Many Happy Returns

You were thrilled by holiday sales-don't be chilled by post-holiday returns.
Magazine Contributor
7 min read

This story appears in the January 2001 issue of Entrepreneur. Subscribe »

As surely as a busy holiday season brings an increase in Web sales, it also brings more returned merchandise. Unfortunately, returned merchandise is a major by-product of increased Internet growth, especially as consumers become much more comfortable purchasing items over the Net.

"There will be more consumers returning goods purchased over the Internet during this Christmas season than ever before," explains Julie Breen, an e-commerce research analyst at The Boston Consulting Group. "That's simply because there are more goods than ever before being purchased over the Internet."

Web shoppers return merchandise for a variety of reasons. Twenty-five percent of customers who have returned items purchased online say the product wasn't what they expected, according to's 1999 "Return to Sender" Shoppers' Expressions survey. Seventeen percent of those who returned items purchased online said the items didn't fit correctly, and another 17 percent said the items were damaged. Sixteen percent of respondents said the wrong items were delivered, 15 percent said they simply didn't want the items, and 10 percent said items were of poor quality.

Not being able to see or touch a product in real life has often been cited as one of the Web's main short-comings. However, that kind of problem may become less prominent in time, says Irwin Barkan, founder of, an independent data services organization in Burlington, Massachusetts. "There's incredible technology at work in making touch, feel, color, look, size and fit issues more user-friendly," he says. "Some of the issues regarding these changes are [related to] the current bandwidth and speed available on consumers' computers. It may be a few years before the lines cross between this technology and consumers at home."

The good news: While returns are a problem for e-tailers, they're not a headache for customers. In the survey, 78 percent of the consumers who returned items purchased online during 1999's holiday season described their expe-rience with an e-tailer as "satisfactory" or "very satisfactory." The bad news: Of the 6 percent of shoppers who had "unsatisfactory" experiences, 62 percent said they wouldn't return to the e-tail sites responsible as a result. The biggest consumer complaint regarding online returns? Having to pay return postage.

Overall, 86 percent of the survey's respondents said they considered e-tailers' returns policies of significant importance. What features do users like in a returns policy? Receiving a refund as soon as the item is returned; being able to return the item to the e-tailer's brick-and-mortar store; receiving postal pickup at their homes; low or no restocking fees; and being able to exchange the item for something more suitable.

Melissa Campanelli is a technology writer in Brooklyn, New York, who has covered technology for Mobile Computing & Communications and Sales & Marketing Management magazines. You can reach her at

Simple Solutions

How well you handle online returns will likely determine your future success-or failure-in the dotcom world.

There are a number of ways to handle returns, but one particularly popular way is to provide customers with return labels that can be placed on packages to be sent back to the ful-fillment center or business. The U.S. Postal Service (USPS) was the first to offer a system to allow customers to print return labels straight from their own PCs. Called Returns@ease, it works like this: After customers alert you that they want to return items, you can provide them with merchandise return labels via the Web so they can return the packages by mail.

To use Returns@ease, you must obtain a merchandise return permit from the USPS and set up an account at a local post office. The reg-istration application, programming codes and applicable guidelines for using the service can be found online at The service is free to customers and doesn't require additional hardware or software. Keep in mind, though, that there is a minimum charge to merchants of 30 cents per return, plus postage and any fees for special services such as shipping insurance and delivery confirmation.

UPS also has an e-returns service that provides consumers with a label they can print from their PCs. But the UPS system has additional functions. For example, "[If your customer returns a CD because] he changed his mind, the system can ship it back to the merchant for restocking," says Steve Holmes of UPS. "But if the CD was returned because it was defective, the system knows immediately to put the name and address of the manufacturer on the return label so it can be returned under warranty."

Once packages are shipped, you and your customers can keep track of the status of those packages directly from your Web site or via the UPS Web site. Customers can hand return packages to any of UPS' 70,000 drivers, or-depending on your returns policy-UPS drivers can pick up the packages at consumers' homes.

Based on your returns policy, you'll be charged a transaction fee and various transportation charges, which are billed to you or your customer once you receive the items from each return.

Outsourcing Returns

Many netpreneurs, not wanting to handle the returns process themselves, turn instead to returns management solutions (RMS) companies for help. RMS companies handle all aspects of returns management for you. They can generate shipping labels and return authorizations, which include information about why customers are returning the products, what they're returning and other pertinent information. They may also take care of the physical handling and disposition of those returns. Sometimes, these companies even have returns facilities, where employees scan, open, verify and assess the condition of the returned products.

Many RMS companies integrate their systems with yours, so your order management, credit processing, transportation, returns authorization generation and customer service systems are all connected. This way, you can track the status and condition of returned products, and items can be routed to the locations you designate.

Many RMS companies also allow your customers to return products to USPS offices or other carriers' offices, where they're shipped back to you. They also give your customers instant credit for returns. RMS companies usually charge an installation fee, starting at $10,000, and a transaction fee for each returned package-anywhere from 50 cents to $4, depending on the level of service offered.

One such company is Newgistics Inc.. With Newgistics' Return-Valet service, you can offer your customers the ability to return merchandise to local neighborhood parcel centers and receive instant credit on the returned goods. You can also have packages shipped in bulk to a regional returns facility, which can help to substantially lower your costs associated with returns. Another com-pany to check out is, which lets you offer your customers a returns process through 3,400 Mail Boxes Etc. locations nationwide or the USPS.

Whether you decide to process returns yourself or hand the responsibility over to an outside firm, remember that satisfied customers are the only ones who will return to your Web site for purchases in the future. And having just served a ton of brand-new customers this past holiday season, can you really afford to lose them?

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