Selling your product to a customer and receiving payment might not be the end of the sales process. You need to be prepared for situations where customers return products or are unhappy with your service.

To prevent confusion, frustration, and the potential loss of customers, it’s imperative that you have a clear return policy for your retail store. Having a return policy that is set in stone is important for your business as it allows you to standardize your process to better keep track of goods being returned. It can even help you to discover any unusual return patterns or issues with a particular batch of goods.

What Is a Return Policy and Why Do You Need One?

A return policy for a small business is a set of rules that lets customers know what to expect if and when they need to exchange or return a product they bought from your store. It makes sense to have a return policy as some sources estimate that around nine percent of purchases made in a brick-and-mortar store are returned, and around 30 percent of online purchases.

Return policies vary by business and are generally influenced by the type of industry and the kinds of products that you sell. Your retail store return policy acts as a set of guidelines in case customers don’t want to keep what they’ve purchased.

Five of the most common reasons for returns are:

  • The product is damaged or defective.
  • The customer has changed their mind and no longer wants the product.
  • The customer purchased the incorrect item.
  • The product didn’t meet the customer’s expectations.
  • The customer received the product as a gift and doesn’t want to keep it.

Creating a return policy for your retail business is necessary before you start selling products. If you have a customer that wants to return something and you don’t have a policy, you could end up with a frustrated customer and an equally frustrated employee. To make things simple for your customers and your staff you should always keep your written return policy as friendly and positive as possible. Avoid negative and accusatory language and behavior as this could drive customers away.

Some states even require you to post your return policy in a visible location in store, at each public store entrance or at the cash register, more on this later.

What to Include in a Return Policy

Your return or refund policy should include the following information at the bare minimum. The policy should state whether or not a receipt is required. You should explicitly detail the number of days a customer has to notify you should they want to return an item after they have bought it or received it as a gift. You should also detail the kind of refund that you’ll give to the customer after the item is returned, whether it’s a similar product, store credit, or cash.

Finally, if the product has been purchased via your eCommerce store, you should state who should pay for the return shipping. Some retailers opt to include a return shipping label in the package. However, this is not mandatory. If you expect customers to pay for their returns, it’s best to state this in advance to save your customer from any nasty surprises that can damage the relationship.

The Importance of Receipts

You should always give your customers a receipt when they buy something from you. A receipt is proof of purchase for customers as it comprehensively states all the details of the transaction, including the products bought, the prices, and your business’s information.

Receipts are an important part of the return process because they verify that the purchase was made from your business. They can also help you accurately record a returned purchase in your accounting books. There are two basic ways that you can incorporate the need for a receipt into your return policy. You can state that you will offer no returns or exchanges without receipts, or that you offer returns and exchanges without a receipt.

It’s often a good decision to state that you require a receipt to help defend your business from fraud. A survey by the National Retail Federation found that returns without receipts made up ten percent of returns. Of that percentage, ten percent were return fraud cases. So, that’s around one percent of returns that are fraudulent in intent.

Some unscrupulous consumers might choose to purchase a product from another business then bring it to your store to try and make a small profit. Or, they might even steal from you and then attempt to return the product to you to get money. Thankfully this is uncommon, yet it is still an unfortunate aspect of owning or managing a retail store. However, a strong receipt process can help you effectively combat the issue.

Effectively Managing Your Return Process

When you decide on your return policy, ensure that the process of performing returns runs smoothly by considering the following:

Be consistent with your policy. Make sure you give each and every customer exactly the same treatment. Accept the same products, offer the same refunds, and don’t change the rules without letting customers know beforehand. This helps prevent your business from receiving bad feedback, or even worse, a bad review. If a customer mentions to their friends and family how helpful and friendly your staff was, it’s likely that they will have no issues purchasing from you again, nor will their friends and family have issues shopping with you.

Always display your return policy in clear view of customers and employees. It can be a good idea to include it on your receipts (if there’s room) so the customer can take home a copy of it. It could be a good idea to set up a sign with the policy on it by the register.

Explain your policy to the customer when they make a purchase as this can help dispel any uncertainties. Tell them whether they can return the product, how long they have to return it, if they need a receipt, or if they’ll be required to show a driver’s license when returning the merchandise. You might even decide to circle the policy on their receipt and have them initial and agree to it.

