What to do with returns?

Margins don't support the effort.

[dickbaker]

Last week I posted a thread with a lot of silly questions. I didn't mean them to be silly or stupid, but I asked them the wrong way.

Despite all of that, I received some very good replies.

One reply dealt with the question of returns. The poster mentioned that "the customer is always right (even when he's wrong)." I've learned this truism in my 19 years of being self-employed.

Let's say I have a widget that I buy from the manufacturer for $15, plus perhaps $5 per unit shipping cost. I'm now up to ~$20 per unit. I sell the unit for ~$35, including free shipping (a suggestion made by that same poster).

If a customer decides that he/she doesn't want the widget for whatever reason, I'm in the red by about $5 for a widget that I can't sell. I certainly can't sell it if the package has been opened and the widget has been used. Maybe I could sell it on some auction site, but that just seems like a lot of effort to recover $5 in lost revenue.

What then? Just throw the widget away?

Sorry for such simple questions, but I have no experience at all with Ecommerce.

I do have experience with marriage, though. Some 38 years. And my wife is definitely not in my camp on even my idea of an experiment with one ecommerce item.

I'm not looking for advice on that point. I know how to handle it. What I'm saying is that, if my ecommerce idea works, I invite anyone to seek counsel from me on the subject of marriage. ;)

Thanks for any replies.

[axgrindr]

For the return policy you can put as many conditions on the return as possible, it's just important to have the return policy posted on your site somewhere during the checkout process.

You can put a time limit on the return. Say 30 days after purchase.

You can require that the product be returned undamaged in the original packaging before any refund will be given.

You can also require that the customer pay for the shipping of the return and that you do not refund the original shipping cost.

You can also reduce returns by showing the customer exactly what they are getting with detailed descriptions and pictures.

I wouldn't worry too much about trying to regain profits from returns unless the product you're selling is not very good and you're expecting many unhappy customers. Taking a loss on some sales is just part of the game.

[Corey Bryant]

Just be careful on charging the card. Especially with shipping charges. The customer can do a chargeback on these (just by saying services not rendered) and chances are, he will win.

-Corey

[ccDan]

I certainly can't sell it if the package has been opened and the widget has been used.

Put up a "used widgets" section on your website. For example, if you sell a used widget for $25 (versus $35 for new), you'll recoup the $5 you lost in shipping and break even on that widget.

[LifeinAsia]

Small consolation, but do remember the tax write-off (depending on your local tax laws).

[Kendel]

I wouldn't worry too much about trying to regain profits from returns unless the product you're selling is not very good and you're expecting many unhappy customers. Taking a loss on some sales is just part of the game.

I agree with this statement. Many times you can get caught up in the details of the profit of a single transaction, when you just have to realize that there is the occcasional order that you may lose (or make less) money on. (just make sure those type of orders are occasional). I tend to look at this as a cost of doing business. Returns, etc. for an online store can be just factored in as a whole - just as a b&m retail store will factor in shrinkage, and I'm sure returns, as well. It's part of caculating what margin you need to maintain overall.

Also, I would disagree with the customer always being right. There are those people that will be completely unreasonable no matter what (fortunately I have not dealt with any with my online store, but I have in other businesses). However, I do find that if you think first of what's right for the customer, versus what it is going to cost you, being accused of providing bad customer service will likely never happen.

[ItsAllBallBearings]

I have a bit of a different take on this one: I dont think that its ok to accept a loss on ANY sale. Why make the sale if it has a chance of costing you money? Why set up a business model that you KNOW will lose money in certain cases? Especially when it is preventable

To work around the online returns issue, we make our return policy VERY clear and we charge a restock fee (% of total sale) for all our products. This restock fee covers our shipping and labor to send out the item. Fortunately our products are not packaged, so we dont have to worry about that. But, most MFGs have return policies of their own that will allow you to send back unsold, damaged, or returned product.

[ken_b]

With the numbers you mentioned it's going to be hard to resell the item and get any real relief. Depending on the number of returns you get I'd consider donating the items to a local charity thift store.

[ispy]

The returns I have seen seldom come back like new and cannot usually be resold. In fact they are often damaged, probably during the initial shipment or due to being packed poorly in return shipping by the customer. Your right that reselling them is not usually worth the effort if it throws a wrench into the usual routine. Refusing damaged goods and sending them back to the customer is hard to do and will almost always result in a chargeback along with additional shipping complications. If you are hard set on recovering an expensive item taking photos and using them in your defense against a chargeback will work if your very good.

Try donating the items all at once at the end of the year. We did this for a school auction and they mentioned our name in the brochure for the whole auditorium to see. You can also write off the donation on your taxes. Other alternatives include the salvation army, they will pick up and it's a write off of the retail price, or Christmas gifts.

We take a stance of the customer in actuality not always being right. If they are being unfair the deserve to be told this and why, if the concern is a legitimate one then policies can be changed, but it is not a profit only stance but one which contributes to the morale and integrity of the business.

[LifeinAsia]

write off of the retail price

Whoa! You'd better sit down with your tax advisor regarding proper accounting for inventory.

[axgrindr]

In general you seem to be very worried about returns before your store is even set up.

