Returns management

Returns are part of selling, especially online, where customers can’t touch or try products first. Fashion e-commerce sees far higher return rates than stores. Each return costs money twice: the reverse shipping and handling, and the value lost if the item can’t be resold at full price.

A returns process has four parts:

1. Authorize: the customer starts a return, often online, with a reason. A return authorization (RMA) number links it to the original order and sets the rules, such as the time window and condition.
2. Collect: pickup, drop-off points or stores.
3. Inspect and decide (disposition): grade the item, then restock it, refurbish it, sell it at a discount, return it to the supplier, recycle it or scrap it.
4. Refund or replace, quickly, because slow refunds drive complaints and repeat contacts.

The fastest savings often come from preventing returns. Return reasons show patterns: if “too small” dominates for one brand of shoes, fix the size chart; if “damaged in transit” is high, fix the packaging; if “not as described”, fix the product page. Some returns are also abuse, such as wearing an outfit once or returning a different item, so rules and checks help.

Speed matters throughout. A returned phone case or kurta loses value every week it sits in a pile.

The full cost of a return

Reading return reasons

A typical breakdown might look like this: size or fit 45%, not as described 20%, changed mind 15%, damaged in transit 10%, other 10%. Each points to a different fix:

• Size and fit: better size charts, fit recommendations from customer data, reviews that mention fit.
• Not as described: accurate photos, colours and specifications.
• Damaged: packaging and handling fixes, by route and carrier.
• Changed mind: policy design, since some of these returns are a cost of selling online.

Policy levers

• Return window: shorter windows reduce late returns and value loss, but can reduce sales.
• Free or paid returns: a small fee cuts returns, especially “changed mind” ones, at some cost to conversion.
• Exchange first: offering an exchange or store credit before a refund keeps revenue in the business.
• Instant refunds for trusted customers, with checks for those with unusual return patterns.

Abuse and fraud

Some returns are not honest: clothes worn once and returned (wardrobing), empty-box or wrong-item returns, and returns of items bought elsewhere. Controls include serial-number or tag checks, photos at pickup, scoring customers by their return history, and inspection before refund for high-risk cases. The aim is to stop abuse without making honest returns harder, since easy returns help sell.

Refunds without returns

For low-value items, collecting and processing a return can cost more than the item is worth on resale. Many retailers then refund without asking for the item back (a returnless refund), sometimes asking the customer to donate or dispose of it. The rule should come from the economics: compare the recovery value with the return cost, by category, and watch for abuse.

Rules in India

The Consumer Protection (E-Commerce) Rules, 2020 require e-commerce entities to display return, refund, exchange and warranty policies clearly, and set duties for marketplaces and sellers. Returns policies must be stated plainly and applied as published; policy design happens within those rules.

Liquidation and secondary channels

Items that can’t be sold as new need fast routes to value: factory outlets, open-box listings, refurbished sales, liquidators and recyclers. Agreeing these channels in advance, with clear grades and prices, avoids returned stock piling up while it loses value.

Returns in true profitability

A product with high sales and high returns can earn less than one with modest sales and few returns. Measure profit after returns by product, brand, seller and customer: net sales, return costs and value lost. That changes decisions about which products to promote, which suppliers to keep and which customers to reward.