How to Handle Order Returns on an eCommerce Marketplace

Product returns are a pain point for sellers on marketplaces. Returns can cut the seller’s profit, badly influence conversions, and increase spendings on logistics. No one likes product returns—neither the seller, nor the buyer. But the fact is that product returns are a normal part of selling online, especially on large eCommerce marketplaces.

According to the National Retail Federation, in 2020 customers returned products worth $428 billion—more than 10% of total retail sales. NRF estimates the cost of returns to be $101 billion.

An interesting fact about eCommerce product returns is that a lot of customers order multiple items just to return all of them or a part of them right after they receive the order.

This especially applies to online marketplaces selling apparel and shoes, where customers order multiple sizes, try them on, and return those that didn’t fit. Imagine: a customer orders the same T-shirt in three sizes, keeps one size and returns others, which results in a 66% return rate for this order! 70% of returns in fashion eCommerce stores and marketplaces are fit-related.

The biggest rate is in the women’s clothing industry—23%, then goes footwear with 20%, men’s clothing is in third place with 14%.

Actually, product returns happen across all industries. 25% of buyers return between 5% and 15% of the products they buy online.

In this article, we’re figuring out the reasons for product returns, the best practices to develop a return policy and handle returns on a marketplace, and how to reduce order returns on an eCommerce marketplace.

Why do customers return orders?

Online marketplaces and stores receive significantly more returns compared to brick and mortar shops.

20% returns in eCommerce
VS
9% returns in offline

The most popular reason for return on fashion marketplaces is of course wrong size or style. Size too small—30%, size too large—22%. But there is a number of reasons that apply for all the industries:

The customer changes her mind

This is the reason for 12% of all returns. A customer can change his mind because of many factors: the product description was not precise enough, the product didn’t meet the customer’s expectations, and other factors.

What you can do here is convince you marketplace sellers to make product descriptions and images as precise and possible. Or you can create product listings for your sellers.

A seller shipped the wrong product

This happens all the time on marketplaces, especially on large ones like Amazon. That’s why big players usually have a very thought-out return policy.

When you have large sales volumes, hundreds and even thousands of orders per day, you can’t eliminate all the mistakes in the order collection process. A small mistake in the CRM, order management system, or in the sorting and packaging routine can lead to shipping a wrong item.

A customer doesn’t need the product anymore

This usually happens when the order takes too much time to arrive. The product might arrive too late and the customer just doesn’t need it anymore. The customer could get impatient and buy the same item from a local shop. Or maybe the customer needed the product asap for some event or trip—and when the product arrived, the event already ended.

Exactly the same thing has happened to me recently. I was going on a mountain bike trip and needed new brakes for my bike before I left for the mountains. The item didn’t arrive on time and I just bought the brakes from my local bike shop a day before my trip.

A product arrived non-functional

A product can become non-functional either when it’s damaged during the shipping process or it’s defective initially. Actually, the worst thing that can happen is a broken item during shipping—in this case, customer satisfaction and loyalty immediately goes down to zero.

A marketplace must have the RMA functionality that allows customers to initiate a return by picking the reason for return. If you’re getting too many returns because of the damaged products, keep an eye on your seller’s packaging and order handling procedures. Also, make sure the sellers use only trusted carriers for shipping orders.

If you’re getting returns because the items are defective, advise your sellers to check suppliers and warehouse conditions like moisture, temperature, and other storing conditions.

Gift returns

This type of returns often happens during or right after the Holiday season. People give gifts to each other and sometimes they are just off the mark. It’s really hard to give a perfect gift, especially if you don’t know a person well enough.

Wardrobing

Not a very popular reason for product returns but still, it happens from time to time. Sometimes people buy a product just to use it once and return for a full refund. Like buying a gaming console to play an anticipated game and returning the device. Or buying a dress to participate in an event and once the event is over—return the dress back to the retailer.

Return fraud

It’s often criminal fraud that involves purchasing products with stolen credit cards or counterfeit money. For example, a fraudster pays for the order online with a stolen credit card he or she can’t get cash from and then returns the item and gets a refund.

