Returns management: How to handle customer returns effective

1. What is returns management?

Returns management is the logistics process that businesses use for handling returns effectively, overseeing everything from the moment a customer initiates a return to the final resolution. An effective returns management system covers policies and workflows for authorising returns, managing the return shipment, inspecting the product, and processing refunds or exchanges. 

The goal is to balance efficient, cost-effective operations for your business with a seamless, positive experience for your customer.

Efficient returns management should be a priority for any online business, especially in a competitive market like Ireland. Given that a majority of consumers—as many as 67%—will check an online retailer’s returns policy before committing to a purchase2, a clear and easy returns process can be the deciding factor in making a sale. When handled well, it reinforces your customer’s trust in your business.

An optimised, customer-first system that processes customer returns quickly ensures shoppers receive their refunds without delay, making them more likely to become repeat customers and leave positive reviews.

Improved customer satisfaction and loyalty

Perhaps most importantly, effective returns management will improve customer satisfaction with your brand. Studies show that 79% of consumers will not shop with a retailer again after a bad returns experience3, which can cause cascading repercussions, as retaining a customer is far more cost-effective than acquiring a new one. 

Furthermore, a clear and simple returns policy can be a strong draw for shoppers in Ireland and beyond, giving them the confidence to make an international purchase. “Simple, free returns” was cited by 49% of global consumers as something that would give them confidence and reassurance to shop cross-border4.

Reduced return fraud

A well-structured returns management process is your first line of defence against return fraud. It helps you promptly identify irregularities and protects your business from policy abuse. By implementing clear verification steps within your process of handling returns, you can minimise financial losses from fraudulent customer returns, safeguarding your profit margins and allowing you to invest in serving your honest customers better.

Efficient inventory management

An often-overlooked benefit of a strong returns process is more efficient inventory management. When returned items are processed quickly for inventory accuracy, your stock records remain precise. This allows you to forecast inventory needs more effectively, ensuring popular items are restocked and made available for genuine customers, and helps you manage warehouse space without disruption.

Positive brand recognition

A good returns experience builds a positive brand reputation. It also offers a sustainability benefit; an effective process helps identify paths for returned products beyond landfill, such as refurbishment or recycling, establishing your brand as environmentally responsible. With e-commerce set to command 15-20% of the Irish retail market5, strengthening your returns process is a key way to capitalise on this growth and build strong brand recognition.

• Step 1: Customer initiates the return

The process begins when a customer decides they want to return a product. Typically, they will do this through an online returns portal on your website or by contacting your customer service team.

At the point a customer initiates a return, you should ask them if they want a replacement, refund, or exchange. This is a critical first step where you should capture the reason for the return (e.g., wrong size, damaged, not as described), which provides valuable data for later analysis.

• Step 2: Return authorisation

Once a request from your customer is received, you will have to evaluate it against your company's return policy.

At this stage, you authorise the return, providing the customer with instructions for the next step. Many businesses issue a Return Merchandise Authorisation (RMA) number at this stage, which helps track and manage the specific customer return throughout the entire process.

Making this step simple for the customer is important, but it's also where you can implement rules to prevent fraudulent returns, such as items returned outside the policy window.

• Step 3: Return shipping

Once authorised, the customer needs to ship the item back to you. A smooth process here involves providing the customer with clear instructions and a shipping label. Offering convenient options, such as a pre-paid label for drop-off at a local point or a scheduled courier pick-up, can significantly improve the customer experience.

Many businesses in Ireland partner with third-party logistics providers like DHL Express to offer efficient and cost-effective return shipping options for their customers.

• Step 4: Inspection and quality check

Once the product arrives back at your processing location, you should notify the customer that it has been received. The product should be inspected for any damage or signs of use to verify it matches the stated return reason. At this point, you should confirm whether the customer is eligible for their requested resolution in line with your business’s returns policy.

• Step 5: Customer resolution

After a successful inspection, the final step for the customer is the resolution. It’s important to process their refund, send out a replacement product, or issue store credit as quickly as possible. Speedy resolution is key to building a positive relationship with your customer and encouraging them to shop with you again.

• Step 6: Restocking or disposal

The final step for the product itself involves determining its next destination. This is where a reverse logistics strategy comes into play. If the product is in perfect condition, it can be restocked and your inventory system updated immediately. If not, sustainable options like refurbishment, recycling, or repurposing should be explored to divert items from landfill and potentially recover value.

Common challenges in returns management

High return rates

One of the leading challenges in returns management is the sheer volume of customer returns, driven by the nature of e-commerce, where customers can’t physically see or try products before buying. Common reasons include sizing issues or inaccurate product descriptions.

