Author: Nat Josef Oct 20, 2022 7 Min READ

Ecommerce Returns Management: Challenges & Tips | Extensiv

7 Min READ
Ecommerce Returns Management: Challenges & Tips | Extensiv


Ecommerce Returns Management Challenges and Best Practices To Improve Efficiency

We’ve all heard it before: the customer is always right. And while that may be the case—or at least a good mindset for your business to adopt—this doesn’t mean the customer is always reasonable. No matter the circumstances, some people just want to find the loopholes, especially when it comes to returns.

Take me as an example—I consider myself to be a reasonable, ethical person, but one day in 6th grade, I was supremely disappointed with the tiny, burnt, nearly cheese-less piece of pizza placed on my plastic tray. I loved pizza day and that mockery of a slice was simply unacceptable so I conjured up a scheme to return the slice for a better one.

I took a strand of my hair and surreptitiously placed it under the anemic layer of cheese. I walked up to the counter and—hopefully not too loudly—rebuked the offending follicle and demanded another slice. I got it, but I never forgot the look on the face of the employee who served me the original slice. Her expression said it all—she was mortified that a strand of hair made it into the slice in the first place.

It was not my finest hour, but I still consider myself a good person, so it just goes to show that even “good” people will manufacture reasons to get what they want.

People may be manipulative or dishonest about why they want to return items, but as a business that wants happy customers and a good reputation, how do you avoid customers abusing your returns policy? Like most things, a clear, iron-clad policy can stop all the funny business before it even starts.

To address, cut down, or altogether prevent returns, your brand needs to gauge what policies and practices are leaving your company exposed to problematic returns. We paired up with experts from Pitney Bowes to get their thoughts on issues that only lead to trouble and tips on how to write a returns policy that reduces the costs and headaches of returns.

Common Scenarios That Cause Problems for Businesses

When it comes to writing a solid returns policy, it’s best to avoid giving people too much latitude. Here are some common scenarios that can lead to trouble:

Little Awareness of Practices Like Bracketing, Wardrobing, Etc.

Bracketing is when customers order the same item online in multiple sizes or colors, etc. knowing they will just return the rest once they choose the item they want. Its cousin—wardrobing—is when customers buy a holiday-related outfit with the plan to return it once the festivities are over. In a recent BOXpoll, Pitney Bowes found that 68% of consumers who shopped brands like Dyson, Shark, Bissell, and Hoover found these practices acceptable.

This is the customer’s plan from the start, but businesses won't know it until the customer requests a refund. According to the National Retailers Federation (NRF), in 2020, shoppers returned $100 billion in merchandise they purchased online; in 2021, it was $218 billion. Additionally, for every $1 billion in sales, the business sees $166 million in returns and for every $100 in sales, up to $10.30 of that can be lost due to fraud.

And guess who foots the bill? Yep—you.

Off-Brand and Off-Putting Returns Policy Language

According to Pitney Bowes, brands need to have a precise returns policy and prominently display it on their online store platform, resisting the urge to bury it in the fine print. The policy should inspire loyalty and make returns easy, but more importantly, the policy needs to protect your business and be aligned with your brand and mission.

Using phrases like “Under Any Circumstance” and “Sole Discretion” can be a huge turnoff as can requiring customers to jump through hoops and fill out tedious forms. And policies that are overly restrictive (e.g., crazy short timelines for returns, limits on “eligible” items) are not ideal for companies that have built a reputation for being friendly and accessible.

But being too easy-going can also come back to bite you. Take this line from Costco’s return policy: “It helps if you have the receipt or original product packaging, but it may not be necessary to process your return.” By using phrases like “it helps” and “may not be necessary” in their messaging, they’ve basically told their customers that they’ll take back anything no matter what.

Offering Too Few (or Too Many) Options for Returns

While you need to be flexible, it’s not a good idea to have a policy that is “my way or the highway” in nature. Customers often have legitimate, honest reasons for why they need to return an item so businesses need to offer their customers some realistic options without spreading themselves thin with too many options or make it so difficult for their customers that they never shop there again.

Sometimes less is more—and sometimes it’s not. Let’s say your brand sells items to customers who live predominantly in rural areas. You were generous enough to offer free shipping, which was already a strain on your finances, but a strategy you employed to attract customers and stay competitive. Now some of these customers want to return their items for valid reasons, but you only offer the option of returning items by mail.

This is an example of providing too few options. While it’s convenient for your customers, you could find yourself covering shipping costs twice—once for the original purchase and now for the return.

4 Tips for Creating a Successful Returns Policy

Tip #1: Cover the Basics of Your Policy and Display It Prominently

Businesses need to be deliberate, clear, precise, and comprehensive when creating a returns policy so it’s a good idea to be transparent about the returns process to minimize churn and reduce inbound calls. To achieve this, Pitney Bowes suggests the following:

  • On a highly visible place on your site, let the customer know how to request a refund
  • Detail the process around the return label and make it clear if the customer needs to pay for the return label
  • If offering a carrier option, let the customer know how they are expected to get the return package to the carrier. Is home pickup available? Does the customer need to drop the parcel off at a carrier location or third-party retail location?
  • Let the customer know when they can expect their return to be processed; customers want to know when they will get their money back
  • Detail how customers will receive their refund. Will the refund go to the original payment method (credit card, business credit card, gift card), or will they be given store credit?