Training staff is vital so that all of your employees know precisely how to handle returns. Your employees should all be familiar with your business’s return policy as well as how to process a return. You don’t want customers waiting around for employees to either figure out returns and exchanges or to go find their manager. Also, a customer doesn’t want to be told to come back at a different time, because if they do, it’s likely that will be the last time they visit your store.

Keep an eye on your competitors so you know what their return policies look like. You don’t want to lose out on valuable customers because your competitors handle returns and exchanges with fewer issues than your business.

Most people think that customer service ends after the purchase has been completed, but this simply isn’t the case, and if a customer does need to return something to you, you need to make the process as simple and hassle-free as possible. Making the effort to stand out from your competitors can be extremely beneficial to your business and can make a world of difference when it comes to reviews and feedback that you receive.

SEE ALSO: Retail Merchandising Tips and Tricks for Growing Your Business

An Effective Online Return Policy

Many customers prefer to be aware of a store’s return policy before they make their purchase. If an item isn’t the right size or they feel that it’s slightly different from the photos on your website, they want to know their options. Having a return policy that isn’t customer friendly can significantly impact your business and may result in potential customers being turned away by word-of-mouth.

The following checklist can help you to address all the points that your online returns and refunds policy should include:

  • Are you prepared to offer a return on all purchases made on your eCommerce store, with a 100 percent refund, if the customer isn’t satisfied? If so, whose responsibility is it to refund the shipping cost?
  • What are your deadlines for accepting returns? Will you have different deadlines depending on the item, or will you use the same criteria for all of your stock?
  • What is the procedure for returns?
  • What is the address for returns; is it the same as your retail store?
  • Are gifts able to be returned or exchanged without a receipt? As mentioned earlier, this is potentially risky due to people trying to turn a profit through fraudulent refunds.
  • Do you have policies in place to prevent the return or refund “on-sale” items?
  • Do items need to be in their original condition and/or in the original packaging? This is an important thing to consider, as items that are not able to be sold as new might cause losses for your business.

With around 30 percent of goods purchased online being returned, it’s important to have a clear and concise return policy so that your business and its goods are protected.

eCommerce Retail Return Policy Template

This short template should provide you with the perfect starting point for a return and refund policy to display on your eCommerce store. Keeping your return policies as short and as simple as possible is often the best thing to do as it prevents confusion and saves customers and staff time.

Thank you for shopping at business name.
If you’re not happy with your purchase, we’re more than happy to help you.

You have X number of days to return an item from the date that you purchase it.
To be eligible for a return here at business name, the product that you purchased must be unused, still in its original packaging, and in the same condition as when you purchased it.
We require the original receipt or proof of purchase to be eligible for a return.

Once we have received your item, we will let you know that we’ve received it and that we are in the process of evaluating if it’s in the same condition as when it was delivered to you. We will let you know the status of your refund as soon as we have finished inspecting your item.
If we approve your refund, we will refund it to the original method of payment. Depending on your card issuer’s policies, you will receive the refund in a number of days.

You will be responsible for paying the costs of shipping your item back to us. The costs of shipping are non-refundable and non-negotiable. If you are issued a refund, the cost of shipping will be deducted from it.

If you have any further question regarding your refund, please, don’t hesitate to contact us to find out more.

Is It the Law to Accept Refunds?

Merchants are required to accept returns in certain situations. However, some states have laws governing refund and return policies. For example, in New York, you’re legally required to post your refund policy, and if you don’t, you must accept the return within 30 days of purchase.

Many retailers will allow returns if a customer changes their mind or receives an unwanted item as a gift. Retailers are only required to accept returns if the item sold is defective or if they are found to be in breach of the sales contract, for whatever reason.

In addition to retailers being legally obligated to accept the return of defective items, federal law provides a cooling-off rule which gives all customers a maximum of three days to cancel purchases over $25. In addition to these federal laws, many states have their own individual laws concerning refunds, so it’s helpful to check your local laws to make sure that you are appropriately covered.

Now that you know more about retail policies, why you should have them, and what they should include, you should be in a better position to protect your business from unnecessarily losing any customers over returns and refunds.

Yamarie Grullon

Yamarie Grullon has years of experience creating helpful & engaging content for small business owners. As Director of Content Strategy at ShopKeep, a leading iPad Point of Sale System, Yamarie provides merchants with practical advice on all things related to business or point of sale.