Every store owner knows how much the holiday season means to the company balance sheet. But on line, it's the post-holiday months where the ensuing rush to return those misguided gifts can really test a business' efficiency.
"It's just as important to handle returns as quickly as your sales," says Stanley Constantine, president of Maryland-based Baltimore Coffee & Tea. "After all, it's the last taste they get of your business." And keeping track of those returns will provide a more accurate record of the increased sales.
Sadly, many businesses treat their return policies as an afterthought -- a grave mistake in the world of e-commerce. That's why now, before the post-holiday season, is the time to review your return policy and procedures. While you may think of returns simply as lost merchandise, there's much more at stake. Postage and shipping costs, loss of employee time, storage of returned goods, and credit card processing all eat away at profits with every return. With the increased volume of the holidays, the impact of returns is at its greatest.
WHAT TO REFUND
"There's essentially three things you can refund," explains Tom Nardone of Shopinprivate.com, an online retailer specializing in personal goods that may be embarrassing to purchase in person. "There's the cost of the product, the cost of shipping, and the cost of return shipping. Practically all companies refund the first two, but will differ on return shipping." Nardone's policy, which covers the cost and shipping of products, was based on the return policies of competitors and their customer service.
"The written policy on our Web site says unhappy customers can return the product to us for a refund, or seek compensation from the product's manufacturer -- whichever they prefer," Nardone says. "When dealing with returns, our customer service employees are authorized to pay for return shipping if they feel the customer will be happier. It's not in writing for fear that dissatisfied customers will take advantage of the policy. Paying for FedEx packages of returned goods isn't exactly good for a small business like ours," Nardone says. He emphasizes that because of his staff of seven and the types of goods his site sells, this approach has been successful. "The key to a good return policy is to under-promise and over-deliver."
Lucy.com, another online retailer that sells women's fitness clothes, has offered its customers pre-paid shipping since its first day of business. "Anything we can do to make shopping with us easier for our customers, we'll do," says public relations manager Deborah Pleva of the company's return policy. "I'd recommend that approach to any business." Like most e-tailers, Lucy.com provides a return/exchange form on the back of every customer's printed order. In addition, the company includes cards thanking the customer for placing the order, as well as step-by-step guidelines for returns and contact information.
RETURN OR REPLACE
For Baltimore Coffee & Tea Company, returns of online sales are handled in the same manner as phone orders, since all original orders are processed the same way. "We pay for return shipping, as well as other obvious costs," says Constantine. "The vast majority of our orders are from repeat customers and it's worth losing money on returns to keep them happy." The business flourishes because of referrals, and Constantine's staff knows this. "Ask anyone who's been mistreated by a retail business and they only remember the bad incident. They always forget about the good things and remember the problem." Constantine emphasizes that above all else online return policies should be kept simple. "People buy on line because they're in a rush, and as a result, return policies should be conveyed quickly and easy to understand. Good communication is the key."
For some businesses, replacing goods may be better for business than processing the returns. "Sometimes we don't ask for products to be shipped back," Nardone explains. "Depending on the size and cost of a product, it's often cheaper just to send out a replacement." Constantine agrees. "If we send out an incorrect order -- if it's the wrong flavor, or they get decaffeinated when they ordered regular -- we tell the customer to keep it. Not only does it save us time and trouble processing returns, but it makes the customer happy, which is the most important thing."
Returns can provide the rare opportunity for customer feedback and are all too often ignored. For example, a high number of returns for a specific item may indicate defective inventory or an inferior product. "At one point, we had a lot of returns for a gag gift 'party kit,'" Nardone explains. "Customers were calling and saying that one of the items was not included. An employee and I checked our inventory, and over a third of our stock was missing that same item. We learned after that experience to check all inventory, and at times, test products before shipping them out. It's obviously much better to return defective products to the manufacturer without getting customers involved." Lucy.com has rewritten product descriptions based on customers' comments with returns. "We have a writer who is responsible for product descriptions and we will sometimes call customers to find out if the description was misleading or incomplete," Pleva says. "It's actually been very helpful, both in customer service and reducing returns."
With the technology and software that's available for even the smallest business, orders can now be taken and processed without a human ever seeing the information. As a result, many returns of online orders are due to bad or incorrect addresses. One of the simplest ways to avoid these problems is to have employees check the address of every order. "Since we've begun checking the addresses of orders, we correct one or two per day, which can be up to 60 returns a month," Nardone explains. "It's not as time-consuming as you may expect. Usually the mistakes stand out -- things like six digit zip codes, incorrect state abbreviations, or forgotten street numbers. Corrections are as easy as calling the customer to get the address again."
Certain items will always pose difficulty to Internet retailers, however. Clothing is the most obvious example, since buyers are unable to try items on, or at times even see an item in all available colors. In addition to those problems, color representations on the Web and computer monitors are not always accurate. "We tried offering a particular brand of nail polish through our site," Nardone explains. "But we had a high number of returns because there was no way to get the shiny, metallic colors replicated correctly on the Web. Violet and grape both looked like purple on screen. So we ended up dropping the product all together." For items such as these, there may be little that can be done to prevent or reduce returns.
Customer service employees are just as important as the policy that appears on your site. "Make sure your front line has all the information they need for dealing with returns," says Pleva. "Communicate anticipated problems with them and prepare beforehand." Keep them informed of your return policy, as well as what they can and cannot do to help with returns before passing an unhappy customer on to a supervisor.
When approaching your business' online return policies, remember Constantine's words. "Customers are easy to get, but hard to keep. Once they get burned, forget it."