ECommerce Returns Management: A Detailed Guide

If you are running an eCommerce business, there is one area that you can’t ignore. We are talking about eCommerce returns here. 

With a transparent eCommerce return policy in place, you can efficiently manage customer returns for online purchases. You can also collect returned items, inspect them, and process refunds or exchanges. 

All of these aspects are crucial for customer satisfaction in the Canadian market. Due to a high number of online shopping, seamless return experiences heavily influence customer experience. It affects brand loyalty and eventually, business profitability. 

A positive ecommerce returns management process can significantly improve customer satisfaction, encouraging repeat purchases and developing trust in the brand. 

Customers are more likely to buy from an eCommerce store, knowing they have a reliable return option. 

Current Ecommerce Return Rates and Statistics in Canada

According to recent data, the average ecommerce return rate in Canada is around 20%, with clothing being in the most returned category. 

The second most ecommerce return rate is for product category shoes and accessories. Consumers often cite sizing issues as a key reason for returns in the apparel sector. 

Return Rates by Product Category (Approximate):

• Clothing: 25-40%
• Footwear: 20-30%
• Accessories: 15-25%
• Electronics: 10-15%
• Home Goods: 10-20% 

Trends in Return Rates over the Past Few Years:

Marginal Increase in Return Rates: Although no data is readily available for significant fluctuations, some reports suggest a marginal increase in the average return rate for ecommerce over the past few years. It’s been happening due to the growing online shopping trend and the need for convenient return options. 

Focus on Customer Experience: Ecommerce businesses are focusing more on improving product descriptions, providing detailed size charts, and offering flexible return policies to reduce high return rates. 

Factors Contributing to High Returns:

Sizing Issues: Issues in judging accurate size without trying on the product, especially for clothing and footwear. 

Inadequate Product Descriptions: Lack of details about product features and quality can result in customer dissatisfaction and returns. 

Incorrect Product Selection: Customers often order multiple sizes intending to return the items that don’t fit. 

Free Return Policies: While convenient for customers, sometimes generous return policies can encourage higher return rates. 

Key Takeaways:

Customer-Oriented Approach: To manage return rates, Canadian eCommerce businesses need to focus on providing accurate product descriptions, clear sizing data, and user-friendly return policies. 

Data Analysis: Using data analytics to identify trends and causes of returns can help businesses identify areas for improving and implementing targeted strategies. 

Sustainability Issues: High return rates pose environmental challenges due to shipping and handling processes.

Understanding the Average Return Rate for Ecommerce

According to recent industry reports, the average return rate for ecommerce is around 20-30%. It means for every 100 products sold, roughly 20-30 are returned, with variations depending on the product category.

This rate, however, can be significantly higher for industries like fashion, where sizing issues are more important. 

Industry Comparisons:

• Fashion: The fashion industry generally has the highest return rate due to sizing issues, often ranging between 30% and 50%. 
• Electronics: This industry typically has a lower return rate than fashion, with an average of 15-25%. 
• Home Goods: Home goods return rates can vary depending on the product type, but often fall within the 20-30% range. 

Factors Impacting Return Rates:

Product Quality: Poorly written or inaccurate product descriptions can lead to higher return rates. 

Sizing Issues: Lack of fitting, especially in clothing, is a major contributor to returns. 

Customer Expectations: Not meeting customer expectations regarding product features or functionality can result in returns. 

Return Policy: A user-friendly and flexible return policy can influence return rates. Many customers check the policy before purchasing. 

Implications of Return Rates on Inventory and Revenue:

Inventory Management: High return rates can result in complexity in inventory management. On top of it, you will need an additional warehouse to store returned items. 

Cost of Returns: There is a cost for processing and shipping returned items, which affects profit margins. 

Lost Sales: While processing returns, if an item is unavailable for sale, it may lead to lost revenue. 

Customer Satisfaction: A transparent and smooth return process can positively impact customer satisfaction and loyalty. 

Calculating Return Rates in Ecommerce

Why is calculating important? Because it provides valuable insights about return against investment. 

Rate of return = ((current value – original value)/original value) x 100

Here are the steps to calculate the rate of return:

Identify the original value of the investment on the items: Check your records to identify the investment’s original value. Make sure the initial value of the investment aligns with the timeframe you have set. The rate of return is the percentage change from start to end of a timeframe.

Figure out your investment’s current value: Try finding out the investment’s current value by using accurate values to provide more reliable data.

Use both initial and current values in the formula: Use the rate of return formula by subtracting the current value from the original value. Then divide the outcome by the original value and multiply by 100.

Developing an Effective Ecommerce Return Policy

To develop an effective eCommerce return policy, provide clarity, reasonable timeframes, eligibility criteria for returns, and detailed return and refund procedures. 

Key Components of an Effective Ecommerce Return Policy:

Return Process: Outline clear steps on how customers can initiate a return, including contacting customer service, getting a return shipping label, and packaging the item properly.

Clearly Mention the Return Window: Mention a reasonable timeframe for customers to send returns. A typical return timeframe is within 30-90 days of purchase. 

Eligible Items: Specify which items are eligible for returns. Include any exclusions like food or hygiene products. 

Return Conditions: Mention the condition needed for returned items, such as original packaging and tags attached. 

