Returns Policy Best Practices: The Complete Guide

The holiday season is right around the corner, and so too is returns season. According to a 2023 survey, nearly one in three adults who received a gift intended to return or exchange it. This is especially true in the ecommerce space, where return rates are more than triple that of brick-and-mortar stores. That leaves little room for error, so smart brands establish returns policy best practices that create both operational efficiency and brand loyalty after the holidays and beyond.

That can be easier said than done, however. Returns can be a complex side of the business, and as their numbers surge, some retail brands struggle, experiencing not only high levels of waste but financial loss. The key is to look at returns as a value add, recognizing it as an area of opportunity and one worthy of the same attention as the “front end” of the business.

For warehouses and fulfillment providers, returns policy best practices can reduce complexity and costs, as well as improve customer satisfaction, support sustainability, and safeguard long-term business continuity.

Why return policies matter in ecommerce and fulfillment

As ecommerce has exploded, it only makes sense returns have exploded too. Because ordering products is as easy as the push of a button, consumers often “buy to try.” This is especially true in apparel, where a customer might try multiples of one item, planning to return those that don’t fit or aren’t the right color. This is very much reflected in the industry’s return rates, which stand as high as 88%.

Customer expectations surrounding their returns experience are also high. Amazon has made returns an art form. In most cases, customers can return at least one item for free, within certain limitations. Not only that, but Amazon has set up convenient drop-off locations at 8,000 common retail partners, such as Staples and Whole Foods. Customers simply go to their “orders” tab, click on returns, and receive a QR code. Refunds come through quickly, and the customer simply takes the product and QR code to their nearest drop-off location.

That’s the level of customer expectation, and it adds pressure to any retailer hoping to gain customer loyalty. While most brands can’t match the Amazon level of returns policy, they can optimize their returns process, gaining customer loyalty and reducing costs in the mix.

Key components of a strong return policy

A strong component of a successful returns strategy is a clear window for processing. For example, making it clear that customers can obtain a refund on most items if they return them within 30 days. Each brand can establish its own window for returns, but what’s key is that customers know exactly what that is.

Along with a specific return window, businesses should establish rules about the product’s condition. Should the item return in its original package? Must it be unused? And what about proof of purchase? Customers want clarity.

Retailers also need to establish options for refunds and exchanges, offering both in clear language. Cost sharing and shipping responsibility are another key component to a strong returns policy, as is transparency about how those funds are processed. Once a brand settles on the components of a return policy, it should state the terms clearly and visibly on the website.

What to avoid

While a strong returns policy is critical, it must also make financial sense for the retailer. In the race to keep customers, it can be easy for a brand to focus on convenience and overlook the bottom line. There is a cost impact to returns, and brands must be cognizant of that impact. A retail brand might find it more fiscally responsible to offer exchanges instead of refunds, which tend to be costlier. It’s essential to also avoid overpromising. Unlimited free returns, for instance, can be costly, even if customers love it.

Quick tips: The do’s and don’ts of a good return policy

Do’s	Don’ts
Be clear and concise. Use plain language so customers know exactly what to expect.	Don’t use vague terms like “may” or “at our discretion;” they create confusion and distrust.
Display the policy prominently on your website and in order confirmations.	Don’t bury it in fine print or behind multiple clicks.
Offer a reasonable return window (e.g., 30–60 days) to show flexibility.	Don’t make it overly restrictive (e.g., 7–10 days), which discourages purchases.
Provide free or low-cost return shipping when possible.	Don’t surprise customers with high restocking or return shipping fees.
Simplify the process with clear steps and pre-paid labels.	Don’t make customers jump through hoops with lengthy forms or slow approvals.
Be transparent about conditions (e.g., items must be unused, tags on).	Don’t hide exclusions (like final sale items), list them upfront.
Communicate proactively. Send return confirmations and refund updates.	Don’t leave customers in the dark about status or timelines.
Use returns as a retention opportunity. Offer exchanges, store credit, or personalization options.	Don’t treat returns as a loss. Missed chances to turn returns into loyalty.
Leverage data from returns to improve product quality and sizing accuracy.	Don’t ignore return trends. They’re valuable customer feedback.
Align with sustainability goals (e.g., local drop-offs, minimal packaging).	Don’t overlook the environmental impact of excessive return shipping.

Operational best practices for handling returns

A business’s strong returns policy is only half of the equation when it comes to returns policy best practices. The second critical component is the operational strategy within the fulfillment center.

The first piece of this component is establishing standardized reverse logistics processes. These might include an initial product assessment when it comes back in the warehouse door. Associates can grade the products to determine if they should be resold or restocked. Having robust data capture and analysis is critical here, too, as it allows brands to drive value by learning and correcting processes that lead to return patterns.

Another good strategy to operations is integrating returns into warehouse workflows without disrupting outbound fulfillment. To put all this together, brands need technology and tools like barcoding, WMS and RMA systems.

How return policies impact costs and efficiency

Streamlined return policies positively impact warehousing costs and efficiency. Done right, a brand can reduce labor and processing costs, as well as lower transportation and restocking costs.

Efficient returns policies afford retailers the opportunity to resell, refurbish, or recycle returned products. These are cost-efficient and sustainable options that make the best of a potentially costly situation. The payback can include increased customer loyalty, which also offsets any loss from the returns process.

Sustainable return practices

Returns can significantly contribute to high emissions, up to 30% higher than the initial delivery, according to some estimates. In a world where sustainability matters as much to customers as brands, it’s essential to establish sustainable return practices.

These can include encouraging exchanges over returns, partnering with recycling and resale programs, and establishing packaging strategies that reduce return-related waste.

WSI’s role in supporting smart return policies

WSI understands returns and has the expertise, tools, and facilities to optimize the process. These include integration with retail and ecommerce partners to provide a seamless customer experience. It also includes a forward-facing facility design that allows for managing returns at scale. Finally, WSI has the technology to capture data and turn it into actionable information. With data-driven insights, WSI helps brands reduce their returns over time, leading to improved customer experiences and a stronger bottom line.

Future trends in returns management

As ecommerce continues to grow, the return process will continue to play a critical role. Future trends that will shape the future of returns include AI and predictive analytics, which will assist in reducing returns volumes. Sustainable, “green returns” will grow as a priority to customers, as firm ESG initiatives take hold across the supply chain. Finally, brands can expect increasing demand for customer experience-focused reverse logistics.

Brands cannot afford to treat returns as an afterthought. Ready to optimize your returns process? WSI is ready to help.