How to develop a clear return policy and why it’s important?

Clear return policy is the key to efficient return management on your marketplace. An easy-to-understand return policy not only reduces the number of returns but also helps to deliver a great customer experience.

A good return policy must be simply written and clear for customers. The purpose of your return policy is not just to protect you from excessive returns but also for making the return process easy and convenient for your customers.

There is a number of must-have things a return policy must include:

• Time frame in which a customer can return a product. The return period usually starts from the moment a customer picks the order from the delivery company. The duration of the return period differs depending on the type of products, niche, and many other factors. Usually it counts from 14 to 90 days. You can lengthen the return period to increase customer trust.

• Return criteria. Here, you can specify in what condition a product should be to qualify for a return. Most often, marketplaces and retailers only accept undamaged products that don’t have any signs of wear. Also, don’t forget to state the requirements for successful product return.

• Refund methodology. The way of refunding depends on the marketplace, the software it uses, products, and other factors. You can offer a full refund on a credit card, a partial refund, a replacement, marketplace bonuses that can be used for future purchases, and so on.

• Time frame in which a customer must collect the replacement product. If a customer returns a defective product and asks for a replacement, you should state the period in which the customer must collect the replacement item.

A marketplace return policy should be easily accessible. Place it on the website in multiple places such as product pages, the company page, footer and wherever it fits. Print a copy and put it in every order you send out. A great practice is to complement the online return policy with a video that shows how to initiate a return.

An awesome example of a clear return policy is the Walmart marketplace’s policy. It’s available in PDF—a customer can read it on any device, save it to the hard drive or print.

What experts say

Alex Williams, an eCommerce business owner. A Certified Financial Planner, and the CFO of FindThisBest—a comprehensive guide for shopping retail products.

A return policy needs to convey to the customers what limitations and criteria a business needs to place on returns. 

• Time Frame: My organization accepts the return of any product within 15-30 days of its purchase.

• Accepted Conditions: Broken, used, or damaged goods are not accepted for returns as they inevitably lead to a loss and could even damage our reputation.

• Return Criteria: We have laid down a strict law when it comes to the return criteria. If the product is to be returned, it should be accompanied by its original receipt.

• Refund Methodology: We prefer to use an in-store return method rather than refunding full cash to the customer; this helps us safeguard from any losses.

Scenarios to handle returns on a marketplace

A marketplace is an eCommerce website with multiple independent sellers. The sellers are basically online shops gathered in one place, on one platform. Sellers store products in their warehouses, dispatch orders to customers, and as a rule they process returns themselves.

There are three major scenarios a seller can accept and process a return:

• Accept returned products in the warehouse. Even if a seller doesn’t have a brick and mortar spot, they do have a warehouse where they keep all the stock. A customer sends the order back to the seller. Once an item arrives at the warehouse, the merchandising employee inspects the item and confirms it is eligible for a return and further refund.

• Accept returned products in an offline spot. This is the best option if a marketplace seller has a brick and mortar store, a pickup point, to some kind of a showroom. Recommend your sellers to motivate customers to return items to the store whenever it’s possible. Not only does it speed up processing a return as the seller can inspect the item right away, it also prevents future returns. Returning an item, a customer can try a replacement product immediately.

• Outsource logistics. There are third-party logistics providers that take all the shipping processes on themselves, including product returns. This is a great option if a seller doesn’t have their own warehouses and offline sales spots but have budgets for hiring a 3PL. These logistics providers have their own warehouses: they accept returns, inspect the product, and approve refunds. The seller doesn’t participate in this process directly.

According to invesp research, 62% of shoppers will prefer to shop online if they have an opportunity to return the item to an offline store.

How to reduce the number of returns on your marketplace?

The two main reasons for return that can turn your customers away are the lack of product information and delivery of damaged items.

