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Why building a returns policy is crucial to scaling your startup

Co-workers brainstorming on returns strategy

As a startup entrepreneur, you're obsessed with every detail that goes into developing and shipping your product.

But what happens when your customer doesn't want to keep the item you delivered? What steps can you take to make the return a positive experience?

As the volume of online shipping grows, so does the demand for online returns. According to the UPS Pulse of the Online Shopper™  survey, four out of five online shoppers highlight free return shipping as important when choosing an e-retailer. For every item you ship, there's a chance it will come back.

So what are the practical considerations when developing your approach to returns management ? Let's take a closer look at some of the factors involved.

The reality of returns

To maximize e-commerce success, startups must offer comprehensive return services. Online shoppers put even more emphasis on an easy returns process than when they shop in-store. According to data compiled by Shopify, as many as 20% of ecommerce purchases are returned. That’s more than twice as high as the return rate for in-store sales (8-10%), and the rate triples to 30% during holiday seasons. For high-value products bought online, returns can run as high as 50%.

High volumes of online returns are now beginning to spread across the year. The biggest day of the year for returns used to happen in early January. Recently, the high point shifted to the third week of December, as holiday shoppers take advantage of increasingly convenient ways of returning packages.

Returns may be an unavoidable fact when it comes to online selling, but there are steps your startup can take to meet the needs of the modern consumer at the same time as helping, not hindering, your growth plan.

Designing a returns policy

Consumer demand for hassle-free return shipping starts before the point of purchase. Online shoppers expect companies of all sizes, startups included, to have a clearly-stated returns policy. More than two-thirds of online shoppers (68%) review a company's returns policy before clicking “check out.”

Industry research suggests a more lenient returns policy can actually be good for business. Shoppers value an easy returns process and a no-questions-asked approach. But that doesn't mean your policy should become an open-ended liability for your startup.

What should your returns policy contain?

There are several key points you’ll need to address in a clear-cut returns policy, from how much time a buyer has to return an item, to the exact required conditions for return. You should also specify who pays for shipping and handling, and the different ways a customer can be reimbursed. The more you streamline your refund process, the happier your customer will be.

Also, consider how closely your returns policy aligns with your outbound shipping terms. If you offer free shipping on online sales, what is the cost of offering free shipping on e-commerce returns  too? According to the UPS Pulse of the Online Shopper survey, more than a third of shoppers (35%) view having to pay for return shipping as a top issue for them.

Check the returns policies of well-known retailers to set a benchmark for your business. What approach do similar companies in your sector take? Are you being competitive?

If your margin is too tight to support free shipping on all returns, consider:

  • Setting a minimum spend, above which the shopper is eligible for free returns.
  • Offering free returns for customers enrolled in your loyalty program.
  • Running a time-limited promotion for free shipping and returns.

Whatever policy you decide, ensure the wording is clear. Your policy needs to be comprehensive, user-friendly, and free of ambiguity. Set up an FAQs page on your website and offer customer service support that covers all the bases—from text and email to app and phone—with contact information that is easy to find online.

Managing return logistics 

Setting and communicating a policy is one thing, but running a returns process is another. Returns management can hurt your fledgling business and drain precious cash if not planned for properly.

From labeling to restocking, there's a lot to take care of when managing customer returns. There's the labor cost of receiving, inspecting, and repairing returned goods, not to mention the expense of return shipping .

To plan for inbound returns, make sure you have real-time visibility into where your packages are in the world, and the volume of returns in transit at any one time.

Educate your customer about the different ways they can return their package, from business or residential pick-up to a convenient drop-off point or at a The UPS Store® location. The peace of mind that comes from knowing a package is safely on its return journey is a key part of the customer returns experience.

Once the item is back in your possession, work to maximize its remarketing value. How you handle the repair and resale of returned goods represents an important cost area for your business. Ensure you have a robust process in place for quickly returning the item to saleable condition.

Getting help with returns management

For reliable returns and streamlined reverse logistics, it's never a good idea to shoulder the burden on your own. As a startup, make sure you get the logistics help you need to keep operations humming, including support with factors like:

  • Controlling the speed and cost of inbound shipments.
  • Reducing the risk of return shipments ending up in the wrong warehouses or repair centers.
  • Integrating shipment information into your inventory management and customer service systems.
  • Completing customs documentation for customers returning products internationally.

In addition, access the   portal for assistance with creating and managing your startup’s returns policies, from determining the eligible return period to capturing customer comments on returned items.

It's all about customer experience

Ultimately, a good returns policy is good for customer experience and may even increase customer loyalty. Buyers don't like uncertainty—they want to know where they stand.

Be proactive about establishing a great process for returns. Don't wait until the calls come in before deciding how to handle them. If the prospect of dealing with returns frustrates you, this will rub off on your customer. Instead, turn the situation to your advantage and think of your returns process  as a selling point for your business. If customers like the way you operate, they will come back to you again and let others know.

Effectively managed, returns can even enable organizations to uncover profits. According to returns optimization company Optoro, a positive returns experience helps drive future business, with 97% of consumers likely to buy again from a retailer after a positive experience.

The opposite is true when the returns experience is poor, with almost nine out of ten shoppers saying they would avoid that retailer in the future.

Communicate your success stories

Invest in your returns process and make it as good as you can get. Ask for positive testimonials from your customers about their experiences. Post this material to your website, and promote success stories in your marketing emails and on social media. As a startup, your resources are precious. Don't let a good PR opportunity go to waste.  

Don't forget that the best form of returns management starts with minimizing returns in the first place. Give your customers plentiful information to make informed choices about their product selection, and solicit expert advice on how best to design a packaging solution that reduces damage in transit. By minimizing the risk of damage, good packaging will lower your rate of returns.

Return to vendor  

Whether you're still picking and packing out of your garage or you're relying on an e-fulfillment service, having no returns policy is not an option. 

Instead, manage customer returns for success. With so many choices in the marketplace, ensuring an excellent client experience at all stages of the customer lifecycle is essential to engaging and retaining new business. For companies to remain competitive, it is not possible to consider returns management as an afterthought, as Dan Healy of packaging company Sealed Air remarks. 

At UPS, we understand reverse logistics  can feel overwhelming at times. But getting an early handle on your returns management can help you save money and avoid headaches down the line.

”UPS has helped our customers get ahead of the curve with a portfolio of technology-driven returns services,” says Kevin Warren, UPS’s chief marketing officer. “We help retailers deliver a premium experience that manages the cost of the returns process while meeting the needs of today’s discerning consumer.” 

Email us at startupteam@ups.com or sign up for a virtual consultation, and let's optimize your returns policy for success.

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