For many e-tailers, a return signals the end of the line: the customer was unhappy with their item and won’t likely come back. Best to move on to the next buyer, right?

This is a common missed opportunity. These retailers leave money on the table and miss a chance to build a stronger relationship with the customer. The reality is that returns give online retailers a golden opportunity to set themselves apart from competitors regarding customer experience. 

Whether it’s gifts for Christmas, Mother’s Day, Father’s Day or a birthday, returns are unavoidable in online retail. December returns increased month-on-month 44.5%, 51.5% and 35.9% in 2019, 2020 and 2021, according to data from shipment tracking company AfterShip. If your online store is not prepared to handle returns around holiday events, you might be stuck refunding a lot of customers while inventory is thrown off-balance. 

The outdated returns mindset must be flipped from one of rejection to one of opportunity. With strategic messaging, smart automation and clever incentives, sellers can convert returns into repurchases. If they are especially motivated, they can convert those returns into upsells.

Rising Returns

With the proliferation of online shopping during the past few years, returns have gotten much more prevalent because customers cannot see or feel an item to gauge fit or quality. Simply put, the more shipments sent, the more returns requested. While online shopping was growing before COVID-19, the pandemic shifted online retail sales into overdrive. Additionally, options like self-serve return portals and nearby physical return hubs (where customers bring the item back without having to create a shipping label) manifested an environment where buyers were more comfortable returning items.

On the flip side, sometimes buyers are simply not happy with their item, so they return it. Additionally, recent supply chain issues mean customers might not be able to purchase their first choice in a product. Instead, they turn to a backup, which might fall short of expectations, leading to a return. 

But the biggest reason for returns is that customers received the wrong size or color. Digging deeper, what this really means is that customers ordered a number of different sizes and colors of the same product to see which one they liked the best, and ultimately decided to keep only one. It’s the e-commerce version of using a brick-and-mortar store’s fitting room or window shopping through a mall.

A Streamlined Solution

While the end-of-year holiday season crunches e-tailers the most, there are many smaller gift-giving events throughout the year that lead to increased returns traffic. Preparing for a drastic increase in return orders is an effective way to streamline processing time for refunds or exchanges.

The first step online retailers should take is investing in a solution that automates the return process and seamlessly integrates with their enterprise resource planning (ERP) software or warehouse management system (WMS). Whatever can be done to save employees the time and headache stemming from dealing with the minutiae of handling returns will make both the retailer and customers happy. By setting up an automation system, retailers allow customers to generate their own return labels and even issue refunds automatically. This takes another inefficient process — manual returns support — off your team’s plate.

A lack of clear communication is also a barrier to customers who return products. The holidays are already stressful, and a complicated return adds to the madness. It is important to keep customers informed regarding the status of their returns and refunds via text or email updates. Make sure these messages are helpful and mark each phase of the process. Too many messages annoy customers; too few lead to calls that overwhelm customer service agents. 

For brands operating multiple returns locations, set up an automated note that shares nearby return locations based on the customer’s address. To avoid confusion and potential complaints, merchants must clearly communicate eligibility rules to ensure customers know that certain items are not eligible for returns (e.g. discounted items). Finally, implementing a returns management portal for your support team minimizes human error associated with the return process.

Boosting Sales, Loyalty

Now here come the crucial steps that convert your returns into money. To serve customers requesting returns, build a branded return portal that features your business’ navigation bar, logo and assets living within your store’s website. Make sure your return portal includes a call to action that encourages customers to choose an exchange before offering the refund option. This allows a business to keep all, or at least part, of a sale rather than issuing a full refund. This simple step is skipped by many retailers. However, it is a foundational tool for boosting website traffic and brand loyalty. 

In order to convert a return into repurchases, online retailers should also explore the possibility of offering extra store credit when customers choose to make an exchange. While this means giving up a little money up front, it often leads to additional purchases. Another successful strategy is rather than refunding to the original purchase method (e.g. a credit card), brands should try converting the purchase price to store credit to generate further sales. 

For brands with both online and physical stores, offering a physical return as one option within the overall return process rather than forcing customers to ship an item back can be a powerful brand-building tool. The customers who choose to return an item in-person will enter your store and see the rest of your products, increasing both visibility and brand awareness. This may lead to upsells, additional purchases or size/color exchanges instead of a refund.

There are many strategies to turn the returns process from a losing prospect into a net positive for an online retailer; don’t be afraid to create your own solutions. It’s a powerful way to separate your store from thousands of other online retailers while building a loyal base of customers and unofficial brand ambassadors.

Andrew Chan is co-founder and chief marketing officer of AfterShip.