Should You Let Customers Keep Refunded Products?

Despite the busy holidays, major retailers like Amazon, Walmart, and Target have taken a different approach to product refunds. Instead of asking consumers to return the product, retailers are telling them to keep it. It’s an unexpected response that’s garnered attention from the e-commerce world. Why do big companies let customers keep refunded products? And how are they able to absorb these kinds of losses?

This article will answer those questions and hopefully give you an insight on whether it’s a good idea to follow.

Why are retailers handling refunds differently?

The COVID-19 pandemic has played a critical role in how retailers are handling product refunds. Due to the surge of online shopping, e-com sellers felt the need to adopt a different approach to customer returns. Of course, this doesn’t mean free gadgets or TVs — the policy caters to low-cost items that cost anywhere between $1-$20.

The biggest reason retailers do this is because of economics. Processing a return for a cheap product is more expensive than people think. Returns can cost anywhere from $10-$20, and if the item’s value is below that of the return cost, then retailers can absorb the small loss. Thus, it makes perfect sense to simply let the customers keep the refunded merchandise. That way, they won’t have to deal with freight fees.

To make sure the new policy works to their advantage, retailers are using artificial intelligence to determine if the product is worth returning or not. It’s a smart move for companies like Amazon because not only do they save on shipping fees, but they also build goodwill with their consumers.

Logistical nightmares are another reason why retailers have adopted this new refund policy. The rise of consumer demand has led to shipping containers being stuck on boats, creating a ripple effect that has bottlenecked the supply chain.

What it means to customers

According to Savemycent, around 73% of shoppers value the return experience they have from a retailer. Companies that do a great job of handling product returns are more likely to benefit from repeat sales as it reinforces their brand image. By implementing new return practices, e-commerce sellers can build stronger relationships with their target audience.

The new return policy is a win-win situation for customers. Sure, they get to keep a product they don’t want, but it also saves them time from going to the post office. For the most part, customers seem excited about the thought of receiving “free” products, even if they’re low-cost items only.
Over the years, Amazon and Walmart have introduced partnerships to pick up product returns from customers’ homes. But as the pandemic continues, fewer people are willing to go to physical stores. By implementing a simple refund system, customers benefit from a safety and convenience standpoint. This enhances the overall return experience and creates a positive impression from the customer’s point of view.

Retailers are smart enough to know that the new refund policy will backfire if they don’t keep track of the customer’s buying habits. That’s why their AI systems take into account the buyer’s purchase history so that only qualified customers are entitled to free refunded merchandise. That way, customers won’t be able to abuse the system by ordering a bunch of low-cost products.

What it means to your business

If you’re an e-commerce seller, you may be wondering whether it’s a good idea to adopt this return policy for your business. Implementing a similar return policy works great for businesses that manage their fulfillment as it allows you to lower your return expenses. Not only do you save on shipping costs, but you also foster customer loyalty which will help with retention rates down the line.

Like we’ve previously mentioned, the cost for returning a product is around $10-$20 (excluding freight costs). If the product falls below the value of the return cost, it is preferred to let the customer keep the item. The cost-saving benefits add up over time, saving both parties the time and the resources when dealing with product returns.

Another benefit of adopting this type of return policy is that you maintain a healthy logistics system. Given the logistical struggles brought about by the pandemic, it’s a wise choice to lessen returns for low-cost products. E-commerce sellers who have massive product return run the risk of overwhelming their logistics system, which will inevitably lead to shipping delays.

How you can improve your product returns

There’s always room for improvement in product returns. As return rates skyrocket due to the pandemic, it’s the businesses that make the necessary adjustments that will thrive. To make sure your customers are satisfied with your return policies, make sure to follow these five tips.

1. Make your return policy visible to customers

Having a good return policy means nothing if your customers aren’t aware of it. To truly enhance the overall return experience, you should display your return policy wherever applicable. On your website’s FAQ page, write down the complete details of your return policy. This ensures that you and your customer are on the same page regarding refunds, return deadlines, and more.

The same details should also be visible on any partner sites where you sell your products. If you can, try to add a hard copy with the product before you ship it. The easier it is for customers to access your return policy, the better it’ll be for your brand’s image.

2. Process your returns quickly

One thing that frustrates customers when it comes to product returns is the slow refunds. If it takes too long for you to issue a refund, it’s likely the customer will never buy from you again. Thus, you must process your returns quickly and efficiently.

Another thing worth noting is the deadlines for your return policy. Customers have high expectations when it comes to product returns. To make sure you meet their expectations, try to include a period on how long the refund will take and how long they can return the product. That way, your customers know what to expect when they send the product back to you.

3. Offer free return shipping

Customer satisfaction is key when creating a good return policy. That’s why many retailers offer free returns as a way to invest in customer relationships. Customers view free returns as a crucial part of the buying experience, and e-commerce sellers who offer them are likely to have repeat customers.

When you offer free returns, you show that you value your customers. This bodes well for your customer retention rates as well as your brand image. But you can’t just offer free returns all the time as doing so will impact your bottom line. If you find that the shipping costs are too expensive, try to find a way to work around the fees.

For example, you can state in your return policy that free returns are available for orders $50 and above. What this does is encourage your customers to add a few more products to qualify for free returns. You benefit from the added purchase as well as the reduced costs of return shipping.

4. Evaluate your product returns

When a customer returns a product, take the time to analyze why they decided to return it. Is the quality of the product not up to par? Are there issues with the delivery and the way the parcel was handled? Make sure to create a customer feedback section on your website so you can identify what went wrong with the products returned. That way, you can work on the issues and meet the expectations of your customers.

It’s also a good idea to categorize the products returned by your customers. From there, you can pinpoint the problem with the most commonly returned items on your website.

5. Provide tracking with your product returns

Just like how important tracking shipping is to customers, the same thing applies to returned items. You want your customers to be able to track the returned product so that they’re aware of its status. Make sure to provide tracking information the moment the product is picked up. You can send the customer updates through text or email for improved visibility on your product returns.

Providing tracking helps customers manage their expectations as it ties up with the deadline you set in your return policy.

Conclusion

Letting customers keep refunded merchandise isn’t new. But with the situation we’re facing now, the practice has only magnified even further. Not only are the big retailers implementing new return policies, but e-commerce businesses that handle their own fulfillment as well. Ultimately, it’s about improving the overall return experience that should be the focus of every e-commerce seller out there.

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