Collection on returns: the impact on your store

Returns are an unavoidable reality in e-commerce, and can have a significant impact on your store’s profitability and reputation.

In this article we will explain what refund collection is, how it affects your business and how to manage it efficiently.

Returns information

Returns are an unavoidable reality in e-commerce , and can have a significant impact on your store’s profitability and reputation.

According to the Mexican Online Sales Association (AMVO), in Mexico, the product return rate in e-commerce is estimated at 20%, which means that 1 in 5 purchases is returned to the business. This implies a total annual cost of more than 127 billion pesos for the country's businesses.

Additionally, returns can be generated by legitimate reasons or by customer abuse , which occurs when a customer makes a false claim or returns a different or damaged product.

This type of fraud has seen a 119% increase in Latin America.

What is a refund charge?

Return chargeback is the practice of charging the customer for part or all of the cost of returning a product, whether for shipping, packaging, processing, or reconditioning.

Its aim is to discourage unnecessary or abusive returns and offset the costs generated by their management.

It can be of two types: explicit or implicit.

An explicit return charge is one that is clearly communicated to the customer in the return policy and is applied directly at the time of requesting or making the return.

An implicit charge for returns is one that is hidden or disguised in the price of the product, the shipping cost or the purchase discount, and is applied indirectly at the time of purchasing the product.

Image taken from SalesCycle

How does charging for returns affect your store?

Charging for returns can have both advantages and disadvantages for your store, depending on how you implement it and how your customers perceive it.

Some of the most common advantages and disadvantages are as follows:

Advantages

Charging for returns can help you reduce the number of returns by making customers think twice before purchasing or returning a product.

This can improve your profit margin by reducing the costs associated with returns. It can also improve the quality of your inventory by preventing returned products from becoming damaged or outdated.

Disadvantages

Charging for returns can negatively impact your customers' satisfaction and loyalty by making them feel dissatisfied or cheated with your service.

This can damage your reputation by generating bad reviews or comments on social media or rating platforms.

This can reduce your competitiveness by making your prices less attractive or your terms less favorable than those of your competitors.

How to manage returns collections efficiently?

To manage it efficiently, you must take into account several aspects, such as the following:

Define your returns policy : You must establish the conditions, deadlines, methods and costs of returns, and communicate them clearly and transparently to your customers. You must avoid abusive or confusing clauses, and comply with current legal regulations.

Analyze your market and your competition : You must know your customers' expectations and preferences, and adapt your return policy to their needs. You must study your competitors' practices and offers , and differentiate yourself from them with added value.

Offer alternatives to returns : You should try to resolve your customers' issues or complaints without resorting to returns, whenever possible. You can offer options such as exchange, repair, partial refund, discount coupon, etc.

Optimize your returns process : You must make the returns process easier and faster , both for yourself and your customers. You can use technological tools, such as prepaid labels, QR codes, collection points, etc. You can also outsource the returns service by hiring a specialized company.

How can I prevent returns in my store?

Returns are an unavoidable reality in e-commerce, and can have a negative impact on your store’s profitability and reputation.

To avoid returns in your store, you should follow these tips:

• Create a helpful product page : Provide accurate and complete product information , such as sizes, materials, colors, and any other relevant details. Include high-quality images of the product from different angles and perspectives. Offer a live chat to answer customer questions, and display reviews and photos from other buyers.
• Provide accurate sizing information : If you sell clothing, you need to make it easy for your customers to choose the right size. You can use tools that allow them to enter their measurements and sizing preferences, or display the model's height and weight along with the size they're wearing. You can also offer a free or discounted exchange service, in case the size isn't right.
• Offer alternatives to returns : Try to resolve customer issues or complaints without resorting to returns, whenever possible. You can offer options such as exchange, repair, partial refund, discount coupon, etc. These options can help you retain your customers and reduce the costs associated with returns.
• Establish a clear returns policy : Define the conditions, deadlines, methods and costs of returns, and communicate them clearly and transparently to your customers. Avoid abusive or confusing clauses, and comply with current legal regulations. If you are going to charge for returns, do so explicitly and reasonably, and not in an implicit or disguised way.
• Analyze the reasons for returns : Collect and analyze data on the reasons behind returns to identify trends and opportunities for improvement. You can use surveys, feedback, statistics, etc. to find out which products, categories, seasons, etc. generate the most returns, and take steps to correct the problems .

If you would like expert advice on how to improve your bounce rate and how to create an accurate and effective page, please contact us.

Written by Moises Hamui Abadi : I am an entrepreneur, founding partner of Viceversa and SoyMacho. After leading several digital businesses and advising several other businesses, I decided to form MHA Consulting, a digital marketing consultancy dedicated to growing and empowering digital businesses in more than 7 countries and generating more than 1,500 million pesos.