How to Manage Dropshipping Returns

07/14/2022

Dropshipping is one of the fastest ways to make money online—if you do it right. But there is one risk that everyone has to watch out for: managing dropship returns.

 

Why is managing dropship returns such an issue? 

 

Especially for online retailers, there’s the issue that customers can’t preview their items in person before buying, which makes for higher return rates. Whether the item didn’t fit, wasn’t the right colour, or simply wasn’t what the buyer wanted, all of these are factors when it comes to returns.

 

What’s more: Statistics suggest that at least 30% of all products ordered online are returned, while brick-and-mortar stores only see return rates of about 9%.

 

As a dropship retailer, your goal shouldn’t be only to save time by automating your returns. It should be to create a manageable return process. The first time a customer requests a return should not be the last time they do business with you. After all, 92% of consumers surveyed said they’d be willing to buy from an online store again if the product return process was easy enough.

 

While dropshipping can be a very efficient business model, it takes some effort to make dropshipping returns easy on the customer as well as your business. Let’s dive into some best practices to strategically manage your returns.

 

 

 Why should you care about how your returns are handled?

 
Above all, the most important part of a business is creating a seamless experience for your end customers. Customers expect a simple, single return policy, so if your vendors have different return policies or if returns need to be sent to different places, it is your responsibility as a retailer to alleviate this burden from your customers. As such, having a strong returns experience can be huge to boost your brand.
 
In other words, the fact that you dropshipped an item should not affect the end customer’s experience. The customer views you as the retailer, so they should only communicate and coordinate returns with you.
 
What are the pitfalls of dropship returns?
 
You may be wondering: what is it about dropship returns that makes them so difficult?
 
Firstly, different vendors have different policies concerning time frames and conditions of returned goods, While one vendor may allow a 30-day return period, another may only offer a week. 
 
Additionally, tracking is difficult. If one order has items from multiple vendors, they will be going to different places. This makes tracking whether items have been received very challenging. Similarly, tracking your refund from the vendor can be time-consuming. 
 
Furthermore, if one of your vendors does not accept returns, you will be left to deal with the physical inventory. Conversely, if your vendor does take returns, you must ask your customers to send returns back to a different address, which can prove quite confusing. 

What is the lifecycle of a return?

 

While it may seem simple, the first step to a strategic approach to returns is outlining the lifecycle of a return:

 

1) Customer lets retailer know that they want to return an order and what items are going to be returned

2) Retailer gives the customer instructions on what to do with the return (packing instructions, what to include with the return, how to ship it back).

3) If the retailer is prepaying shipping, the retailer creates a shipping label and provides it to the customer

4) Customer sends the item back

5) Item is received at the returns warehouse/destination

6) Warehouse alerts the retailer that the item has been received

7) After the return is received (or picked up), the retailer issues a refund to the customer

8) If the item was sent back to the original supplier, the supplier issues a refund or credit memo to the retailer

9) Item is either restocked (as new), warehoused separately (as an open box), or disposed of (liquidated or donated)

 

How do vendors handle returns?

 

Depending on how your vendors handle returns, the strategy that you will take as a retailer will change. Let’s dive into the two most common return scenarios:

 

1) My Vendors Accept Returns:

 

If your vendors accept returns, we suggest asking them the following questions:

 

a) What is their return process?

b) Do they need advanced notice?

c) Do they need to issue you an RMA?

 

Ideally, your vendor should have a process in place where retailers can authorize a return. This way, the customer is not left waiting. Similarly, you will want to standardize processes among your vendors if possible. If you have multiple vendors, we suggest aligning your timeline with the shortest duration return policy that your vendors offer. 

 

2) My Vendors do not Accept Returns:

 

If your vendors do not accept returns, it is your responsibility as a retailer that returns get handled efficiently with no extra burden placed on the end customer. This can be done in the following ways:

 

a) Use a 3PL or warehousing strategy 

 

3PL is is an organization’s use of third-party businesses to outsource elements of its distribution, warehousing, and fulfillment service.  

 

By outsourcing shipping and fulfillment operations, business owners and operations managers alike have been able to cut costs, reduce risk, and more efficiently handle returns. This is because the warehouses inspect and hold your returns for you, effectively eliminating your logistical responsibility. 

