Returning a product can turn out to be costly if you don’t manage the process properly. Companies that offer returns can only look for incentives such as discounts at this time. To make a comeback in the marketplace and remain profitable, companies take on additional costs associated with customer service and shipping products back on its way multiple times.
However, here are 3 tips to minimize your losses while still offering returns to customers.
- Sell Product Warranties
When a customer chooses to return a product for a refund, the company takes on possible risks. Restocking costs can be high, because some refunds require an item to be resold.
One must use return protection products in order to avoid any disappointment that comes with purchasing a product and finding out it was damaged during shipping.
For more expensive items, such as cars, companies may want to consider adding a warranty to their product. Warranties protect business from replacing an item that has become damaged or escorting the warranty for a customer that claims it is not fixed if the company meets the code of claiming.
With insurance products, you can set your own price-range for the premium, or commission, and then sell them at the cost of production. This new model opens up a whole new source of income for your business.
- Turn Returns Into Exchanges
Of course it would be more profitable for a business to charge the customer extra for what they added to the order, as well as return shipping, than to issue a full refund. The difference between returns and exchanges is most prominent when looking at profitability. When a customer returns a product for a refund, the business usually loses money on the customer acquisition and return shipping costs and needs to refund the customer any profit made on the original order.
When you’ve made a mistake, sometimes there’s no easier way to put it right than with an exchange. Offering a replacement product instead of a full refund can maintain your company’s cash flow while meeting their original goal.
There are many ways to ask customers to exchange their product. A common way is by only offering to cover the cost of return shipping if the customer chooses to exchange a product for a better option.
- Upsell or Cross-sell on Exchange Requests
To increase profitability, ecommerce companies should consider using upselling or cross-selling techniques to make exchanges more attractive to customers. For products with narrow margins, this strategy may be a better value for your business.
Selling customers the opportunity to use their store credit on complementary items will generate a significant boost in expected revenues and increased customer retention.
Ship returns at the customer’s door for free. Depending on how much an item costs, your cost will drop significantly when you allow customers to return products with free shipping. The opportunity to upsell also awaits!
For sure, you won’t be here if you are not having trouble with the returns and exchange of your business. We hope these tips will be of use in your business!