From the January 2006 issue of Entrepreneur

If you're an e-retailer, you can expect a certain share of your merchandise to be returned once the busy holiday season ends. Generally, returns are a cost center--and a pain in the neck. But there are ways to ease that pain.

Consider Swell Commerce Inc., a 40-employee e-tailer in San Juan Capistrano, California, that sells surf lifestyle apparel and accessories. About three years ago, Swell began using SmartLabel, from Newgistics Inc. of Austin, Texas. It's a service that can be used by businesses with at least 10,000 nonstore returns a year, a good fit for Swell's $12 million to $15 million in annual sales.

The service lets e-tailers offer customers a prepaid, preaddressed, bar-coded SmartLabel with their orders. To return an item, a customer affixes the SmartLabel to a package and drops it off anywhere the U.S. Postal Service retrieves mail. Swell charges customers a flat $6.95 for the return label, most of which gets paid to Newgistics.

Prior to using this service, "customers [had] to call us for a return authorization number and pay their own postage back to Swell," explains Nicholas Nathanson, the 36-year-old founder and president of Swell. Using Newgistics saves Swell money by reducing time-consuming customer service calls. The prepaid labels are also a good deal for customers, who pay lower shipping costs than with any other method they'd be able to find.

What's the best way to handle returns? Hillary Mendelsohn offers some tips. She's creator and editor in chief of Thepurplebook, 2006 Edition: The Definitive Guide to Exceptional Online Shopping and president of Thepurplebook LLC, a lifestyles media company in Beverly Hills, California, that focuses on online retailing.

  • Make returns as easy as possible. "The easier you can make the return process, the more likely the customer will make [another] purchase," says Mendelsohn. Pack clear return instructions with the product, and include a prepaid return label or box for customers.
  • When it comes to returns, be fair. E-tailers have to make sure they give a longer time frame for returns online than they would at a brick-and-mortar store. Also, let customers know what they're going to get when they make a return--whether it's store credit or a refund--upfront. And when possible, offer multiple return options. For example, allow customers to return products via mail or in your brick-and-mortar location, if you have one.
  • Look at returns as an opportunity. "Having returns is just another opportunity to have a good experience with your customers," says Mendelsohn. "Not only can you make it easy for them, but you can also incentivize them to reorder by sending a coupon along on the packing slip that offers free shipping or 10 percent off their next order."
Melissa Campanelli is a marketing and technology writer in New York City.