How to reduce returns and refunds: Practical tips for eCommerce sellers

Returns and refunds are significant hurdles for eCommerce sellers, impacting both profitability and operations. They can both be quite the pain points for online business owners, for many reasons. But, wait – what is the difference between the two?

Distinguishing returns from refunds

According to the Shopify blog, when a customer sends an item back to your store or warehouse, it’s considered a return. Typically, customers must return the item to receive a refund, which involves reimbursing them for all or part of the purchase price of the unwanted product.

Returns and refunds – the numbers

Understandably, the costs of shipping, restocking, and inspections can quickly erode margins, while logistical and customer service burdens strain resources. Return fraud and practices like ‘wardrobing‘ (when customers purchase products, use them only for a short while with the intent of returning them) add further financial risks. The average eCommerce return rates hover around 20-30%, with at least 30% of all products ordered online being returned. In 2022, returns cost retailers $816 billion in lost revenue, with businesses losing about 66% of the original item’s price due to returns.

Shoppers are highly influenced by return policies; 67% check the returns page before making a purchase, and 54% say that free returns or exchanges are the second biggest influence on whether they buy from a brand. Moreover, 58% of consumers want a hassle-free ‘no questions asked’ return policy, and 47% want an easy-to-print return label. An easy return process can significantly impact customer loyalty, with 92% of consumers saying they would buy again if the product return process were easy.

Efficient return processes are essential, as warehouse operations are heavily affected by returns, with around 30-35% of work time dedicated to non-revenue-generating tasks. Detailed product content is crucial for 88% of shoppers, influencing their purchasing decisions and potentially reducing return rates.

In this article, we will explore the different ways in which eComm sellers can reduce the likelihood of returns by combining multiple methods and thinking outside the box. We’ll share actionable tips with real examples of certain platforms and trustworthy tips by industry-leading eCommerce sellers, including new AI tools that are worth exploring.

Top eCommerce sellers minimize returns and refunds. See how you measure up

In the competitive world of eCommerce, seasoned sellers have developed several effective strategies to manage returns and refunds. Many leverage comprehensive return management platforms to streamline the process and enhance customer satisfaction. Offering free returns has also become a common practice, not only to increase visibility and trust but to achieve top-rated status on major platforms. 

Additionally, sellers focus on transparency and clear communication, providing detailed product descriptions and high-quality images to set accurate customer expectations. By prioritizing customer feedback and continuously refining their return policies through trial and error, these experienced sellers maintain high levels of customer satisfaction and loyalty, setting a benchmark for others in the industry. Alex Ugarte, operations manager of London Office Space:

When customers know exactly what to expect, they’re far less likely to be dissatisfied.

Alex Ugarte Operations manager, London Office Space

To summarize the top four methods:

• Using comprehensive return management platforms
• Offering free returns
• Focusing on transparency and clear communication
• Prioritizing customer feedback

In this article we will focus on practical tips for reducing return and refund rates, and achieving overall customer satisfaction.

Consider offering a trial period for high-value products

A no-questions-asked return policy can reduce purchase hesitation and build customer confidence, encouraging sales and minimizing returns. Implement this by updating return policies and clearly communicating the changes to customers.

Free returns can boost visibility and help you achieve top-rated status

Stephanie from @selectthreads notes that many buyers filter search results by free shipping, making sellers who offer free returns stand out. This strategy attracts more customers and improves your seller ranking on platforms like eBay.

Craft detailed return policies with exchange incentives

Offer free return shipping for exchanges instead of refunds to retain sales and address customer needs. This approach reduces the overall return rate and fosters customer satisfaction.

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Create effective customer education and support tools

Invest in high-quality materials like manuals, video tutorials, demonstrations, and live Q&A sessions to help customers understand how to use products properly. As Kenan Acikelli, CEO of Workhy, explains: “I’ve found that when customers have a clear understanding of what they’re buying, they’re less likely to be disappointed.” Shaju N D, managing director of Intellect Outsource, adds: “Don’t include unnecessary details or be too creative with your video editing. Most likely, your customers are looking for a quick, easy tutorial that will take them from step one to step two fast.” Prioritizing customer education leads to higher satisfaction and fewer returns.

When customers have a clear understanding of what they’re buying, they’re less likely to be disappointed.

Kenan Acikelli CEO, Workwhy

Always be upfront about your products

Being meticulous with measurements, photographs, and descriptions can reduce returns. Matt Aird, CTO of Custom Neon, advises: “We make sure our clients are aware of exactly what they are purchasing by offering thorough specifications, correct measurements, and high-quality photos taken from various viewpoints. This clarity lowers the likelihood of returns by helping in the proper expectation-setting.”

Invest in high-quality, interactive product content

Beyond clear photos and descriptions, consider integrating 360-degree views, AR (Augmented Reality) features, and interactive videos to showcase products in action. This immersive approach helps customers understand the product better, reducing returns due to mismatched expectations and enhancing overall user experience.

Quality control inspections are key

Matt Aird, CTO of Custom Neon, shares: “Customers receive things in flawless condition, which lowers the number of returns resulting from flaws or quality issues.” By ensuring products meet high-quality standards before they reach customers, you can significantly reduce return rates and enhance customer satisfaction.

