Returns management with Shopify: How you can process returns in your store

Returns are an unavoidable part of online retail, but they don't have to be a nightmare for your business. Efficient returns management can not only increase customer satisfaction, but also minimize the cost of returns and optimize your business processes. In this blog, you'll learn how to effectively manage returns in your Shopify store - from automating the returns process to practical tips for reducing returns. This will help you keep control of your returns while ensuring a positive experience for your customers.

What is returns management and why is it important?

Returns management refers to the entire process of handling returns. It aims to make information, goods and payment flows efficient and customer-oriented, avoid unnecessary returns and ensure customer satisfaction.

Well-organized returns management is crucial for every e-commerce company for several reasons:

Customer satisfaction

A clear and uncomplicated returns policy creates trust and increases customer satisfaction. Customers who know that they can easily return products are more likely to make a purchase.

Repeat purchases and customer loyalty

A smooth returns process can increase the likelihood that customers will continue to buy from you in the future. A simple returns process promotes trust in your brand and ensures that customers are happy to return if their experience is positive.

Cost management

Returns can be costly, especially when the volume of returns is high. With an efficient returns policy and processing, you can minimize the costs of storing, shipping and processing returns.

Image and brand perception

Professional and customer-friendly returns management can have a positive impact on your brand image. A transparent and user-friendly process shows that your company is customer-oriented.

Data analysis

Effective returns management helps you to identify and analyze the causes of returns. This data can be used to optimize products, descriptions or the ordering process and reduce returns in the long term.

Return rate: what is it and what does it say?

The returns rate is a key figure in e-commerce that indicates the proportion of returned goods in relation to the total number of products sold. It is expressed as a percentage and serves as an important indicator for retailers to evaluate the efficiency of sales and logistics processes.

What types of return rates are there?

Alpha returns rate

This metric is based on the number of returned parcels and provides valuable insights from a logistics perspective. It is often used by mail order companies, especially in the fashion and footwear sectors, as it focuses on event-based processes. This method helps to better plan and optimize handling processes at parcel level.

Calculation: Number of returned parcels : number of parcels sent x 100

Beta return rate

This method focuses on the product range perspective by analyzing which items are returned particularly frequently. This method, which refers to the number of items returned, is most frequently used by online retailers as it provides insights into returns behavior by product group. In controlling, it enables a quantity-based analysis and identification of items with a high proportion of returns.

Calculation: Number of returned items : Number of shipped items x 100

Gamma return rate

The gamma method looks at the value of returned items in relation to the total value shipped. It helps retailers to better understand the financial impact of returns. In combination with the beta returns rate, it is possible to quickly identify whether customers tend to return expensive or inexpensive products. This price-related key figure provides important information for strategic decisions.

Calculation: Value of returned items : value of shipped items x 100

What is a good returns rate?

A returns rate of less than 10% is considered efficient in most sectors.

For fashion items, where returns are much more common, a rate of less than 20-25% is already considered good. The reason for this lies in the specific challenges of the fashion industry: variations in size, fit and personal taste often lead to customers ordering several items to choose from and returning unsuitable variants.

A “good” returns rate shows that the business is tailored to the needs of customers, processes are optimized and customer satisfaction is high. It also makes a significant contribution to the company's profitability.

The 5 most common reasons for returns and how they can be reduced

Returns can be a challenge, but they are often also an indication of opportunities for improvement in the sales process. There are various reasons why customers return items, and many of these reasons can be reduced through targeted measures. Studies show that, on average, one in nine goods ordered is returned. The clothing industry is particularly affected: here, size problems, fit or differing expectations regarding color and material lead to a particularly high rate of returns.

1. false expectations of the product

Customers can return items if they do not meet their expectations - whether in terms of appearance, material or functionality. This discrepancy is often caused by inaccurate or misleading product descriptions, inadequate images or a lack of details about product features.

Preventive measures:

• Provide clear and precise product descriptions and high-quality images. Show the product from different perspectives and in different applications.

• Avoid misleading product images and make sure customers know exactly what they are buying.

• Offer product videos to give an even clearer idea.

2. customers buy multiple variants

Some customers order multiple sizes or colors of a product to ensure that they find the variant that suits their individual preferences and needs. This behavior is particularly common with clothing and shoes, as fit and color are often difficult to judge from pictures and descriptions alone.

Preventive measures:

• Offer discounts for keeping products or incentives for fewer returns (e.g. a coupon promotion for the next purchase if fewer are returned).

• Reduce the need to order multiple variants by offering targeted recommendations and personalized product selection.

3. incorrect size selection

Customers often order the wrong size, especially for clothing and shoes. This problem often arises because sizing information and standards can vary by brand, model or country of origin, making selection difficult. In addition, customers sometimes find it difficult to correctly estimate their own size, especially when they shop online and do not have the opportunity to try on clothes.

Preventive measures:

• Provide detailed size charts and measurement guides to help customers make the right choice.

• Add customer reviews and photos from other shoppers so customers can better assess how the products actually fit.

• Offer size advice or a size finder to make the selection process easier.

4 Damaged or defective products

One of the most common reasons for returns are defective products that have been damaged during transportation. Damage can occur in various ways, for example due to inadequate or faulty packaging, improper handling by shipping service providers or external influences such as extreme weather conditions during transportation. Damaged goods not only lead to customer dissatisfaction, but also to additional costs for the retailer, whether through replacement deliveries, refunds or the disposal of products that are no longer fit for sale.

Preventive measures:

• Make sure products are carefully packaged to prevent damage during shipping.