 

If you are interested in learning more about 3PLs and how to implement a 3PL strategy in your business, check out our article here. 

 

b) Accept your own returns 

 

When you accept your own returns, you can either re-sell them as new should their condition be suitable or selll them as an open box.  Alternatively, you can keep and store the returns yourself and use a service like Returnly to handle the hassle for you. 

What are return management strategies?

 

Depending on the size and scale of your business and your vendor’s return policies, some of these strategies may fit into your company better than others. Here are some of the most common and effective returns management strategies. 

 

1) Have all returns sent back to you

 

When you accept returns yourself, there are three main ways that you can choose to handle them. Firstly, you can store the in a warehouse and resell them for a discount. Alternatively, you can dispose of them or send them to a liquidator. 

 

This strategy is a very streamlined single return policy. It does not require any communication between the customer or the vendor, and it allows you as the retailer to be in control of your returns. 

 

The downside of this strategy is that you are required to deal with all of the physical inventory. For small businesses with limited returns and adequate storage space, the excess inventory does not present much of an issue. For medium-large retailers, however, this extra stock can be overwhelming and hard to maintain. 

 

2) Send returns back to vendors 

 

When you send items back to your vendors, you no longer have to deal with any logistical battles or hold on to surplus inventory. Depending on your vendor’s return policies, however, sending them returns can be quite costly and difficult to coordinate. 

 

Similarly, if all of your vendors have different return policies, returns can take much longer than anticipated. In turn, this reflects poorly on your overall customer experience. 

 

If you decide to return items to your vendors, ensure that the return process is aligned between all of your vendors and that you are able to ensure timely returns.

 

3) Reship the customer a new item without expecting a return

 

It is no secret that returns are costly. Instead of sending returns back to your vendors or housing unwanted items in a storage closet, many retailers opt to reship the customer a new item without having the original shipment returned. 

 

For low-cost items that are relatively easy to ship or for larger retailers who are willing to accept the lost revenue, this is a great, low-hassle option.  

What elements do I need to properly manage returns?

 

1) A clear policy 

 

Unsurprisingly, customers expect a clear returns policy. Your returns policy should include: how many days you have to return, what condition return items should be in, what items are eligible for a return, and how soon customers should expect a refund. 

 

If your vendors have different policies, your returns policy should be consistent with the most restrictive of your vendor’s policies. For example, if two of your vendors allow for 30-day return periods, but one of your vendors only accepts returns within 7 days, you should only offer a 7-day returns policy. 

 

Conversely, if your vendors do not accept returns or have an unfriendly returns policy, you may have to accept returns on your own and create a more kind and lenient policy. 

A clear returns policy will ultimately help your customers start a self-service return and save your support team valuable time. 

 

2) A customer-facing returns portal

 

Return rates typically fall between 10%-20%, so making the experience as easy as possible for your customer is an absolute must. Many businesses and customers prefer to use a customer-facing returns portal to speed up the process.

 

Without an automated returns portal, customers must wait for a customer service reply. Furthermore, returns inquiries tend to take up a lot of support time that could be better used to deal with more complex issues. 

 

In an automated returns portal, customers are able to start their own reviews. In turn, a returns portal drastically refuses the time and effort that goes into processing reviews and creates a much better customer experience. Some sites that can help you get your returns portal up and running include Return Magic and Returnly.

 

3) A system that streamlines communication between retailers and vendors 

 

When looking for a dropship automation platform that can handle returns, there are a few specific qualities that we recommend looking for: 

 

a) Does the system show expect reviews?

b) Does the system show the status of the items? (i.e. is the item  in good condition or defective)

c) Does the system show if the return arrived to the vendor?

d) Does the system allow the vendor to provide a refund or credit for the return?

e) Does the system provide a way to track whether you have received a refund from your vendor?

f) Does the system provide a quick and easy way for you to refund the end customer?

g) Does this system provide a way to send a shipping label to a customer?

 

Want to get set up today? Contact Duoplane to see more ways we can help streamline your returns process.

 

The pain-free approach to managing returns

 

The whole idea behind dropshipping is that it’s a fast, streamlined way to do business. That doesn’t work if you don’t have customer returns figured out.

 

 

There may be some upfront work required to make your returns more automatic and less painful. But since it’s such an important part of your daily life in eCommerce, it’s worth getting each variable right.