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How to Manage Returns & Reduce Costs

When wondering how to manage returns, common sense tells us to begin with the returns policy. What should a business consider when establishing a returns policy? There are many things to consider, and a great deal of advice can be found. We will cover the recommendations concerning what the policy should cover, how the policy can increase customer satisfaction and customer loyalty, and how an online store can mitigate the cost of returns.

Once we have looked into returns policies, we will look into how to facilitate the returns process and finally, we’ll look at how a fulfillment services company handles returns management. 

How do you handle sales returns? When an online store writes a return and refund policy, it must take into question many different terms for returning or applying for a refund, keeping in mind that the returns experience has a strong effect on customer satisfaction and whether or not the customer will keep shopping with the brand.

Some questions to consider would begin with the time period. Can the customer return the product after 30 days or 90 days, or is the limit 15 days? Can the product be used? Does the product need to be in its original packaging? Is the shipping paid? 

Let’s say your returns policy states that customers have 14 days in which to return the product and only store credit will be issued. Does this policy fit with your buyers? Will it enhance customer loyalty? The answer may be No. The first recommendation, therefore, would be to know your buyers and create a return policy that makes sense for your business and the buyer. Who are your buyers? What are your products? What policies make sense for the business? 

We will try to determine how the policy can bring about customer satisfaction and customer loyalty while reducing the financial loss that comes with managing returns.

Create a Return Policy & Return Process

The general consensus is to choose a reasonable return period, remembering that consumers have many retailers to purchase the product from, and they will likely consider returns when making that decision. Your policy may allow returns 30, 60, or even 90 days after the purchase date with some exceptions.

Interestingly, some experts assert that customers are less likely to return products that have longer deadlines. They assert that flexibility in the return deadline actually reduces return rates. The evidence seems to suggest that the longer the time frame, the less likely the consumer will be to return it. Keeping in mind, of course… a returns policy can be adjusted based on experience.

What are the basic decisions to be made? We will list the questions to be answered: 

  1. Determine how the customer would initiate a return. It could be an email, a web page, or a form. It should be easy to locate. 
  2. What do you offer? Can the customer request an exchange, a store credit, or a refund? Considering your customers, what would create the customer satisfaction you desire? 
  3. Do you have non-returnable or non-exchangeable products? If you do, the recommendation is to make it very clear which products are ‘final sale’.
  4. In what condition can your products be returned? Can clothing be lightly worn, does the tag still need to be on, does the product need to be in its original condition, does the consumer need to have it in the original packaging, can it be broken or damaged, and so forth?
  5. What is the time frame for returns and exchanges? Considering customer satisfaction and customer loyalty, indicate how many days the customer has – 15 days or more.
  6. What items can be returned, and which ones can be exchanged?

Should the policy make it easy and painless to return merchandise? Experts say yes, it should. The recommendation is… pay attention to ‘customer lifetime value’. Making it painless will, in the long run, be good for your bottom line. In eCommerce, returns can easily lead to more sales.

It’s important to remember that customers don’t initiate a return because of the ease of the return process. Most buyers would rather not have to be bothered with a return. Admittedly there are a few that abuse the returns option, but most returns are done because of a dissatisfaction that is greater than the inconvenience of returning a product. A difficult return process will make the customer much less likely to buy again. 

Ultimately, advisors say to make the policy clear and leave no room for interpretation. Secondly, make it prominent on the website so there is no difficulty finding it. Also, in addition to being clear and available, make it simple to understand. Create a policy that the buyer can understand with ease. This leads to customer satisfaction and customer loyalty.

The Returns Management Process

returns management process - AMS Fulfillment

Certainly, the returns policy is the first part of the returns management process. Before we cover the actual fulfillment of returns, there are some more considerations for sellers to review.

In addition to writing a successful policy, sellers can consider a feature called “returnless refunds.” For low-value items, with the shipping cost in consideration, some businesses find that offering a refund and not requiring the return of the product is the best choice. The cost of processing returns can be 50% or more of the cost of the goods sold. 

Since Amazon introduced the idea in 2017, returnless refunds have become much more common for lower-priced items. The customer will receive a refund with no ‘get it shipped’ effort on their part and of course, this leads to customer satisfaction and loyalty. In addition to cost, another thing to consider about returnless refunds is the environmental impact. There is the impact of packaging as well as transportation, which, when factored in, may make returnless refunds more attractive to sellers and to customers who are considering the option.

Another recommendation is to make exchanges effortless and attractive to the buyer, giving plenty of opportunities to choose this option on their own. A means of encouraging an exchange is to put it in your policy that the customer can return past the deadline window if requesting an exchange. Along the same vein, some sellers have begun giving shoppers who wish to return an item the possibility of not only exchanging their product but exchanging for a same-value gift card or store credit. The suggestion is to offer a discount on their purchase if they use the gift card or store credit on the same day.

A third bit of advice is to give the customers several methods for returning the product. If possible, offer in-store returns or returns to a third-party network. These options don’t require a box or a label, and the customer can quickly and easily get a refund or exchange. If the choice does involve a box and a label, give several delivery options including expedited shipping, considering the customer may require it. 