Think outside the box – literally

Packaging matters. Insubstantial, uninviting packaging can make customers reconsider their purchase or doubt its authenticity. Instead, choose appealing, shipping-protected packaging. As Michael Schmied, senior financial analyst at Kredite Schweiz, explains: “You wouldn’t believe how many returns are due to damaged goods. It’s heartbreaking to see perfectly good products come back just because of flimsy packaging.”

I always tell my clients to invest in better packaging… [it] shows you care about your product and your customer’s satisfaction.

Michael Schmied Senior financial analyst, Kredite Schweiz

Turn lemons into lemonade

Dissatisfaction is a seller’s worst nightmare, but compensating unhappy customers can lead to loyalty and retention while preventing future returns. Jaiden Vu of the Chasing Scale podcast explains that most customers value feeling reassured over getting a refund. Showing empathy can boost loyalty. u/Agcryptonic from r/ecommerce suggests offering exchanges, store credit, or a 50% refund while letting customers keep the product – reducing hassle and costs. These strategies turn potential losses into stronger customer relationships.

Enhance customer decision-making with pre-purchase assistance tools

Brian Chasin, CFO of Soba New Jersey: “Implement tools like virtual try-ons, size guides, or product comparison features on your website to help customers make better-informed decisions before purchasing.” By providing customers with these resources, businesses can ensure that customers select the right products for their needs, ultimately reducing return rates and increasing customer satisfaction.

Pre-purchase assistance can significantly reduce the likelihood of returns.

Brian Chasin CFO, Soba New Jersey

Implement a robust post-purchase follow-up system

After a purchase, send a series of emails explaining product usage and benefits, reinforcing the decision to buy. Consistent communication is key in maintaining a good relationship with your customers.

In addition, automate follow-ups to confirm satisfaction, offer usage tips, and encourage reviews or direct communication for issues. Personalized thank-you emails, how-to guides, check-in messages, and other forms of consistent communication ensures customers feel supported and confident, leading to higher satisfaction and fewer returns.

Employ user-generated content and reviews

Encourage satisfied customers to share photos and videos of your products. Displaying this content on product pages provides real-life context and reassurance to buyers, reducing returns. Joshua Paul, business consultant, believes that:

Prospective customers can make better selections by learning from the experiences of other customers.

Joshua Paul Business consultant

Utilize predictive analytics for inventory management

This method helps forecast product demand and identify items with high return costs, allowing you to adjust inventory and marketing strategies. By anticipating customer needs and trends, you can reduce overstock, minimize returns, and enhance overall efficiency. 8fig’s Sales Forecasting tool will help you do just that.

Think of your mobile users

With nearly 80% of consumers making eCommerce purchases from smartphones, it’s essential to optimize listings for mobile. Shoppers often miss small details on smaller screens. Ensuring mobile-friendly listings improves customer understanding and reduces returns.

Avoid the ‘try before you pay’ model

Nabil Malouli, VP of global eCommerce at DHL, shared his insight on the DHL podcast: “The ‘try before you pay’ types of models are incentivizing consumers to order more and then just return what they don’t like. So, obviously, that’s not gonna be a good way in order to reduce the amount of returns that we see in the market.” This strategy can inflate return rates rather than reduce them.

[The ‘try before you pay’ model is] not gonna be a good way in order to reduce the amount of returns that we see in the market.

Nabil Malouli VP of global eCommerce, DHL

Experiment with return policies to see what works best

Use a trial and error approach to determine the most effective strategy. To streamline this process, consider using platforms recommended by experienced sellers, as these are trustworthy and effective. Here are three of the most popular:

Happy Returns: A comprehensive return management solution that simplifies returns for both you and your customers, enhancing satisfaction and reducing hassles.

AfterShip: Provides automated tracking and notifications, helping you manage returns efficiently and keep customers informed throughout the process.

Loop Returns: Focuses on automating the return and exchange process, allowing you to retain more revenue and offer a seamless experience to your customers.

The unmatched value of human touch in an AI-driven world

While we’re usually all about AI, it’s important to note that sometimes, a personal, human touch “remains irreplaceable,” says Richard, project manager at eCosmetics. “AI might be a whiz with numbers, but it can’t understand the intricacies of a customer’s skin type or desired look like our trained team of human experts who offer personalized advice.” Some areas require people rather than machines, and savvy business owners adjust themselves accordingly.

Foster a transparent and trustworthy brand image

Share behind-the-scenes content about manufacturing, sourcing, and company values to build trust and strengthen customer relationships. When customers trust your brand, they are more satisfied with their purchases and less likely to return products. Showcasing your commitment to quality and ethics creates a loyal customer base that values your brand’s integrity.

Enhance your brand through a loyal community

Use social media, forums, and loyalty programs to build a strong community. Encourage customers to share experiences, tips, and reviews. A loyal community provides valuable feedback and helps reduce returns as customers feel more connected to your brand. The ‘serving before you sell’ approach, recommended by Tori Dunlap of Her First $100K, is highly effective for fostering loyalty and minimizing returns.

Conclusion

Being an eCommerce seller is often a one-man show, requiring you to juggle multiple roles and tasks. This can lead to a heavy burden. With 8fig’s AI-based financial management tools and tailored funding solutions – you can take the load off. Join 8fig today to discover how to tackle challenges like returns and refunds with grace and ease, ensuring smooth operations and sustained growth for your business.

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