How To Develop a Solid Returns Policy


Now that your e-commerce business is up and running and your products are going out the door, and you’ve read our articles about Shipping and Fulfillment and Drop-Shipping, it’s the time to focus on the last part (but definitely not the least important) of our shipping methods series: reverse logistics. Being able to accept returns and exchanges is key to building a successful e-commerce business, and developing a solid returns policy will help you keep your churn rate low and build a loyal customer base.

E-commerce never could have grown into the force it is today if it weren’t for the ability to reliably ship products. E-commerce, as an alternative to brick-and-mortar retail, required a dependable infrastructure in place to make it just as easy for consumers to receive their goods, otherwise shoppers would have always opt for the physical store.

For the same reason, it’s just as important to provide your customers with an efficient and straightforward way to return or exchange products. Your returns policy shouldn’t be designed to discourage returns, rather it should be seen as a value-added service for your customers.

This approach has allowed Zappos to achieve an unprecedented 75% return customer rate and break 1 billion USD in sales in 2008. Zappos has made returns a core part of their marketing strategy, which is one of the reasons why they are so often praised for having the best customer service in the business.


When it comes to developing your own returns policy, start with these key tips and philosophies:

Be Transparent

The conventional wisdom suggests that a high return rate is a bad thing, so many traditional businesses make the mistake of trying to discourage refunds and exchanges in any way they can. This often comes in the form of making it difficult for the customer to return a product, such as by not being clear and upfront about the return policy or by forcing customers to contact customer service directly.

If you force your customers to hunt for your return policy, you are ensuring that they won’t buy from you again. In fact, surveys have found that most customers want the details of a return policy ahead of the time of purchase, with 72% of German respondents and 48% of American respondents claiming they would give more business to stores that have hassle-free returns.

Tell shoppers right from the beginning how easy it is to return a product if it’s damaged or not what they expected, how much time they have to file a return, and how refunds are awarded in terms of cash, credit or product exchanges. Include this information in an obvious and easy-to-find location so shoppers never need to hunt for it.

Extend the Return Period

Most returns policies range from as short as 14 days up to 30, 60 or 90 days. Admittedly, it doesn’t seem fair to let consumers use products for much longer than that and still return their purchase free of charge.

But the latest trend, spearheaded by Zappos and, is to offer a 365-day returns policy. According to Zappos’ head of customer loyalty, Rob Siefker, the longer the return period, the more comfortable shoppers are about making their purchase in the first place, which in turn increases your overall conversion rate.

In fact, when clothing and accessories retailer 3rd Power Outlet increased their returns policy from 14 to 90 days, the total number of returns actually decreased. If consumers have more time to decide whether or not to return a product, they feel less pressure about it and are more likely to become comfortable with something even if it didn’t fully meet their expectations.


Returns are a hassle. Not only have you lost a sale but you also now have the added logistics and paperwork of managing your refunds, costing you time and money. Rather than staffing a returns department, businesses should try to automate as much of the returns process as possible.

Automation benefits both you and your customers. By having a returns/exchanges form they can fill out online, you save the customer the hassle of calling in and save yourself from staffing someone to answer the phones. You can also simplify the whole process by shipping out pre-printed return labels along with every purchase so that the customer has nothing to worry about.

Be Accurate and Descriptive

At the end of the day, you still want to keep your return rate low. The best way to do this is to be as accurate and informative in your product descriptions as possible. Include everything you can, such as the product’s dimensions, colour, weight, material, and whether there are any additional elements required such as batteries or specific maintenance requirements. And of course, include several detailed photos.

Ask for Feedback

Finally, your returns policy contributes significantly to your customer’s overall experience. Even if you followed each of these tips to the tee, you’ll never know how solid your returns policy is until you ask your customers. If they are not impressed enough to come back for more, ask them why and adapt your policy to meet their expectations.

After having a positive returns experience, 95% of shoppers will revisit an online store to make another purchase and 45% of them will actually recommend you to their friends, according to Endicia. So when it comes to managing your shipping and fulfillment, don’t forget about this all-important step of developing a solid returns policy.

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Shipping and Fulfillment: Choosing the Right Methods


We’re living in a digital economy. Though still only a small portion of the total retail market, the effect that e-commerce has had on the way people buy and sell around the world has wide-reaching implications that affect the lives of everybody taking part in the economy, online or offline.

The growth of e-commerce has been so rapid for two reasons: access and convenience. Access because it gives businesses the ability to offer their products and services to consumers regardless of distance or geopolitical boundaries, and convenience because it empowers consumers to shop from anywhere and have products delivered directly to their doorstep.

This is why cross-border commerce is reshaping the retail landscape and why being able to ship your products in a timely and effective manner is so integral to the success of e-commerce. However, the logistics of shipping and fulfillment can be a challenge for small businesses, so we’re going to take this opportunity to break it down for you.