Refund Methods: Provide the refund methods in detail. Whether it’s a full refund, partial refund, store credit, or exchange for a different item. 

Return Shipping Costs: Specify who will be responsible for return shipping costs (customer or seller). 

Best Practices for Creating a Return Policy:

The Return Policy is Easy to Find: Display the return policy prominently on your website, so customers can easily access it from the checkout page. 

Crisp Language: Use plain language, and short sentences, avoid legal jargon, and present information in a simple manner that is easy to read. 

Friendly Tone: Use friendly and positive language to reassure customers about the return process. 

Flexible Terms: Think of offering some flexible terms in certain situations. For example, increasing return windows for specific cases. 

Keep Updating the Return Policy: Review and update your return policy from time to time to ensure it aligns with current business needs. 

Strategies for Efficient Returns Management

Key strategies for efficient returns management include: 

Clear Return Policy: Create an easy-to-understand return guideline that develops customer trust and streamlines the process. 

Analyze Return Data: Monitor and analyze return data to identify the areas for improvement. 

Quick Response: Provide quick response regarding return processing and pickup options to improve customer satisfaction. 

Effective Tracking: Offer an effective tracking system to keep customers updated about their return status. 

Optimizing Reverse Logistics: Efficiently manage the movement of returned items back to the warehouse. 

Use of Technology: Use the Warehouse Management System (WMS) and other tools to automate daily tasks and streamline returns management. 

Reducing Ecommerce Return Rates

Tips to Reduce eCommerce Returns:

Clear return policy: Clearly specify your return policy on the website, including timeframes, terms & conditions, and any return fees. 

Improve product Descriptions: Provide detailed and accurate product descriptions including size, materials, fitting, and usage instructions. 

High-Resolution Visuals: Use high-resolution images from multiple angles, product videos, and lifestyle to showcase the product. 

Sizing Guides: Add clear and reliable size charts, especially for clothing items. 

Post-Purchase Communication: Send helpful tips regarding product usage and expected delivery timelines. 

Easy Returns Process: Make the returns process seamless by offering online return and convenient returns shipping options. 

Promote Exchanges: Encourage customers to exchange products for a different size or color instead of issuing a full refund. 

Data Analysis: Track returns data for individual items and identify trends to understand reasons for returns. 

Analyze Return Reasons: Use customer reviews to identify common issues and make adjustments to product listings. 

Packaging Optimization: Use robust packaging materials to protect the items during transit and minimize damage during shipping. 

Educate Customers: Provide details on product care and usage to prevent returns due to misunderstanding. 

Identify Serial Returners: Apply measures to identify and address customers who frequently return items without a valid reason.

Future Trends in Ecommerce Returns Management

Emerging technology trends in returns management include: 

AI and Chatbots: AI-powered chatbots can manage customer inquiries about returns, automate return initiation, and provide real-time updates. It will improve customer service and reduce manual work. 

Robotics and Automation: Robotics and automation with robots can efficiently sort, inspect, and even refurbish returned items, reducing labor costs. 

Augmented Reality (AR): AR can guide warehouse workers to the right location to pick up returned items. This will speed up the process. 

Data Analysis: Analyzing return data can reveal trends and predict future return patterns,  inventory management, and return policies. 

Blockchain Technology: Blockchain can provide security and transparency in the returns process by tracking the returned items. 

Generative AI: Generative AI can create customized solutions for returns based on individual customer needs and product features. 

Conclusion

Returning purchased items occur frequently in the eCommerce business. To avoid losing revenue, you need to take action to overcome this hurdle. 

Data suggest that it is easier for customers to return their products. Data also revealed that it will increase the chances of re-visiting your brand.

The rate of return is a metric for calculating the profit-making potential of investments. It’s the growth rate that you can expect an investment to generate. 

The rate of return can help you analyze and compare possible rates over a specific period. A streamlined returns management process sorts out issues and opens up new possibilities.

FAQs

Q1: What is the average return rate for ecommerce businesses in Canada?

Ans: According to recent ecommerce returns statistics, the average return rate for eCommerce businesses in Canada is around 20%. Certain industries like apparel might have even higher return rates, reaching up to 25%.

Q2: How can I calculate the return rate for my online store?

Ans: To calculate your online store’s return rate with the formula below: 

(Number of returned items / Number of items sold) x 100 = Return Rate.

Q3: How can I reduce the return rate for my ecommerce business?

Ans: To reduce your eCommerce return rate, provide detailed and accurate product descriptions, high-quality images, detailed size guides, and clear return policies, and encourage exchanges instead of refunds.

Q4: What are the best practices for managing returns efficiently?

Ans: The best practices for managing returns efficiently are having a clear return policy, managing inventory, processing returns quickly, analyzing returns, optimizing reverse logistics, and fast refunds.

Q5: What legal considerations should I be aware of when creating a return policy in Canada?

Ans: In Canada, when creating a return policy, the most crucial legal aspect is that there is no legal mandate for businesses to accept returns or issue refunds. In your return policy, the return clauses must be displayed. 

Q6. What are the key elements of an effective ecommerce return policy?

Ans: The key elements of an ecommerce return policy should be clear, transparent, and customer-focused, with a reasonable return window, well-defined refund methods, clear information on return shipping costs, and a simple process for initiating a return.