Creating an Effective Returns Policy | Know How

From attracting new customers to delineating tasks for your team, running a profitable online store means having a solid plan for handling returns. It does not matter if the return is due to an error or is expected, a clear and well-considered returns policy will protect your bottom line.

Crafting your return policy

Making your return policy easily accessible and simple is a great way to establish good customer service. With returns, the simpler the better. Detailing in three steps or less how a customer can return a product to you can actually help sustain their future business. Customers are less likely to work with stores that saddle them with extra steps or fees. Although, it is imperative that your return policy also considers your business' needs.

Attract buyers with hassle-free returns

An online shopper takes a greater risk than someone who completes their purchase in a brick-and-mortar store. Even the best images, detailed descriptions, and comprehensive reviews do not replace the experience of touching and feeling a product. Although most buyers will never return a product, the added assurance that they can do so alleviates a number of online shoppers’ concerns and minimizes the risk involved in the purchase.

It is also important to keep in mind that the most frequent users of store returns are statistically more experienced online shoppers. So, even though they may return more shipments, they are also more likely to return and purchase again. Your business wants to attract the volume these customers bring. However, an inflexible or complicated return policy may cause a shopper to take their business elsewhere.

Before you begin drafting your return policy, consider ways to make it hassle-free for your customer:

  • Easy to find and understand: post your policy in an easy to locate the section of your website. Link to it throughout the buying process to reassure customers that there’s nothing to hide. Use simple language and keep it as short as possible.
  • Simple to initiate, with minimal steps: provide an email contact, easy to complete form, and/or phone number, then be sure that you are monitoring this line of communication. Reduce hurdles, such as forced return authorizations and excessive restocking fees, that are intended to limit returns (rather than serve a specific business need).
  • Generous return window: allow as much time as your company can for customers to initiate a return, keeping in mind that most customers expect at least a month.
  • Provide the postage: whether or not you charge for returns, customers dread having to work directly with carriers. Mailing or emailing a label makes the process easier for your customer.
  • Fast refunds or credits: once an item is returned, buyers expect to receive their refunds or credits quickly.

The bottom line: your customers want assurance that you offer a hassle-free return policy - and happy customers, even those that needed to return a product, are more likely to purchase from you again in the future, as well as recommend your shop to others.

Minimize the impact of returns on your business

Despite any steps you decide to take to accommodate your customers, “hassle-free” returns do need to mean “free” returns. This gives you great leeway to craft a policy that also supports your bottom line. Make sure you examine how product returns impact your business from a competitive, profitability, and implementation standpoint.


First and foremost, check out your competitors to see how they handle returns. Understand that if your competitors have more attractive policies, such as free returns while you charge for shipping or layer on extra fees, you may risk losing business. However, if other businesses in your industry do not offer free returns, passing the costs onto your customers may not hurt. Even a simple, well thought out and communicated policy can give you a leg up over the competition.


Rightly so, most business' concerns focus on the costs of returns. These can include the cost of shipping, lost business, restocking, and customer service inquiries. While the last two are largely unavoidable, the first two can be minimized or even nullified.

Offsetting costs:

Despite the inherent costs of returns, there are ways to minimize the financial impact:

  • Minimum purchases: consider offering free returns on orders that meet a minimum purchase value (ex: $100).
  • Promotions: use free returns as a limited-time marketing tool during high volume months, when increases in volume can offset losses.
  • Restocking fees: although unpopular with consumers, these help to recoup expenses of reintegrating returned products into inventory. Restocking fees may be unavoidable for large and costly items that represent a significant investment in inventory space and product cost.

Getting products back to your warehouse:

When a customer returns a purchase, you have options to reduce shipping costs:
  • Free shipping: if you offer to pay the shipping costs for returns, you get to choose which services are used. Selecting slower services may save you, as well as implementing pay-on-use returns so that you do not take a loss on unused labels. Consider free shipping when selling:
      • Lightweight, easy to ship items, as the cost to ship is minimal.
      • Sized items that are hard to select online (such as women’s clothing), as it takes a large risk off your customer.
      • Consumables, which are probably being purchased by customers familiar with the product, so the risk of return is very low and the possibility of loyalty very high.
  • Pass along the costs: customers dread having to purchase postage themselves, you act as a middleman. Require your customers to pay you for the postage cost and you can simplify the shipping process for them without taking on the added costs.
  • In-store returns: businesses who also run a brick-and-mortar store can completely eliminate shipping costs by offering free returns in store.

Controlling your operational expenses:

Ultimately, returns will require the resources of your team, ranging from the warehouse to customer service.

  • Clear policy: the added benefit to a clear policy is that it is easy for your team to follow and enforce. You will also receive fewer customer service inquiries if it is well spelled out and communicated.
  • Dedicated teams: for larger operations, assigning specific individuals to handle restocking or fielding customer service inquiries on the topic ensures that tasks are handled efficiently as well as makes tracking costs easier to manage.
  • Provide third-party warranties: when a customer purchases a warranty, you have transferred responsibility to a third party to handle the customer’s concerns.

Consider your return policy an extension of your brand - it is not only meant to maintain your bottom line but also represents your core values. When your employees see your return policy upholds the values they have been a part of building, you create instant advocates. Combine this with a clear policy, that everyone understands, and make the whole ordeal less painful.

Remember that although consumers prefer a generous return policy, this is not possible for all businesses. When this is the case, make the most of it! Keep your policy to the point and remember that you can always make an exception, especially for your most loyal customers.

See our guide on how what to include in your return policy.


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