Tip #2: Be Crystal Clear About What Your Policy Covers

The last thing you want to do is expose yourself to potential nightmares from customers who might capitalize on a vague policy that doesn’t specifically address what you do and do not allow in your returns policy. It’s one thing to be “nice” and flexible but setting boundaries and clarifying your policies helps everyone by reducing potential miscommunications and heading off unrealistic expectations.

Some examples of well-written, we-mean-business return policies include this one from Funny Aprons, the “Fast Track Refund” program by Lululemon, and American Eagle, whose policy includes a handy tracking timeline and a robust FAQ section.

On the flip side, businesses should stay clear of overly lenient returns policies like Costco’s, which is written in such a way that customers can return anything, at any time, for any reason—no questions asked (which they often do).

Unfortunately, when you give some people an inch, they will often take a mile, so Costco has had to accept returns of dead Christmas trees in February, an empty bottle of wine from a customer who complained that it gave her a headache, and packages of peanut butter M&Ms because they had chocolate in them, which her kids were allergic to. Her reasoning? That she had previously purchased M&Ms without chocolate, which is—obviously—untrue, but led to a refund.

That kind of leniency just leaves the door open for abuse. Costco can get away with that kind of thing, but most brands can’t be that lax and still remain in business.

Tip #3: Be Smart About the Returns Options You Offer

Don’t go too crazy with the options—you should make sure you have the labor and resources to actually deliver on your promises. For example, if you offer customers the option to return items by phone, email, a live chat, through your site, through a third-party seller, and through multiple carriers, you could overwhelm you and/or your small staff by pulling them in too many directions, which could lead to errors and slower returns.

Too many options can cause your business to lose money at multiple points during the returns process, including costs related to packaging, the labor it takes to fulfill the original order and the return, not to mention the freight costs of transporting your items to them, the return of items back to you, and even the additional costs of sending them a replacement. Shipping prices are expensive enough without having to pay for it three times over.

To avoid this and stop the drain on your bottom line, Pitney Bowes suggests:

  • Offer your customers multiple drop-off locations like the post office, UPS store, parcel lockers, and return bars as an alternative
  • Give your customers label options—like including a custom QR code generator or pre-printed label they can bring with them to a carrier location
  • Provide customers with a retailer portal or carrier website to schedule a home pickup
  • Deduct shipping fees from the customer’s refund—a BOXpoll survey found that 39% of surveyed customers equate paying for a return shipping label to a lion eating their leg, so unless you sell prosthetic limbs or lion repellent, this is a good choice to offer.

Tip #4: Take the Time to Factor in All the Costs to You and Your Customer

For new, small-, or medium-sized businesses, it can be challenging to enumerate all the costs associated with returns so hidden or not-so-obvious factors can easily be overlooked.

To handle returns and still run a profitable business, it’s necessary to balance the cost of processing returns with the actual cost of the item and your margin of profit. For example, if you sell packs of stickers at an already low margin of profit from what you paid wholesale, that $3 profit could send you into the red when your return shipping fees are $3.95. If the label itself costs more than the original item, you might prefer that the customer keep it.

Big retailers like H&M, Zara, JCPenney, and J.Crew are adding (or thinking of adding) a fee for returns. If you aren’t planning to do something similar, it’s a good idea to identify other areas where costs can be passed onto customers.

In Pitney Bowes’ inaugural retailer survey, they found that returns cost an average of 21% of order value. You don’t need a business degree to see how untenable this is for a company so be sure to take into account:

  • Your bandwidth, labor, and resources for processing and packaging returns
  • The cost of processing the returns compared to the actual cost of the product
  • The cost of processing and transporting returns
  • Areas you can (and can’t) afford to “take a hit”
  • Costs associated with inflation, supply chain challenges, and higher customer acquisition costs
  • Which items can be returned for store credit

A Final Thought: Prevention Might Be Better Than the Cure

While all these expert tips and policy strategies will no doubt help your business, there is another solution to consider: preventing returns in the first place. This could be a route for some businesses looking to nip any potential problems in the bud.

Many brands—big and small—are starting to implement virtual try-ons and try-before-you-buy options to bridge the digital and physical experience and help customers get a feel for their products before actually buying them. Warby Parker—a massive eyewear brand—offers a home try-on of up to five pairs of glasses. 

Clothing and jewelry brands are also early adopters of this tech trend, offering prospects the option to try on clothing they’re interested in before they buy it. Amazon’s Prime Wardrobe is pretty well-known, but smaller brands have also seen huge successes with this model. Walmart has launched their own virtual try-on platform and there are now multiple AR apps that will let you try on shoes using your phone.  


The early pandemic-related shutdowns of brick-and-mortar stores significantly increased online shopping and the rate of returns. But free shipping and free returns—which were never “free” for ecommerce businesses—eat away at profitability so it’s important for brands to craft and refine their returns policy now before peak season holiday-related returns starts rolling in.

Looking for ways to save money even with higher shipping rates? Check out: How to Address Shipping Rate Volatility During Peak Season: Expert Advice from BUKU Ship and Pitney Bowes


Written By:
Nat Josef

Nat Josef has composed and managed content for 10+ years in the fields of SaaS, logistics, automotive, editorial, and communications fields, primarily in the Bay Area startup community. With a flair for word-smithing and specializing in thoughtful storytelling, her strengths lie in content marketing, technical writing, copy editing, and working with cross functional teams.

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