How to Improve Retail Product Returns with Inventory Control

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Nearly a third of all eCommerce sales are returned and this is particularly true of fashion items that are sent back because of fit or style. In addition, the free shipping and hassle-free return policies offered by large retailers such as Amazon make it risk-free for consumers to buy now and return later.

It is important for companies to establish a good exchange policy for addressing customer returns, one that avoids confusion. Returns, however, can be costly and may eat away at a business’ bottom line.

Effective inventory control has a positive impact on the returns process and will help organisations to better manage this area of the customer experience.

Customer returns policy

Consumers generally favour brands with a liberal returns policy, one that is simple and easy to navigate. Return policies can even increase sales because shoppers are more willing to make purchases when they know that sending items back will be stress-free.

The challenge then is to develop an effective multifaceted returns policy that enhances customer service and reduces the costs associated with customer returns. Some ways to do this include:

  • Accepting the return of online purchases in-store if you are a multi-channel retailer
  • Offering customers a variety of return options, such as choosing between a cash refund, product exchange or a store credit. This gives customers greater control over their returns decision
  • Partnering with third-party logistics providers to undertake purchasing, staffing and warehouse management on behalf of eCommerce stores
  • Having an arrangement with manufacturers to instantly swap any product, under warranty, which is returned due to defect or damage on arrival

Product returns and inventory control

Product returns are fundamentally complex because they affect many functions of the organisation and the impact returns have on a business can be huge.

Putting large quantities of inventory back into stock not only affects physical inventory but also electronic inventory and accounting systems. It requires additional handling and extra space. Returns can also affect a business’s ability to procure and sell new products.

An inventory system that integrates across your supply chain can improve the performance and efficiency of reverse logistics. With the use of handheld scanners and portable barcode scanning technology being especially valuable, providing real-time visibility of customer returns.

Inventory control technology can be integrated into warehouse management to ensure immediate inventory allocation, instant picking from the returns area and cross-docking. With inventory management and barcode scanning, you can more effectively manage your reverse supply chain and improve communication within your organisation.

An effective stock control system helps maintain customer satisfaction when it comes to product returns. You can track the status of returned packages and capture extensive data to understand the issues driving returns. Valuable insights can help improve inventory purchasing decisions to drastically reduce losses caused by returned products.


Remember, not all returns need to be managed in-house. Third-party logistics providers are a viable option for managing international returns. Instead of shipping customer returns to the country of origin, returned goods are resold locally, saving customs and shipping fees.

7 Tips for retail product returns

Intelligent eCommerce businesses grow and develop better with a strong product return policy and process. Make sure your inventory control system is placing your business ahead of your competitors. A product return opportunity can be a chance for you to showcase your high-quality customer service.

1. Consumers want security in product return

Beat the market by having a comprehensive inventory control system that caters well for returns and can handle volume, especially during the holiday seasons. This is an area where traditional brick-and-mortar stores are at a disadvantage.

2. ‘Return’ customers can be your best

Data shows that, in fact, customers who return products may be amongst your best. Some studies report that customers who return products using free shipping may spend as much as 450% more than other consumers.

3. Setting up a good returns policy

Having a clear, easy to read, and thought out returns policy shows that you have confidence in your goods (or your suppliers’ goods). Be sure to include guidance on acceptable return condition and quality. Put your policy in a visible place – either a click-through or a banner at the bottom of the webpage.

Consider offering free return shipping – many customers expect it and ease of return is a pre-purchase factor that can sway a ‘buying’ decision. If you do offer free shipping on returns, advertise it.

4. Above and beyond attitude

Providing your purchasers with a seamless and happy returns experience will set you apart. Be flexible on item returns – let customers return goods to a local store if you have one, and keep them informed about the status of the item return.

5. How to minimise returns

A lot of returns are for mostly administrative reasons. Here are some of the most frequent return reasons and tips to reduce the number of returns your business handles.

Product is different than description, item quality or fit is an issue

  • Host high-quality product images, such as 360 degree images or instructional videos
  • Provide detailed product information, such as size guides or conversion charts
  • Use virtual planners or wardrobes to let customers “see” how the product looks and fits

Incorrect item dispatched

  • Review your inventory control data handling system
  • Check the right information is being sourced from the correct locations and being sent to the appropriate shipping partner

Product damaged in shipping

  • Check in with your dispatcher to see whether products have suitable protection layers for transit

6. Local laws and refunds

Don’t forget, local consumer laws will also most likely require you to accept returns and offer refunds. Ensure you’re meeting the minimum legal requirements.

7. Streamline with RFID tags

RFID tags can simply be scanned, and the process is done automatically, taking away the burden of manually processing inventory stock. A new sales tag can then be attached, and the product can be back onto shelves in a timely manner.

Having each tag scanned during each phase of the supply chain allows staff to know the history of an item. This streamlines a retailer’s back-end processes and can prove whether the product was paid for. It will also show the price paid to be sure discounted items are not returned for a higher price. This option is a big step to decreasing return fraud.

There are benefits beyond reducing returns as RFID tags help to make inventory control much easier. Instead of manually sorting boxes and piles of products, they can be scanned quickly and efficiently. Time can be saved on both ends of the process.

Since maintaining a hassle-free return policy has become the standard operation for most retailers, having better inventory control and an inventory management system that can track important data is important. Good inventory management solutions will give you the option to maintain additional inventory stock levels that mirror your return rates.

Additionally, you can monitor the reasons for returns and address issues to reduce the rate of returns, helping to maintain customer satisfaction. Inventory control is a core part of any retail business and should be able to account for product returns. By using a solution that provides sellers with real-time data about their inventory stock, sellers will be better positioned to deal with products as they return. As much as a business doesn’t want customers returning products, customers equally don’t want the returns process to be difficult. Inventory control helps you manage the customer experience when it comes to product returns management.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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