The process has been reduced to just a few simple steps:

Go to Transactions from your online Square Dashboard.

Select the relevant payment, click ••• then click Issue Refund.

Under Refund Items, tick the box next to Items to refund the entire sale, select the items you’d like to refund or click on Refund Amount to refund a specific amount.

Under Refund Items, tick the box next to Items to refund the entire sale, select the specific items you’d like to refund or click Refund Amount to refund a specific amount.

Your return policy could make the difference between making a sale or losing shoppers to other stores. Bear in mind, however, that while a generous policy may attract more customers, it could damage your cash flow and income streams if the processing of those returns takes up too much of your valuable time and resources. Working with Square means being able to create a returns policy that you can deliver on with the minimum of disruption.