Not enough information about a product	Damaged items
Bad descriptions, low quality pictures or no pictures at all—these can cause the wrong customer expectations. A customer orders the product → receives it → the product doesn’t meet the customer’s expectations → returns the item.	This is the most frustrating thing for a customer. An item can be damaged during the delivery process, or even at the collecting and packing stage. Customer orders a product → anticipates it → receives a broken item → returns → never comes back.

What you can do to make a product listing as informative as possible

When buying a product on a marketplace, a customer can’t see the item in real life before placing the order. From the beginning of eCommerce, this factor has been playing an important role in making a buying decision.

To convince a customer to buy a product, the product listing has to have a detailed description and visual representation. Here what you can do to make a product presentation better:

• Detailed and accurate product description. Make sure you (or your sellers) describe a product from different angles, including materials, dimensions and weight, the purpose, the target user, and best practices of using this product. The standard descriptions from suppliers can literally kill a product listing.

• Detailed high-quality product pictures. Because customers can’t see a product in real life before buying it, show the product to customers with detailed photos from different angles. Don’t use stock photos or pics from suppliers—they are usually of low quality. Hire a professional photographer or build a small studio in your office to take product photos. Help your sellers to take high quality product photos.

• Video demonstration. To show a product in motion, shoot a video demo or an extended video review of a product. You can place the video right in the product description. Train your sellers to shoot video reviews.

• Customer reviews. This is not just a powerful marketing tool but also a feature that greatly helps you reduce the number of returns. Real user reviews can give a buyer the full picture of a product and its characteristics in real use.

• Augmented reality. This feature requires investments. You can develop an app that uses your phone’s camera and virtually places products sold on your marketplace to your interior. This greatly works with furniture, home decor, shoes, apparel, and other products that need to be tried before buying. You can check this cool feature in the IKEA app:

What experts say

Mellanie Ulrich, co-founder of lashfridays.com

​​In my business, our first measure towards decreasing returns is making sure we upload high-quality images as well as a few videos on our Instagram page. It may seem self-evident, but the number of online listings that offer a single, fuzzy photograph of an item is far greater than it would otherwise be.

​​Setting aside some time to look over your current eCommerce products and double-check that each item has high-quality photographs, a thorough description, and, if required, videos is one strategy to decrease returns. At least four images of each product should be taken, one from each viewpoint.

What you can do to prevent a product from damage during delivery

A damaged item not only results in return but can also turn the customer away from your marketplace.

30% of items are sent back to a seller because they arrive damaged or defective.

Most often, marketplace sellers pack and ship orders to customers by themselves. So, you need to make sure they handle shipping the right way. You can take all the shipping into your hands as well. See best practices for shipping on marketplaces.

• Pack items securely. A lot of things can go wrong in transit. You and your sellers need to do their best to protect products from damage: use bubble wrap and “fragile” stickers, fix items securely in the box so that they don’t jolt around in transit.

• Make sure employees know the order shipping procedures. The employees who prepare orders for shipping must know how to pack items securely. Human error is always possible. Try to minimize it.

• Only work with trusted carriers. Connect your marketplace to reliable shipping services that can guarantee safe delivery and offer insurance. They may cost a bit more but in the long term you will save much more money if you use trusted delivery companies.

Summary

Product returns are a pain point of marketplaces. They can cut margins and decrease conversion. But an eCommerce marketplace just can’t go without returns. And it’s important to make product returns for customers as convenient as possible.

A customer usually returns products because changes his or her mind, doesn’t need a product anymore or just because the item arrives defective or damaged (this is the most frustrating one.)

To make product returns as transparent as possible, it’s important to develop a clear return policy. Three essential components of a return policy are: time frame for a return, return criteria, refund methodology.

A seller can accept returns in their warehouse or in a brick and mortar store if they have one. There’s also an option to delegate the return management to a third party logistics provider with their own warehouses.

To reduce the number of product returns, you need two things: the first is to provide the customer with maximum details about the product—descriptions, pictures, videos, reviews, and the second is to make sure the item arrives in one piece.