• Choose reliable shipping service providers and offer insurance for expensive or fragile products.

• Make sure your warehousing and quality controls are strict to identify defective products before shipping.

5. delivery delays

Whether it's a birthday, Christmas or another special occasion - some gifts absolutely have to arrive on a certain date in order to fulfill their purpose. Especially for time-sensitive occasions, customers expect delivery times to be met, as the product ordered is often intended for a planned celebration or surprise. Delays in delivery can not only make the product unusable for the customer, but can also lead to disappointment and frustration as the event takes place without the desired gift.

Preventive measures:

• Provide accurate delivery times and inform customers of delays in a timely manner.

• Offer alternatives, such as express delivery or local storage options, to avoid delivery problems.

Reactive vs. preventive returns management

Reactive returns management

With reactive returns management, the returns process is only processed when a return is initiated. The focus is on efficient and customer-friendly processing.

Preventive returns management

Preventive returns management, on the other hand, focuses on avoiding returns in advance. Companies analyze the reasons for returns and implement targeted measures to reduce them.

Efficient returns management combines both approaches. Prevention reduces the return rate by tackling common causes. Reactive processes ensure fast and customer-friendly processing when returns do occur.

Returns via Shopify's internal solution

Shopify offers an internal solution for returns that can be managed via the backend of your Shopify store. This allows you to organize returns efficiently and keep track of the process.

In the admin dashboard, select the relevant order for which a return is to be processed. Click on “Refund” and specify which items from the order are being returned. Shopify allows you to generate a return label if you are using Shopify Shipping. This label can be sent directly to the customer. Alternatively, you can use an external tool or a logistics service provider to create the label.

Once the customer has returned the parcel, you can track the return via the tracking number in the Shopify system. Status updates can be viewed in the admin area to monitor the progress of the return. After receiving the goods, check the condition of the returned item. If the return complies with the defined return policy, you can initiate the refund directly in the Shopify system. The refund is automatically processed via the original payment method used.

Shopify makes it possible to send automated email notifications informing the customer about the status of their return - from confirmation to completed refund.

Automating the returns process with Shopify: our top 4 Shopify apps

8returns

8returns is a specialized app for Shopify merchants who want to optimize and automate their returns process. The app helps to seamlessly manage returns, increase customer satisfaction and reduce costs at the same time.

Features and benefits:

• Returns portal

• Automation of the returns process

• Data analysis

• Customer communication

• Customizable return policies

• Increased efficiency

• Improving customer satisfaction

Pricing:

• Basic: 109€/ month

• Advanced: 379€/ month

Sendcloud

Sendcloud is a powerful shipping platform that helps Shopify merchants optimize their logistics. It not only simplifies the shipping process, but also the returns process.

Features and benefits:

• Multi-carrier support

• Automation of the shipping process

• Shipping notifications

• Returns portal

• Time saving

• Cost optimization

• Better customer experience

Pricing:

• Free: Free installation

• Lite: $29/month

• Growth: $89/ month

• Premium: $175/ month

Return Prime

Return Prime is a Shopify app that seamlessly manages returns, exchanges and store credit. It simplifies the returns process for retailers and improves the customer experience at the same time. The app provides a central platform to efficiently process returns, minimize workload and gain valuable insights into return reasons.

Features and benefits:

• Returns portal for customers

• Automation of the returns process

• Exchange and credit note management

• Notifications and communication

• Improved customer satisfaction

• Increased efficiency

Pricing:

• Free: Free installation

• Grow: $9.99/ month

• Grow - Boost: $49.99/ month

• Scale: $149.99/ month

Xentral

The Shopify app Xentral connects the Shopify store with the ERP software, a powerful solution for optimizing business processes. Xentral's ERP system has an integrated returns portal and is therefore very well suited for returns management with Shopify.

Features and benefits:

• Automated order processing

• Warehouse and inventory management

• Invoice and financial management

• Shipping management

• Returns portal

• Time savings

• Increase in customer satisfaction

Pricing:

• Free: Free installation

• External costs can be billed separately from your Shopify invoice by Xentral ERP Software GmbH.

Returns management using the example of Latori customers and the returns process

Asphaltgold

The fashion & streetwear store relies entirely on the functions of 8returns for returns management, both to increase customer satisfaction and to optimize internal processes. The user-friendly returns portal is integrated directly into the online store and enables customers to manage their returns themselves conveniently and easily.

Customers can enter their order number and email address to start the returns process. The system provides clear instructions for every step - from selecting the items to be returned and specifying the reason for the return to creating a shipping label.

HUNTER & stylecats®

The two online stores of HUNTER and stylecats® benefit from efficient integration by not only using the same backend, but also sharing the same returns portal. For returns management, the brand relies on easyReturns' user-friendly returns portal, which enables customers to process their returns with ease.

The easyReturns returns portal is designed to make returns processing quick and easy. To start the return, customers enter their order information and follow clear instructions. From selecting the items to creating the return label, every step is handled quickly and easily, making the returns process efficient and customer-friendly.

Conclusion

Returns management is an essential component for any successful online store. With Shopify, you can optimize the entire returns process and ensure customer satisfaction at the same time. By using modern tools and apps such as 8returns, Sendcloud or Return Prime, the process can be automated, which not only saves time and money, but also increases service quality.

In addition to the reactive processing of returns, preventative measures such as detailed product descriptions, size advice or optimized packaging should not be neglected in order to minimize the return rate. Strategically thought-out returns management strengthens your customers' trust in your store and supports long-term business success.