Creating an Effective Returns Policy | Know How

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

Here is an overview of steps to take - scroll down or click through each link for details:


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 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's 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’s 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’re 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 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’re monitoring this line of communication. Reduce hurdles, such as forced return authorizations and excessive restocking fees, that are intended to limit returns (rather than server 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 on your customer.
  • Fast refunds or credit: 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 does 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 around 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 scan-based returns so that you don’t 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 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’s easy for your team to follow and enforce. You’ll also receive less customer service inquiries if it’s well spelled out and communicated.
  • Dedicated teams: for larger operations, assigning specific individuals to handling 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’ve transferred responsibility to a third party to handle the customer’s concerns.

Consider your return policy an extension of your brand - it’s 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 isn’t 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.

The bottom line: returns do not equate to lost sales. Rather, hassle-free returns serve as an effective marketing and customer retention strategy, as well as providing your business a competitive edge in many markets.

Communicate your return policy:

Now that we've evaluated the impact of a returns on your customers and your business, it’s time to put it down in black and white.

How to communicate with buyers:

Use simple language and keep the policy as short as possible, while still covering the process in enough detail that it’s not left up to interpretation.

Make your return policy easy to find and include it in all your relevant communications.

  • In-store: ensure that customers can quickly link to the policy from any page in your store. Include the full details of the policy on your site. If you have a particularly simple or hassle-free policy, call this out with banners.
  • Post purchase: continue to reference your return policy in confirmation emails and packing slips, setting expectations throughout the process. If you have a short policy, your customers will appreciate that you can include the entire message in these personalized communications. In the case of longer policies, be sure to highlight key aspects and link to you complete policy on your website. Learn more about using ShippingEasy's confirmation emails and packing slip templates.
What to include in a return policy:

Clearly detail the return process in your policy using simple language. Longer policies benefit from sections while shorter policies may be adequately explained with a few sentences. In any case, shoppers will want to answers to the following questions:

  • How long do they have to return a purchase?
  • How do they start the return process?
  • Will you issue a refund, credit, or exchange?
  • If you refund, how will customers receive their refund?
  • Who will pay for the return shipping?
  • If returns are prepaid, how will the customer receive the return postage?
  • Are there any extra fees?
  • What condition must products be in to be eligible for returns?
  • Are there specific restrictions on returning certain types of products?


  • Are there specific limitations on international purchases? If you have a large international customer base, be sure that you've carefully researched available carriers before you commit to any specific policies. In many instances, it will not be possible for you to purchase prepaid postage on your customer's behalf. Learn more.

Don't forget that a large majority of returns are due to no fault of your customer - for details, check out the next section of this guide. You can use your policy to reinforce for your customers that your business makes their satisfaction a top priority. It’s a sure fire way to build loyalty.


How to minimize returns

Regardless of your return policy, you can take steps to reduce the likelihood of returns all together. Just keep in mind the most common reasons that customers return products:

  1. They changed their mind
  2. Wrong product was shipped
  3. Package arrived damaged
  4. Product doesn’t work
  5. Item failed to meet customers’ expectations

Customer changed their mind:

While you can't keep your customers from changing their minds, you can encourage that they keep their business with you by providing store credit, the option to exchange, or a coupon towards a future purchase.

Wrong product was shipped:

Mistakes happen, but if this accounts for a large percent of your returns then it may be time to review your warehouse practices, including inventory management and shipping processes. ShippingEasy provides several resources that can help any operation:

  • Shipping rules: help establish consistent processes - learn more.
  • Pick lists: assist in organizing the picking process - learn more.
  • Packing slips: serve as a final check that orders are packed correctly - learn more.

Package arrived damaged:

With the massive quantities of packages moving through the mailstream, it’s not surprising that they are occasionally damaged during transit. However, as the shipper you can take steps to ensure that products are properly protected from hazards. When shipping high value goods, adding additional protection with shipment insurance further reduces the financial impact of damaged packages. Learn more about protecting your shipments.

Product doesn’t work:

Train your team to troubleshoot issues with the products you sell. Perhaps the item really is a lemon, but maybe your customer just doesn’t understand how to use it. Even basic steps, such as confirming that batteries are correctly installed, can save everyone time and money. You customer will most certainly be happier to know that the problem was user error, so make sure that you team is available and able to help troubleshoot.