Shipping 101

For the most part, you have full control of your customer’s experience. Making sure they have a good experience browsing your web store and ordering your products is an important part of running a successful business, but it doesn’t end there. It’s just as important to ensure a good customer experience when it comes to delivery, but it can also be more difficult.

Whether you’re drop-shipping or using a courier, chances are some or all of your shipping and fulfillment isn’t directly under your control. The most extreme example of this, drop-shipping, is when you don’t even keep your own inventory but instead, once an order has been placed, contact the wholesaler and have them ship the goods directly from their warehouse to the purchaser. Read our article about drop-shipping to learn more about this method.

For the purposes of this article, we’re going to assume you are managing your shipping and fulfillment in-house.

The Basics Elements of Shipping

  • Packaging: As e-commerce grows, so do the standards which consumers hold it to. Packaging and presentation are just as important as any other element of the customer experience. Packaging is an extension of your brand – if your products look good when they arrive at the customer’s door, they’re going to want to come back for more.
  • Tracking and insurance: It depends on your courier, but tracking and insurance is typically inexpensive and can provide you with a great deal of security as well as the ability to offer package tracking services to your customers. Lost or damaged packages are not only bad for the customer experience, but can also be a hefty unexpected expense, especially for small businesses with slim profit margins.
  • Customers and tariffs: If you’re selling across borders, you’ll need to fill out the appropriate customs documentation, available online or at your local post office. Fill these forms accurately to ensure that packages don’t get stuck at customers, which can cause them to arrive late or not at all. Keep in mind that there may be additional tariffs, taxes or duties to be paid by the customer at the time of delivery, so try to make your customers aware of that before purchase so they don’t blame you for any additional fees.

Developing a Shipping Strategy

There are many finer details to developing your shipping strategy, but we’re going to look at the two key choices you’ll have to make before any others: your shipping method and your pricing structure.

You have the choice of three distinct shipping and fulfillment methods. The first is drop-shipping, a common method for new and small business which has its advantages but completely outsources that side of your business, leaving you with no control over your customer’s delivery experience. The second is the opposite, where you handle all inventory and delivery duties internally, which comes with a couple of distinct advantages:

  • Branding and customisation: You have complete control over how your product is branded, packaged and presented, giving you the ability to lend a personised touch which will be seen as added value by your customers and encourage them to come back for more.
  • Keep expenses in-house: You’re responsible for hiring and paying the staff that handles and packages your product, meaning that no share of the profit, however small, is going to a third-party fulfillment company.

However, this also means that you’ll be paying for more man-hours to ensure that your products get packaged and shipped in a timely manner, which many small businesses may not be able to afford.

The third shipping method, using a fulfillment warehouse, lies somewhere in the middle. Essentially, you rent space in their warehouse to store your inventory and pay them to ship the orders on your behalf. This doesn’t allow you the same level of personalisation as keeping your inventory in-house, but does have some advantages:

  • Lower costs: Because fulfillment warehouses ship large quantities for multiple merchants, they can benefit from economies of scale. They’re often integrated with several major logistics companies, so they can fulfill orders at a lower cost and have access to a wider range of shipping options.
  • Shorter delivery times: Fulfillment warehouses are streamlined shipping professionals, with carefully developed schedules and routes and often centrally located, depending on where your customer base is. They specialise in getting your orders delivered in the most timely and efficient way.


The number one cause of shopping cart abandonment is high shipping and handling fees, so keep that in mind when choosing which of the following pricing structures is best for your business:

  • Offer free shipping: This is the best way to increase your conversion rate and encourage repeat customers, and adding the words “free shipping” to your marketing materials also allow you to get a leg up on the competition. That being said, many small businesses operate on such slim profit margins that they can’t afford to offer this perk, particularly those that are selling across borders.
  • Charge shipping at cost: By integrating a real-time shipping calculator into your checkout page you can charge customers exactly what it costs you to ship the product. This ensures that you don’t take a loss when shipping larger products and also appears transparent to customers, which can help build trust.
  • Charge a flat rate: The third option is to calculate the average cost of shipping on your orders and base a flat rate around that. This simplifies your calculations and is easy for the customer to understand, but it’s important to choose at flat rate that covers your shipping costs but is still low enough that it won’t turn customers away.

The value of these two choices will depend on the nature of your business as well as the demographic you’re marketing to, so do your research, gather data, and test different methods to see whether they’re sustainable and what effect they have on your conversion rate.

However, there’s still one missing piece to this puzzles: reverse logistics. Returns and exchanges are one of the keys to building loyalty and lowering your churn rate, so much so that Zappos has built their return policy directly into their marketing materials. Visit the DalPay Blog in the coming weeks for our article How To Develop a Solid Returns Policy, and follow us on Facebook and Twitter for the latest news and advice from around the industry.

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