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Jaidyn Farar

5 Ways to Improve Your Returns Processing

by Jaidyn Farar
Return, package, damage, customer service

A customer orders a sweatshirt online. When it arrives, they eagerly rip open the package, pull the sweatshirt over their head… and discover that it’s too small. What next? 

If the ecommerce store’s returns processing system is confusing and complicated, the customer will be left with a too-small sweatshirt—and a grudge against the brand. But if the merchant offers a hassle-free returns process, the customer can easily swap the ill-fitting article of clothing for one that’s just right. So what exactly does returns processing include, and how can you make sure your business does it right? 

What is returns processing? 

Returns processing, also known as reverse logistics, is the handling and management of goods that are sent to customers but need to be returned. It includes receiving the returned items, evaluating their condition, and deciding whether to restock, refurbish, recycle, or dispose of them. Because most consumers (88%) make returns at least occasionally, it’s important to have a defined system for processing the items they send back. 

Having a simple, clearly defined returns process decreases the risk of shopping online. Buyers who are on the fence feel more comfortable making a purchase knowing they can return it if necessary, and those who opt to send something back have a frustration-free experience.

Let’s take a look at the returns process from start to finish.

How returns processing works

Returns processing is similar to normal order fulfillment, but some steps happen in reverse. First, refund requests come through the system and are authorized. Next, the customer ships the product back to you, where it’s examined, sorted, and sent to its end destination in a warehouse or landfill. We’ve broken the process into five main steps. 

Step 1: Initiation, authorization, and documentation

The dress isn’t very flattering. The lampshade got crushed. The dog bed is a lot smaller than it looked in the picture. When a customer opens their package and doesn’t like what they find, they initiate the returns process. Using the channel you provide—your website, customer service, or a returns portal—they notify your business that they want to return their recent purchase. 

Before moving forward, your team decides whether the customer is eligible for a return, looking at factors like the return window, the condition of the product, and the reason for the return. Once you approve the return, you’ll generate a return authorization number that can be used to track the product as it travels to your warehouse. 

Step 2: Packaging and labeling

It’s important to send customers clear instructions on how to package, label, and send the product back to your company. You can provide a digital return label that the customer can print themselves or go the extra mile by including a return label in each package you send. If you are an EasyPost customer, consider looking into our USPS Pay-on-Delivery option. With POD, you can send a label and not get charged until the customer uses it for a return. See more here

This stage of the returns process can make or break the customer experience. If you make things too hard, there’s a good chance the customer won’t buy from you again. Unsurprisingly, most of them don’t dream of spending all day prepping and sending a package.

If you have both an ecommerce store and a brick-and-mortar location, consider allowing people to drop returns off at the physical store. One study shows that 54% of consumers prefer to drop returns off at a designated retail location. 

Step 3: Receiving, inspection, and disposition decision

Once the returned item reaches your warehouse, workers inspect it thoroughly. Then it’s time to answer the big question: what happens to returned items? You have several options, and the one you choose depends on each product’s condition and your company’s policies. 

  • Restock. Simply return the product to your inventory for resale to other customers. Restocking minimizes waste and avoids lost revenue—just make sure restocked products are in great condition, or they might be returned again. 
  • Refurbish. If a returned item has minor flaws or wear, you might opt to refurbish it. This includes repairing, cleaning, and restoring the product before selling it at a reduced price. Refurbishment is a great way to salvage products, but it requires additional time and resources. 
  • Recycle. If a product is so damaged it can’t be restocked or refurbished, recycling is the next best option. Recycling involves disassembling the item, salvaging usable parts, and repurposing them for new products. This reduces landfill waste, but like refurbishing, it can be costly. 
  • Discard. If none of the previous options are possible, you’ll have to dispose of the returned product. This is the least environmentally sound option, so it should be a last resort. If you need to dispose of items, discard them safely and follow environmental regulations. 

Step 4: Processing and resolution

Finally, process the return according to the disposition decision. Promptly issue a refund or replacement to the customer.