I think you'll find that chargebacks might be a bigger concern once you are actually selling your product. It varies for everybody but our company had a total of 3 returns last year and these were customers who didn't really understand what they were buying.
Our biggest concern is chargebacks and fraud because this can effect your merchant account status and the fees you pay.
With chargebacks you don't get the product back at all and there is very little you can do about reversing a chargeback.

In my opinion you should just go for it, start selling your product and see what happens.

[moose606]

We have a return policy cleary stated on our site, and deduct 15% restocking fee when we credit the customers credit card, but sometimes waive this if they reorder another product. If the returns can't be sold as new, we sell them on ebay. All of this makes a good point for selling only products $60 and up, with 50% GP.

[derekwong28]

Returns are a fact of life of e-commerce, as are lost shipments and chargebacks due to fraud. There is no way to know what effect they may have on your bottom line without trying and testing. If the return rate turns out to be unacceptablly high, then you should take that item off your shop.

If you are very concerned about it, I suggest that

1. Consider raising your prices and margins to cover any losses.
2. Instead of sealed packaging, can you use paper cartons instead so that the returned item can be resold afterwards.
3. Make sure that the customer undertand that they are responisble for return shipping costs. We do not charge a restocking fee but may retain the original shipping charges.

[RailMan]

If a customer decides that he/she doesn't want the widget for whatever reason, I'm in the red by about $5 for a widget that I can't sell. I certainly can't sell it if the package has been opened and the widget has been used.
(snip)
Sorry for such simple questions, but I have no experience at all with Ecommerce.

it's not your lack of experience in ecommerce, it's your lack of basic business skills

returns are a fact of life - shops generally do not provide full refunds for used goods so why should you? you will have legal obligations to refund for unwanted goods (providing they are unused and undamaged etc) but not for used goods

if goods get damaged in the post, make sure you have procedures to replace the goods and charge the cost of damaged goods to the postal service / courier / etc or to claim from your business insurance or whatever - even better, do something to stop the goods getting damaged in the post - better packaging is always good

and then you might want to rethink your pricing because you should never be out of pocket - if you want to survive in business, you need to run your business like a business - do it properly to start with and it'll pay you back in the long run

[sun818]

If margins, don't support the effort - consider having a no returns policy. You still have to deal with customers that perform a chargeback, but hopefully the volume on that will be minimized assuming your customers are clearly informed of this policy on the web site and e-mail.

If you do get a return, you could consider listing on eBay as a used item with a description explaining the context around that specific product.

You can also raise your unit cost of that SKU. If you bought 50, but 5 were returned, then your unit cost would be spread across the 45 that were not returned.

Warranty costs you money. A 30 day warranty will cost you less money and time than a 90 day warranty.

[pbradish]

Just a quick suggestion - I use ebay from time to time to sell returned or gently used wigits.

[willybfriendly]

We charge a restocking fee.

Then, we have someone who will sell on E-Bay for us for a commission. (Returns and overstocks mainly)

And, we have someone else who sells on commission at a local flea market. (This is mainly 2nds of customed manufactured stuff, but occassionaly damaged but still usable.)

Then there is the venerable write off for trashed stuff that needs to go to landfill.

There is still some "per transaction" loss, but the above strategy is about minimizing the loss and maximizing overall profitability. Depending on margins, your mileage may vary...

WBF

[sun818]

You can also return it to your supplier for credit or exchange it for working product (if the return is defective).

[unperturbed]

consider having a no returns policy

In the UK a customer has 7 days to cancel their order even after it's shipped, so check the laws in your country if you go this route.

[JesperFJ]

>>In the UK a customer has 7 days to cancel their order even after it's shipped
Actually it is 14 days, which is common law in the EU countries. To make it easier for myself I just offer it worldwide.

I believe refunds is a calculated risk, and if you are not ready to accept loss on any single order, you will miss out on business opportunities that could otherwise have made you rich.

Jesper, Denmark

[RailMan]

>>In the UK a customer has 7 days to cancel their order even after it's shipped
Actually it is 14 days, which is common law in the EU countries

trying not to appear like i'm nitpicking, it's not "common" law, it's THE LAW
the EU created the distance selling "directive" which required all EU countries to implement laws giving rights to consumers - the UK implemented this as the Distance Selling (Trading Standards) Regulations (or something like that) effective from about October 2000

one such right is the 7 day cooling off period in which consumers can cancel orders where they haven't seen the goods they are purchasing (for example, goods being bought from a website), subject to certain requirements etc - there are various rights and exceptions - there is also some protection for businesses (i'm not going into detail about the regulations / laws etc - look them up yourselves)

other countries implemented their own versions, all very similar, all based on the EU directive - these are the law and all businesses trading on the net in the EU need to be aware of them

anyone not aware of these regulations / laws should not be in business, simple as that - there is no excuse

but this is a distraction from the initial thread about a business owner making a loss because goods were returned ............

[piatkow]

Having read through this whole thread the one thing that struck me that there is nothing specifically realated to trading over the net here. The issues for a printed mail order catalogue or ads in a newspaper would be identical.

We actually make a profit on lost parcels as we get refunded the face value of the content PLUS postage. The cost of postage is already factored in to the price. As these are all invoiced chargebacks are not an issue.