Best Practices for Managing Returns

What would be the basic best practice to limit returns in the first place? One recommendation is concerning clothing and shoes. Make sure your size charts on the website are clear and easy to read, with the result being fewer errors about size. Nearly half of the footwear and apparel returns are due to having purchased the wrong size, so give attention to avoiding those returns with accurate and easy-to-read size charts. 

More best practice recommendations are to clearly mark final sale items, make sure the customer knows there are no returns on the item, and offer a little leeway on items that have to fit properly, like a woman’s bathing suit, for example. The bottom line is to base your return policy on the product with customer satisfaction in mind.

Another point not previously covered is regarding the display of the product in the online store. Experts suggest that it’s important to give customers enough information to ensure they are ordering what they believe they are ordering. Always use high-quality visuals and ample information. 

When crafting the policy, keep in mind how long you carry your inventory. If there are hot items that sell out and cannot be re-ordered, consider how this may influence your return policy. Also, keep in mind what your competitors are doing regarding returns. Consumers will decide between your store and their store, so track what your competitors are offering in their return policies.

The final best practice is to make the return process fair and smooth, without friction. When speaking with the customer, ask questions to find out what the customer’s expectation is concerning the product. How did the product fall short? Asking questions can provide valuable information about the products that the company can use to improve its inventory. 

Customer Loyalty – Listen to the Customer

Listening to the customer requesting a return and asking questions on how the product failed could provide an opportunity to suggest another product that would be more suitable and therefore a possible choice for an exchange. The bottom line is to listen, sympathize, and work to solve the issues in the best way possible, also gaining vital information on how you, the seller or manufacturer, could improve. 

Whether it’s the website that needs improvement, the product, or the return policy, listen for this information. Also, look for patterns in returns and exchanges that will tell you which products are returned most often and work to discover and mitigate the underlying cause.

Returns and exchanges are to be expected in retail sales. All of the policy recommendations, returns management efforts and best practices are geared toward keeping the returns from being financially damaging to the company and protecting the customer’s lifetime value.

Uncontrollable Return or Controllable

Considering why a customer makes a return, the question arises as to what the seller can control and what they cannot control. A customer could return a product because of a defect that could be prevented, i.e. controllable. Another customer received a damaged product due to poor packaging – very controllable. A third customer simply ordered the wrong item – no control over that. Knowing why the product was returned, the seller can change those things that can be controlled.

Some customers will order multiple products or multiple variations and return what they don’t like or need. These could be called “serial returning” customers or uncontrollable returns. During the holiday season, there will be more returns and this is to be expected, as not all gifts are a good match. 

Before we move on let’s review how to manage returns before logistics. The returns management process is as follows:

  1. The returns policy should be clear, simple, and fair.
  2. Your policy will be easy to find and review on your website.
  3. Your customer service team is trained to resolve the dissatisfaction, provide options, and gain information to help the company improve.
  4. After the return has been arranged, what remains is logistics – how is the return accomplished? 

What Is Reverse Logistics?

what is reverse logistics - AMS Fulfillment

In the following sections, we will cover fulfillment of returns including receiving, inventory management, handling, shipping, and ending with a satisfied customer.

Once the policy is written and published, and once the customer service personnel have done their part, the product or item has to be returned to the location it came from. At that location, decisions will be made about the next step. Reverse Logistics refers to the product being returned to the warehouse. It was shipped out to the buyer and that flow is reversed – it is shipped back. Both sellers who do in-house fulfillment and logistics fulfillment companies engage in Reverse Logistics. The proper management of returned products can cut losses by returning undamaged products to inventory if possible. 

What are the three parts of return management? The answer would be what happens before the return, what happens during the return, and what happens after the return – so, pre-return, return, and post-return.


The eCommerce customer receives the product and finds that the product is not satisfactory in some way. The customer fills out the web form or calls customer service to facilitate the return or refund or exchange per the policy. 

Customer service communicates with the buyer to find out what the issues are. Serving the customer in the best manner, they gain information for the company to use in making improvements if appropriate. Determining that the return is approved, customer service will facilitate the return, refund the customer, or approve the exchange. If the policy allows in-store returns, this can be discussed and arranged. 


Shipping the product back to the warehouse must take place next. If the company’s fulfillment is in-house, the company must arrange shipping of the return from the customer back to the warehouse or sorting facility. Depending on the policy this may involve a pick-up at the customer’s location or the customer can use a provided return label. If a fulfillment company warehouses and facilitates the company’s fulfillment, the customer will likely utilize a prepaid shipping return label to send the product back to the warehouse.  

The product is returned (reverse logistics) to the warehouse or sorting facility where it originated. The item will be received by a returns team that is in communication with customer service. The returns team will examine the product and relay the condition of the product. Can it be returned to inventory? Does it need re-packaging or repair? Was the product damaged during delivery or return? A supervisor or auditor will inspect the product and answer questions about its condition.


The next step will be to restock all saleable returned products into the inventory to be re-sold. If the product is broken and can be repaired and re-sold, that will be done. If the product cannot be re-sold, can it be donated or must it be disposed of? An environmentally conscious company, be it in-house fulfillment or a full-service fulfillment center, will make every effort to donate or recycle rather than dispose of a product in a landfill. 