Item failed to meet customers’ expectations

One of the hardest parts about selecting a product online is that there is no way to closely inspect the item before making a decision. This can easily lead to misunderstanding and shoppers finding themselves with something that doesn’t match their expectations. Avoid this problem with excellent documentation. Keep in mind these tools:

  • Images: capture your products from multiple angles and provide the option to zoom in to view finer details.
  • Descriptions: the more detail the better, just be sure that descriptions are well-written and organized. Include a written summary as well as tabular technical specs for each item you sell.
  • Customer reviews: provide a forum for customers to review their previous purchases, even offer incentives such as discounts off future purchases or the chance to win a drawing to encourage participation from your customers.
  • Sizing charts: when selling a variety of sizes, as is the case with apparel, include an easy to use sizing chart on your site and make it easy to find. This helps make sure that your customer receives the right size the first time and doesn’t have to exchange (or worse yet return the purchase all together).


Return postage options

While you can always require that your customers handle all of the shipping logistics of their returns, consumers prefer buying from companies that provide prepaid shipping labels. ShippingEasy provides two versatile options to accommodate any return policy: pre-paid returns and scan-based returns.

Provide a prepaid return label upon request:

A prepaid return label is purchased by a merchant, paid for when printed, and provided to a customer in order to return product back to a warehouse. Keep in mind, that you can still seek compensation from your customer for this label, but the actual purchase will be made through your own carrier account.

This will be the default option for most businesses as it doesn't require any advanced planning. Simply wait for notification from your customer that they need to return a purchase. Then generate the label and send it to them. When purchased from ShippingEasy, you can even automatically email the return label to your customers.

Advantages of prepaid return labels:

  • Screen returns: since customers will need to contact your company before sending back a product, you'll have a chance to better understand their reasons and take measures to overcome their objections and/or fix any problems.
  • Save labels: when you email a label to your customer, you save on label and/or ink costs.

Disadvantages of prepaid return labels:

  • More customer inquiries: the flip side of having your customers contact you is that your customer service team will field more inquiries. This could drain your resources if you do not have a clear plan in place.
  • Refund unused labels: when you generate a prepaid label, you pay for it up front. If your customer changes their mind and doesn't use it, you're still out the postage. Fortunately, Stamps provides simple tools to locate and refund unused labels. Learn more.

Before you begin processing prepaid return labels, make sure that you've configured your ShippingEasy account. First, decide how to send the label to your customer. There are several options available within ShippingEasy:

  1. Automatically email it upon purchase. Learn how to set it up.
  2. Download PDF. Then print it and snail mail or email it from a personal account.
  3. For Amazon merchants, download it and upload it to Amazon. Learn more.
If you opt to have ShippingEasy email the label, take a few extra minutes to customize your return notification email. Learn more.

With your settings configured, you're ready to generate a prepaid return label. Just follow our step-by-step guide for simple to follow instructions.

For more information about prepaid return labels, take a look at our FAQs.

Mail a scan-based return label to your customer with their purchase:

Unlike prepaid returns, scan-based returns are not paid for when the label is created. Postage is only deducted from your postage account if and when the return label is scanned by USPS into the mail stream. While normally offered to customers as part of a free-returns policy, with careful logistics you could also reasonably pass these costs onto your customers.

Scan-based returns are often preferred for rental returns, buying clubs, as well as fashion and apparel retailers. However, to use this option via ShippingEasy requires some advanced planning as it will need to be set up through Endicia's Pay-on-Use Returns service. Once configured, the scan-based return label will be printed in tandem with the outbound shipment and mailed to your customer in the original package.

Advantages of scan-based return labels:

  • Only pay for labels you use: there's no need to watch for unused labels as you will only be charged for those that enter the mail stream.
  • Less customer inquiries: reduce the time you customer service team spends on customer inquiries by eliminating the need for customers to contact you for a return label.
  • Automate returns: ShippingEasy's Shipping Rules provide the option to automate a variety of actions, such as assigning specific carrier services, to orders that qualify for scan-based returns. Learn more.

Disadvantages of scan-based return labels:

  • Lost opportunity to screen returns: since your customer will not need to contact your business before returning an item, you may not even know that there was an issue until the package arrives back at your warehouse.
  • Use more labels: since the scan-based return label will be mailed with the package, it will be printed in tandem with the outbound label, using 2x the labels.
  • Surcharge: Endicia's Pay-on-Use Returns service includes a surcharge on any redeemed scan-based return label.

Before you begin processing scan-based return labels, make sure that you've configured your ShippingEasy account. Learn more about setting up your account for scan-based returns.

With your settings configured, you're ready to generate a scan-based return label. Just follow our step-by-step guide for simple to follow instructions.

For more information about scan-based returns, take a look at our FAQs.


Related articles:

FAQs: Prepaid return shipments
FAQs: Scan-based return shipments
How can I create a return label for an order that was drop shipped or is not in my Shipment History?
Know how: Protect your shipments + ensure delivery
Know how: Capitalize on packing slips + notification emails


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