Step 5: Analysis and improvement

Returns processing is incomplete if you don’t analyze and improve your products and processes. Every return provides valuable data, and you should sift through it to find areas where your business is weak. Then, using these insights, implement changes that decrease the chances of future returns. Learn more in the section below titled “Track what is being returned the most.”

Why is returns processing so important?

Like it or not, 30% of all products ordered online get returned. The way you handle these returns can make a big difference in your business's success. Here's why prioritizing returns processing pays off.

  • More satisfied customers. Nobody wants to have their concerns dismissed. Providing a seamless returns process shows that you understand and care about customer concerns, fostering a sense of trust and loyalty. 
  • Increased customer loyalty. Making returns as transparent and simple as possible encourages buyers to return to your online store again and again. A whopping 96% of customers say they’d buy again from a business with an easy returns process.
  • Streamlined operations. Ineffective returns processing can lead to bottlenecks and increased costs. On the other hand, well-optimized returns processing ensures that resources are allocated effectively. The result? Reduced costs and enhanced operational agility.
  • Competitive edge. Despite the value customers place on returns, not every ecommerce store makes the process easy. Having a customer-centric returns process sets you apart from your competitors, demonstrating your commitment to quality and customer service.

What to include in your business’s returns process

By now, you know that returns processing isn’t just haphazardly throwing inventory back on the shelves. It’s a complex process where lots of things can go wrong. Your business can follow these best practices to avoid common pitfalls. 

Streamline the sorting process

If your sorting workflows aren’t optimized, you’ll probably run into bottlenecks. When these bottlenecks cause the returns process to stretch over multiple days—or even weeks—customers might get impatient. 

Efficiency starts with organization. If you don’t have a designated area for sorting returns, create one. Then, implement a clear sorting system. Make it easy for your team to determine whether returned items should be resold, refurbished, recycled, or thrown away. This will speed up your returns process and keep customers coming back.

Automate returns

There’s technology out there for just about anything—including returns processing. Automating returns using technology will save you time and money, allowing you to accelerate the process and provide a better customer experience. 

For example, you can provide an online returns portal so customers can initiate returns and track their return status without needing to speak to customer service. Even better, automatic texts or emails can alert them of their return’s status in real time. Similarly, you might allow customers to access automatically-generated return labels from their accounts, reducing back-and-forth communication. 

You can even explore AI and robotics technology that automates the returns sorting process.

Have a clear returns policy

Without a clear returns policy, you won’t know which returns to accept and which to reject. With one, you can quickly make decisions when customers ask for a return. Include the following in your policy:

  • What products are eligible for returns?
  • What is the time limit to request a return?
  • Do the items have to be in a certain condition to be returned?
  • Will you give refunds in the original payment method or offer store credit?
  • Does the customer need to pay any return fees? (Keep in mind that 76% of customers say that free returns are an important consideration when shopping online.)
  • How can a customer initiate a return?
  • What’s the timeline for the customer to receive their refund or replacement?

Customers should have access to your return policy before they make a purchase. Being transparent upfront makes it easier when you have to reject a claim. 

Track what is being returned the most

You should dig deep into the specific reasons people are returning your products. Analyze return data to identify recurring issues, then fix them to reduce future returns. Ask these questions to see the potential weak points in your business:

  • Why was this product returned? (The top three reasons people return products are because they don’t fit, are damaged or defective, or don’t match the description.) 
  • What is the return rate for different product categories?
  • How soon after purchase do customers tend to initiate returns?
  • What feedback have customers given about products they returned?
  • Which customer segments request returns most often? For example, you might notice that new customers tend to return things more than returning customers. 

Communicate throughout the process

Customers don’t want to be left in the dark about their return status, so communicate with them throughout the process. Remember, a little transparency goes a long way! Send automated updates via email or a tracking portal to alleviate uncertainties and foster trust.


While a manual returns process isn’t easily scalable, many businesses don’t know where to start when it comes to automation. But with the right technology, your processes will run smoothly without nearly as much effort from you and your team. 

Learn how QALO used EasyPost’s shipping API and tracking webhooks to automate their returns process, cutting it from 7-14 days to 2-5. Then, get in touch to find out how your business can make your returns process less of a headache.