All of this post-return process falls into the category of inventory management in which the technology keeps track of every SKU, knowing where it is in the process. If the customer agrees upon a replacement, or exchange, fulfilling that obligation will take place next, with the appropriate product being shipped to the customer and received. 

This entire process is the reverse logistics process – receiving returned products and delivering the product to the appropriate location. The ultimate intention in reverse logistics is to lessen the financial loss and result in a satisfied customer. Also, the environmental impact should be considered and lessened as well.

Working With a Fulfillment Center

working with a fulfillment center - AMS Fulfillment

Experts recommend that the returns process be optimized to minimize the impact. An environmentally conscious fulfillment center will have an optimized system, with effective inventory management technology. Logistics is only one part of returns management via a fulfillment company. Returns management involves software integrations, shared customer service tasks, inventory management, and recycling.

When returns are done right, and efficiently, the result is customer satisfaction and customer loyalty. The full-service fulfillment company is an expert at logistics and order fulfillment including reverse logistics. Some sellers will handle their fulfillment processes and activities in-house and partner with a logistics provider for outbound shipments. However many others turn to a full-service fulfillment company to handle all of their product fulfillment including returns management. In this way, they can take advantage of the systems, processes, and expertise of the fulfillment center. 

Let’s go over what a fulfillment center does, and then we’ll cover how they will handle returns. The fulfillment centers have experience, shared technology with the seller, the warehouse management system, the inventory management system, the customer service team… we’ll begin with when the seller sends their products to the fulfillment center.

Before the seller’s products are shipped to the fulfillment company and received into inventory, the systems of both must be integrated. In this way, the seller will always know how much inventory they have at what location in the warehouse, and the fulfillment center will receive every order and be apprised of every return. 

The fulfillment center has a warehouse management system as well as an inventory management system, and their systems are optimized to account for every SKU and communicate with the seller. When the inventory is received in the warehouse, everything is scanned into the system and placed in inventory in a precise location. Orders come in and products are picked, packed, and sent to shipping where they are labeled and shipped according to the seller’s shipping preference. The shipping team has both technical and experiential means of finding the best price/time shipping option for the seller. Shipping services are one of the many reasons an online store will turn to a fulfillment center rather than do fulfillment in-house.

Returns Process of the Fulfillment Center

What will the logistics provider do after a return is agreed upon? First, they will get the product shipped from the customer back to the warehouse. This will be done according to the policy. Once the product is received by the returns team, the product will be appraised. The fulfillment center has a dedicated Returns Management team, automated systems, and a process agreed upon with the seller to minimize the cost and get the product back on the shelf as finished goods for all items that can be refurbished.

The returns team will examine the return, determining what is needed next. Is it damaged? Is it in good condition and only needs re-packaging? Is there a replacement requested? Or an exchange? Does the item need repair? Can it be repaired? Is the item not in condition to sell but in condition to donate? If it’s broken and cannot be repaired, can the product be recycled? The returns team will be in close communication with the seller with information to help with refund decisions. In the end, all saleable products will be returned to inventory and broken or destroyed products will be properly handled according to the seller’s wishes. 

The full-service fulfillment company will have a customer service team in communication via shared technology with the seller and with the customer. Many sellers turn some portion of customer service over to the fulfillment company wherein the fulfillment customer service team follows the seller’s policy and OKs the refund or replacement. The fulfillment center will ship the replacement item if that is the desired outcome of the return, and the shipment will of course be able to be tracked by the seller and the buyer until it is delivered into the hands of the buyer.

If the product can be repaired or refurbished, the fulfillment returns team will closely follow the guidelines of the seller. Whether testing, replacing components, repacking, or simply checking for a broken seal, the returns team will accomplish what is needed to return the product to inventory. 

Introducing B Corporations Like AMS Fulfillment

about b corporations - AMS Fulfillment

AMS Fulfillment is a full-service logistics provider, in operation for more than 20 years. The AMS headquarters office and warehouses are in Valencia, California, near the ports. AMS also has two locations near ports on the East Coast, in Delaware and Pennsylvania. 

By full-service, we mean that the fulfillment company handles all types of inventory for all types of clients, i.e. business to business, business-to-consumer, direct-to-consumer, and more. It also means that the fulfillment services offered are very extensive, including managing returns, making repairs, providing customer service, offering business process outsourcing plus many more value-added services. 

When it comes to fulfillment, AMS is highly experienced, with top-notch technology and experienced staff and executives. And there is more… in addition to providing full-service fulfillment services, the company is a B Corporation

What is a B Corporation? A B Corporation is a for-profit company that has been certified and is legally obligated to take steps to “B the Change.” As a B Corporation, AMS is committed to considering stakeholders when making decisions, those being the AMS employees, the surrounding communities, the earth and environment, and the clients. 

AMS is a B Corporation that puts the people and the environment before profit. We hope you will visit the AMS Fulfillment website and decide if this full-service fulfillment B Corporation is the right answer for your needs.

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