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The Ultimate Guide to Returns Management

By Gursumeet Kaur 18th November 2021


We all know that returns are a necessary component within the retail industry. According to last year’s statistics, 8.1% of products purchased were returned. Companies that sell products need to be prepared for product returns.

Processing returns is more complicated than simply shelving items back into their original locations for customers to purchase. However, if you do return management right, then you can keep returns from having a major impact on your business.

returns management

What is returns management?

The returns management process is used in both retail and e-commerce industries and involves working with customers to return products and collecting, organizing, and restocking returned to inventory or exchanged items. Following the return of the item, depending on the product and the situation, the seller must decide whether to recycle the item and save useful parts, repair or refurbish it, resell it, or destroy it. Furthermore, they need to decide what action to take with the customer, such as offering a refund or exchange, a store credit, or repairing the product.

The quality control process is imperative when dealing with returns, as defects in the item should be identified to enable adjustments in production processes, raw materials, or suppliers. It is clear from a survey that the industry still has not cracked the code when it comes to a truly effective returns process. Over 70% of consumers want more flexibility in returning products, but only 4% of retailers are implementing it within their business models.

Process of returns management

The returns management process for a product purchased depends on whether it was purchased in-store or online. It involves:

  • The customer receives the product, is dissatisfied, and requests a return or refund: The returns process begins when the customer decides that they’re not happy with the product. There could be a problem with the product, or in the case of apparel, it might just be the wrong size or color. By following the proper channels, the customer asks the company that delivered the product for a return, refund, or exchange.
  • The company confirms or denies the return, exchange, or refund: Your customer service staff or gatekeepers will look at your return policy to determine whether the customer is eligible for a refund or exchange.
  • The company picks up the product from the delivery address: Companies that handle returns internally often have trouble optimizing routes for both deliveries and pickups because last-mile orders are hard to accommodate. When they accept returns, companies that rely on third-party logistics (3PL) service providers typically use digital prepaid shipping return labels.
  • The product is delivered back to the sorting facility or warehouse and inspected: A delivery driver returns the product to a dedicated sorting facility or major warehouse. Product quality is checked, inspected, organized, and sorted as necessary. After the products are sorted, an auditor from the returns management department will inspect all the returned products and try to figure out the reasons behind the return of the product.
  • The product is restocked and put back in inventory: If the product is still in good condition, it can be restocked on warehouse shelves, added to the inventory count, and can be made available for sale to other future customers.

Workflow for returns management process:

returns management

Why is returns management important?

As part of the order fulfillment cycle, returns management has become increasingly important. With the continuous growth of omnichannel commerce, direct store shipments, and direct home shipments, as well as the complexity of global sourcing, delivery errors are becoming more prevalent. A well-crafted returns management system has a direct impact on a company’s cost of doing business and on the quality of customer service, it offers.

Customers are more demanding of the returns process and return efficiency directly impacts your margins. Improving your returns process can have a positive effect on sales, revenue, and customer retention. A survey sponsored by shipping technology leader, Endicia, revealed these insights about US shoppers:

  • 36% want an easy and convenient shipping process
  • 12% want a swift refund or credit
  • 89% say they’ll shop again at an online store after a positive returns process
  • 67% of shoppers will check your return policy before buying from you
  • 72% of shoppers are willing to spend more and buy more frequently from brands that make the return experience simple

While being able to offer free returns to your customers could result in:

  • Customers increase their number of purchases over the next two years by 58% to 357%
  • Consumers are twice as likely to spend more than $1,000 online

But in order for retailers to be able to offer free returns and the perfect customer-facing policy, it is important to have a solid returns process in place. However, a staggering 69% of retailers are not deploying any technology solutions to help them process returns efficiently.

returns management

Increasing business performance will be a four-step process for retailers of the future:

  • To retain revenue: Customers increase their exchange rates up to 36% by offering one-click suggestions.
  • To reduce costs: Retailers spend considerable amounts on traditional reverse logistical services. By accepting exchanges and returns in person and shipping aggregated merchandise in bulk, they typically save 20% on an average.
  • To raise customer lifetime value: Three in four shoppers say returns are the most troublesome part of buying online, and 87% of them won’t shop with a retailer again once they have suffered a bad returns experience.
  • To enhance sustainability: E-commerce generates 1 billion trees of waste annually. Replacing cardboard boxes with reusable containers, and shipping in bulk saves trees and fuel.

How to manage returns?

Keeping your company’s returns policies in place and giving your customers as little hassle as possible is the best way to handle returns. In order to accomplish this, you may work with a reliable shipping company, or if you handle your own deliveries, integrate pickups and returns as part of your delivery management process through reverse logistics. Keep the following in mind:

  • Incorporate reverse logistics into your deliveries
  • Plan routes for both returns and deliveries
  • Plan ahead with returns in mind

Ways to improve returns

  • Understand controllable and uncontrollable returns: Product returns can drive you out of business or cost you customers, so you must do everything in your power to minimize their impact. This means understanding controllable and uncontrollable returns.
    • Controllable returns are returns that could potentially be reduced or eliminated through better forward logistics processes. This includes checking for things like improper product descriptions, poor packaging resulting in damage, slow delivery times, and general negligence, just to give a few examples.
    • Uncontrollable returns are those that a seller generally can’t do anything about. For example, a buyer who purchases a product but later changes his or her mind without the seller’s fault.
  • Understand the cost of returns: Maintaining customer satisfaction with a good return policy is essential, and customers love it when a business offers free returns. In any case, it’s crucial to understand how much returns are impacting your bottom line, in terms of covering the cost of reverse shipping and tracking. As well as how many work hours are spent managing returns, from taking calls to restocking products. 
  • Have a clear return policy: A clear and transparent return policy is a vital component of providing a great customer experience. In much the same way that your shipping policy must be easily accessible to your customers, your returns policy must also be. You should post it on your website, any partner sites you sell on, and attach a hardcopy with the product when shipping and delivering. This puts you and the customer on the same page and reduces the likelihood of customer frustration by managing customer return expectations regarding refunds, exchanges, return deadlines, etc.
  • Analyze your returns: Every time an item is returned, you get a chance to learn something about your products and your customers. Identify “What items were returned, and why?” Make sure you have a feedback section where customers can tell you what you did right, so you can keep on doing it, and what you did wrong, so you can make changes.
  • Provide visibility into e-commerce returns through tracking: After a customer has placed an order, most e-commerce businesses offer transparency into the shipping process (when the product is packaged, when it’s in transit, when it’s expected to be delivered, and so on). A similar level of transparency should apply to the returns management process. Customers will want to know the status of their return and refund or exchange. So, it’s important to provide visibility into this process by providing tracking information for their return shipment. You can also set up automatic text alerts or notifications to inform them once their return has been received and refunded.
returns management


There’s no need to invest in expensive product return management software to begin improving the processing of your returns. You only need a platform that can offer you the following features:

  • Faster returns processing
  • Customized returns eligibility & rules
  • Real-time status tracking
  • Returned products management
  • Refund management

With flexible route planning and fleet management software like Tookan, you can include return pickups as part of your delivery process. Enhancing the speed and convenience of your returns service will help you improve customer service and make your business more profitable. To learn more about how Tookan can optimize your logistics, start your 14-day free trial today.

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