Returns Management: Solutions, Processes, and Best Practices

More e-commerce orders are getting returned than ever before: a substantial 39% of consumers return an item bought online at least once a month, according to Narvar’s 2024 State of Returns survey. Retail brands that are grappling with the costs, complexities, and operational challenges that come with a high-volume of returns are well-served to find a partner that can unlock cost savings, efficiencies, and an exceptional consumer experience via return management software.

Let’s explore various solutions, processes, and best practices that retail brands can implement to streamline returns management and enhance overall business outcomes.

What is the definition of returns management?

Returns management considers all aspects of the product return process and strategy: How will consumers initiate a return? How will brands process the request, uncover return trends, and then route the return to the appropriate location for inspection and disposition? How will customers get the returned item(s) back to the retailer, and what convenient pickup and drop-off options will the brand offer? 

Savvy operations professionals consider these questions and more as they develop their returns management process and strategy, since it encompasses the entire lifecycle of a return, from the moment a consumer requests the return to the final disposition of that returned item.

How do retailers manage returns? 

Savvy retail brands take an omnichannel approach to managing returns. Typically, the processes and strategies to consider include: 

1. Initiating and authorizing the return. Consumers can request a return through a few different methods, including in-person at their local store, online via a returns management platform, or through customer service channels, as needed. From there, associates can review and approve the return. Typically, e-commerce returns portals can streamline and expedite the approval process by automatically accepting returns based on the return window, reason, and additional business rules. 
2. Selecting a drop-off or pickup method. Once the return has been approved, consumers are then able to choose the drop-off or pickup method for getting the item(s) back to the retailer. Options can include: 
   • In-store return, handing the return directly to an associate
   • Drop off at a convenient, attended location, like one of the 200K+ drop-off locations that are part of Narvar’s Concierge network. 
   • Drop off at a local mail carrier, including USPS, UPS, FedEx, and regional carriers
   • Home pickup, scheduling a time for a carrier to come collect your package
   • …and more! 
3. Generating a return shipping label, QR code, or other instructions. If using a returns management software, the customer will automatically receive either a shipping label or QR code to scan the order upon drop-off or pickup. 
4. Inspecting and evaluating: Upon receiving returned items in the warehouse, distribution center, or store, retailers inspect the items to determine their condition and eligibility for resale.
5. Refunding or exchanging: Depending on the condition of the returned item and the retailer's policies, customers are issued refunds—in the form of store credit, gift cards, and original form of payment—or exchanged items. 

What do retail stores do with returned items?

Retail stores handle returned items based on their condition and type:

• Resale: Items in good condition are often resold either in-store, online, or through outlets at discounted prices.
• Liquidation: Items that cannot be resold at retail value may be liquidated through secondary markets or wholesalers.
• Disposal: Items that are damaged or unsellable may be disposed of responsibly, recycled, or donated.

Depending on the return reason code, seasonality, product turnover rate, and more, returns software can automatically determine the best place to send the return to efficiently process it for the programs above. 

The benefits of an effective returns management process: why is returns management important?

Implementing an effective returns management process offers several advantages:

• Enhanced customer satisfaction: A streamlined returns process improves customer experience, leading to higher satisfaction and retention rates.
• Operational efficiency: Efficient returns management reduces handling costs, processing time, and inventory inaccuracies.
• Cost savings: Proper management minimizes financial losses associated with returns and maximizes recovery through resale or liquidation.
• Actionable insights: Data collected from returns can provide valuable insights into product quality, customer preferences, and market trends.

Returns management best practices: how to improve a retail return policy

To offer a best-in-class returns program, retailers can consider implementing the following best practices:

• Clear and flexible return policies: Clearly communicate return policies to customers, including timeframes, conditions, and refund methods.
• Efficient processing: Automate processes, where possible, to expedite return handling and reduce manual errors.
• Quality control: Implement rigorous inspection procedures to accurately assess the condition of returned items.
• Reverse logistics optimization: Optimize transportation and logistics to minimize return shipping costs and transit times.
• Analytics and reporting: Utilize data analytics to identify trends, root causes of returns, and opportunities for improvement.

Looking for a returns management software?

Choosing the right returns management software and partner is crucial for optimizing returns processes. Narvar, for example, powers return management for a wide-range of enterprise and mid-market brands, including Newell Brands, TWOTHIRDS, Crew Clothing Company, Nuun, Orvis, and Wolf & Shepherd. It’s critical to find a solution with deep, powerful returns management features, expertise in your industry, and the analytics and reporting you need to fully optimize your returns management process.  

By implementing robust returns management practices and leveraging technology, retail brands can not only mitigate the challenges associated with returns but also turn them into opportunities for improving customer satisfaction and operational efficiency.