Managing your Christmas gift returns as a small company

No company owner wants to contend with a high rate of product returns, but they are an unfortunate reality for retailers large and small. Here, we look at the problem and what can be done about it.

No company owner wants to contend with a high rate of product returns, but they are an unfortunate reality for retailers large and small. Here, we look at the problem and what can be done about it.

On Stride Financial reports that an estimated £700 million was spent online during the key ‘Manic Monday’ before Christmas, but with such an amount of present-purchasing comes the risk of returns – an ugly word for the country’s small businesses.

As a small company, it’s very important to have a returns policy in place. Mark Pearson, founder of MyVoucherCodes says that, after pricing, the most important factor in building customer loyalty, both on and off-line, is having a returns policy that is flexible and convenient for the customer.

‘A simple returns policy that is easy for any customer to navigate is particularly important with more expensive purchases as it reassures them that, should they change their mind about the item, they can easily return it without great loss,’ he adds.

Not-so-happy returns

However, it is naturally the case that, as a business, you want to keep returns to an absolute minimum. keeps a running total of the amount it costs the UK’s online retailers in returned goods (that’s not including the value of the items) which at the time of writing is approaching £2 million throughout 2014.

This has given sites like eBay and Gumtree reason for cheer, with recent record-setting years of new listings added over the Christmas period, no doubt thanks to some unwanted gifts.

John Coulston, VP of channel and business development at point of sale software company Vend, says that the likes of Christmas and Black Friday are complex periods for retailers, especially for those which have multi-channels, that is, an online as well as physical presence.

‘The nightmare of managing returns can be extremely complex for those retailers, especially in, for example the fashion sector, as returns from clothing are traditionally higher than electronics, for instance,’ he says. 

If a consumer has bought something before Christmas, there is a higher returns rate online than offline, Coulston says.

‘Managing returned items post-Christmas means the retailer has to manage the impact on their inventory. There are factors to consider such as understanding if the product is faulty, and if it isn’t, whether it goes back into sale or returned to the manufacturer.

‘Dealing with all that is time consuming and creates a headache for the organisation. Its critical to understand the impact from a profitability point of view, that’s a sale potentially lost.’

It follows that companies should be mindful of maximising the potential to sell products again. ‘If the product is taken back to your shop, what can you do to salvage the situation? Can you offer an alternative product perhaps, or if it was a gift, do you have the opportunity to gain a new customer, ie the person who returns it?

‘Can they be sold something else? How can you interest them in the brand you have so they come back and purchase in future? These are questions you should be asking.’

Having multi-channel retail offerings is all about understanding the impact on your inventory, which can be very difficult, Coulston adds. Being able to use technology to manage that inventory and aggregate it across multiple channels is one thing small retailers are doing, he says. ‘Having an instantaneous snapshot of what stock they’ve got and where it is, is crucial.

‘Retail margins and profitability is always under pressure so understanding what you have available at a given time, what they can sell and what condition it’s in, is critical to be successful.’

Knowing what your fast-moving items are, but also understanding how such items match up to the slower-moving but more profitable items is key. ‘It’s all about maximising your sales and understanding the profit that comes out of each line of your business. A real-time inventory system helps with that.’

Keeping control of returns

But prevention is better than cure, so what can small businesses do to reduce the number of returns in the first place? Having a clear and targeted offering helps. Referring to brick and mortar offerings, Gareth Poppleton, managing director of Retail Merchant Services says, ‘Your customers could have made a lot of effort to come to your shop. They have paid for public transport, walked, or negotiated busy high street parking – all things that they wouldn’t have had to do with online shopping.

‘These customers are more likely to make this effort if they know that you have the product they are looking for at the right price and in stock. To ensure this, keep your customers informed with a well-updated website and use social media to answer any customer enquiries. You could also create a pre-order facility so they won’t be disappointed.’

Further reading on retail predictions

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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