The cost represents a major pain point for e-commerce businesses, as 79% of consumers expect free returns when shopping online5. Plus, it’s estimated that the process of handling returns can cost businesses as much as 66% of the product’s original price6.

Fraudulent returns

Another significant challenge is managing fraudulent customer returns, such as customers attempting to return used, damaged, or even different items. 

This issue is more than a minor inconvenience; it's a direct financial drain. Globally, it's estimated that e-commerce merchants lose about 2.9% of their total revenue to fraud7, a substantial portion of which comes from return abuse. 

Implementing a clear, well-communicated returns policy and robust verification steps during the inspection process are key to minimising this risk.

Operational complexity

Processing customer returns can take up a lot of retailers’ time. Items may need to be cleaned, repaired, and logged in an inventory system – all time-consuming, manual steps that are prone to error, particularly for small businesses with few staff and no dedicated returns infrastructure.

This operational complexity can lead to delays in restocking items and refunding customers. Adopting automation tools to track returns and update inventory can significantly streamline the returns process and reduce the manual workload.

Returns management best practices for e-commerce

1. Consider offering free returns

Offering free returns can be a powerful sales driver. While it represents a cost, especially for small businesses, research has shown that free returns are a leading motivator for online shoppers8. The resulting increase in sales and customer loyalty can often justify the investment. Consider offering it on a trial basis to measure its impact on your business.

2. Have a clear and concise return policy

Many visitors to your e-commerce website or app will check your return policy before committing to a purchase. Ensure your return policy is clear, simple, and easy to find on your e-commerce site, as many customers check it before buying. Clearly outline key details such as:

• The timeframe for returns (the window of time they have to send it back).

• The required condition of the product.

• Who covers the cost of return shipping (whether it is free or if you will deduct the cost of shipping from their refund).

• How refunds or exchanges are processed.

You should also include an FAQs section (this will manage the number of customer enquiries you’ll have to deal with).

3. Prioritise speed in processing returns

Speed is a critical factor in the returns process. Customers expect their refunds or exchanges to be handled promptly. A fast and efficient process for managing returns not only meets customer expectations but also strongly encourages them to shop with you again, preventing a negative experience from deterring future purchases.

4. Make them convenient for customers

A convenient returns process is a key differentiator, which is why DHL Express offers an easy label-free returns service. 

With this, your customer can initiate a return online and receive a QR code on their smartphone. They can then drop the package at a nearby DHL Service Point or book a courier pick-up. The QR code is scanned, and the parcel is securely handed over—offering a simple, printer-free, and sustainable option.

5. Transparent customer communication

Maintain transparent communication throughout the returns process. A customer returning a product to your business should be kept informed with regular updates. 

Be sure to send automated notifications once you have received their return, and again when their refund or exchange has been processed, including expected timelines for refunded amounts to be returned to their bank account.

6. Leverage technology

Managing customer returns with limited staff is a significant challenge for small businesses. Integrating the right technology can automate and streamline different stages of your returns management process, saving time, reducing errors, and providing valuable data.

Two key technological tools that can significantly improve your operations are:

• Returns management systems (RMS): This cloud-based software provides an end-to-end solution for automating your returns process. An RMS can manage return authorisations through a self-serve online portal for customers, trigger automated status notifications, and update inventory records. It can also provide valuable data analysis to help you identify common reasons for customer returns and reduce costs.

• Handheld barcode scanners: These devices can be integrated with your inventory or reverse logistics management software. When a return arrives, staff can simply scan the product’s barcode to automatically and accurately update your inventory database in real-time. This significantly reduces the risk of human error compared to manual data entry and speeds up the restocking process.

Final thoughts

As e-commerce continues to grow in Ireland, the importance of effective returns management cannot be overstated. A streamlined returns process not only impacts your bottom line but also builds crucial customer loyalty. Remember these key takeaways to optimise your strategy:

• Prioritise a clear and convenient process: Create a transparent, easy-to-understand returns policy and make the process of handling returns as simple as possible for your customers. If you can afford to, consider offering free returns on a trial basis to measure the impact on your sales.

• Focus on reducing returns at the source: Provide accurate and thorough product descriptions on your website, with plenty of high-resolution photos and videos. Helping customers make informed purchase decisions is the best way to lower your return rate in the first place.

• Leverage technology to automate: Tap into technology to automate as much of your returns logistics as possible. It will save your business time and provide valuable data that will help you address the pain points that are causing returns.

By implementing these best practices, you can turn your returns management from a challenge into a competitive advantage. Partnering with DHL Express can simplify the logistics of your returns process, allowing you to focus on what you do best: building your online presence and growing your business in Ireland and beyond.

With a DHL Express Business Account, you’ll receive support from the experts for every part of your logistics.

Open a DHL Express Business Account