Why a Good Return Policy is Essential to the Success of Your Retail Business

According to Fivestars, 91% of consumers say that a store’s return policy impacts their purchase decisions. But when it comes to return policies, suggests Time, retailers aren’t making the grade. That’s unfortunate because having a well thought out and flexible return policy is an important part of attracting—and retaining—customers.

While return policies are a good rule of thumb for any small brick-and-mortar store, they’re absolutely essential for online businesses. That’s because online consumers don’t actually get to look at and hold the physical product before making a purchase. E-commerce sites must, therefore, instill a sense of confidence in their customers so they’ll feel comfortable enough to buy from them.

“Historically, the money-back guarantee was a way for retailers to stand behind the products they sold. The basic message was, “If for some reason you don’t like our product, return it for the full value of what you paid for it.” On the outside, it is an unconditional agreement that guarantees the quality of the product. As such, return policies have been as much a marketing tool as a retail standard.”

Source: The New York Times

“A concise and clear return policy gives consumers a feeling of security; that what they are buying is guaranteed to be what it is represented to be,” says The New York Times. “If a retailer doesn’t give this guarantee, then consumers often become suspicious and avoid buying the product.”

If your goal is to provide the kind of service that keeps customers coming back, you’ll be committed to creating a policy that makes the return process as painless as possible. Below you’ll find several suggestions to consider when creating and/or revising your return policy, along with some best practices, to ensure a smooth and satisfactory return process for all involved:

5 Considerations for Return Policies

  • Exchanges Only: While you might lose revenue from the replacement product, you won’t have to process a refund or give back the revenue from the sale.
  • Receipt Only Refunds: This approach can reduce fraudulent returns. It’s best for small businesses to require a receipt for a return, but if you want to relax this rule, consider only allowing in-store credit for returns without a receipt.
  • Store Credit Only: The customer will receive credit for the amount of their purchase, less shipping costs. This may not appeal to customers who’ve had a bad experience with your product.
  • All Sales Final: While it might save you money in the short term, protecting you against fickle customers or merchandise getting damaged in shipping, an as-is approach will most likely cost you money in the long run.
  • Full Refunds: If the customer returns an item they purchased with a credit card, you’ll still have to pay the processing fees for the purchase, increasing the amount you’ll pay for the return.
  • Restocking Fees: Charging restocking fees of 10% to 20% helps cover processing fees, handling, and other costs associated with processing returns. They are normally charged only on returns and exchanges made at the customer’s discretion, not on defective merchandise.

Return Policy Best Practices

Post your return policy – Your customers should have easy access to it (it’s not supposed to be a secret). Be sure it’s posted on your website, and in your store, or even printed on the back of receipts.

Train your employees how to handle returns – Nothing’s more frustrating to customers than being told by a staff member that only certain employees can process returns, especially when that employee isn’t available. Educate all staff members to handle returns and solve customer problems. You can even have your employees give a brief summary of your return policy when handing customers their receipts. Something as simple as, “You have 30 days to return items” can help reduce potential issues.

Make returns as pleasant as possible – Don’t pepper customers with questions about their return. Ask them the reason for their return just once. Remain calm, friendly and personable throughout the entire returns process to make the experience as pleasant as possible for the customer.

Process the return quickly – A return should be as quick as making a purchase. Unless you want customers to regard returns at your store as a punishment, make the process as painless as possible. Keep any necessary paperwork to a minimum and be sure your staff is fully trained to handle the return procedure. Remember too, when someone is returning a product, it’s not the time to collect customer data unrelated to the transaction or to ask if the customer wants to join your rewards program.


“Store returns are a fact of retail life,” says The Balance. “No matter what you sell, people will want to return things.” Your goal should be to make the return process as simple and straightforward as possible and turn it into a pleasant experience instead of an irksome chore. In doing so, you’ll earn your customers’ loyalty and encourage them to spread positive word-of-mouth about your business.

Also published on Medium.

Sherene Funk is the author of the contemporary romance Autumn in Your Arms and two small business e-books. She is a voracious reader who owns more books than she can ever read in this lifetime. A graduate of Brigham Young University, she worked in advertising for many years before moving to her current writing position at Rain Retail Software. She researches non-stop to see what successful retailers do and loves to share what she learns with small business owners.