Dropshipping is an appealing business model for many entrepreneurs due to its low start-up costs, scalability, and low-risk. The dropshipping market is expected to grow more than 27% by 2031, proving the viability and staying power of this type of e-commerce business.
While dropshipping can make it easier to start an online business, retailers often struggle to manage the operations of an online store that uses this model. For instance, when customers want to return a product, the seller must coordinate with the supplier to arrange for the return and refund.
Handling returns effectively is a big indicator of success for an e-commerce store. Nearly 85% of shoppers say they won’t come back to a brand if they have a poor returns experience. For a Shopify store to survive, handling returns quickly and affordably is non-negotiable.
In this guide, we’ll break down the basics of dropshipping returns to help prospective e-commerce retailers understand how this process works. We’ll also outline how to create a returns policy, the logistics of managing dropshipping returns, and how different ecommerce platforms can help entrepreneurs improve their returns process.
Read on for tips for managing dropshipping returns for your online business.
The Basics of Dropshipping Returns
Dropshipping is a retail business model in which the store owner does not keep the products it sells in stock. When a customer places an order, the store owner purchases the product from a third party and has it shipped directly to the customer.
This model is appealing to many entrepreneurs because it prevents the need for managing inventory — and the associated costs. Dropshipping also reduces the upfront investment and operational complexities associated with traditional e-commerce retail models.
When a customer returns a product through dropshipping, the retailer is responsible for processing the return. This typically involves refunding the customer’s money and then working with the supplier to get the product returned or disposed of.
Dropshipping returns are initiated by customers for many of the same reasons as other, traditional ecommerce returns. But, because the retailer never handles the physical product, there are a few other reasons why a customer might be dissatisfied with their purchase.
Issues with Product Quality
The retailer may guarantee a certain level of quality — but since they never handle the product, there’s no way to verify the supplier is delivering to the standard as promised. If the product received by the customer is defective, arrives damaged, or is poor quality, they are likely to initiate a return. Damaged products can also result from shipping and handling.
Incorrect Product or Size
Likewise, if the customer receives a product in the wrong size, (or the wrong item altogether), they might want to return it. This dynamic can happen when the retailer doesn’t include the right product specs on their online store or if they don’t use the right measurements — e.g., listing in inches instead of centimeters. Retailers must ensure the product descriptions on their online stores are accurate.
If the shipping takes longer than expected, customers might grow impatient and decide to return the product, especially if they needed it by a specific date. Often, suppliers are located all over the world. Supply chain issues in a region where your business doesn’t even operate can still impact your customer experience.
“If you work with multiple suppliers—as most dropshippers do—the products on your online store will be sourced through a number of different dropshippers. This means you have no control over the supply chain,” wrote Shopify.
Change of Mind
Many return requests are completely out of the control of retailers or suppliers. Some customers may change their minds between ordering the product and receiving it. It’s possible that they bought the product impulsively and later changed their mind. Or, a customer might also decide they don’t want the product anymore or found a better deal elsewhere.
Customer Service Issues
If it’s a hassle for a customer to get assistance or resolve an issue with the product, they might opt to return it out of frustration.
For help with your dropshipping returns on Shopify, check out this returns and exchanges app.
Creating a Returns Policy for Your Dropshipping Business
One of the easiest ways to reduce returns for your dropshipping business is to create a clear and fair returns policy. A clear, transparent returns policy can increase sales: a survey from Narvar found that 17% of shoppers would not purchase without the option to return the item.
A well-written returns policy can help you build trust with your customers, minimize disputes and chargebacks, and provide a framework for handling returns.
A returns policy is a cornerstone of managing dropshipping returns. This policy should outline the terms of refunds or returns for customers who have purchased products from your Shopify store. It should also outline when and under what circumstances customers are eligible for refunds.
A clear and concise returns policy can help to protect dropshipping retailers from fraud — and, in some cases, dropshipping retailers may be legally required to have a returns policy. This is because some countries have laws that govern the sale of goods and the right of consumers to return goods.
[Read more: How To Create A Returns Policy For Your Shopify Site]
As you write your returns policy, consult with your suppliers to see under what conditions they’ll accept returns. Some suppliers may not accept returns at all or may charge a return stocking fee.
Set the return window, or timeframe within which customers can initiate returns. For example, an industry standard is to set the limit that items must be returned within of 30 days from the date of delivery.
Condition of the Item
A returns policy should describe the condition in which the returned items should be. For example, whether they need to be unused, unworn, or in their original packaging. A bathing suit must be returned unworn due to hygiene issues, whereas some mattress companies offer longer returns periods to give the customer plenty of time to use the product as much as they want.
Refunds or Exchanges
Explain whether customers will receive a full refund, partial refund, store credit, or the option to exchange the item. Dropshippers can offer refunds without needing your customers to return their products, and it can work out for both parties.
Do the math: in some cases, the cost of processing returns can be between 20% to 65% of the total item cost. Up to 13% of returns cost twice as much to send back as the original purchase price.
“Ask your customer if they’d like a brand new product instead of a refund. You can tell them that they can keep the existing product too,” wrote Oberlo. “If they accept, perfect! They’ll be pleased by the gratuity product you send them, and if your margins are big enough, you might end up still being net positive in revenue too.”
Outline the steps customers should follow to initiate a return, including how to contact customer support and how to package and ship the item back. Include some information about who will pay for the return shipping. Will the customer or the retailer bear the cost of returning the product?
Finally, list any products or categories that are not eligible for returns, such as personalized items or items on clearance. Explain how the retailer handles returns for damaged or defective items, including the process for obtaining replacements.
Handling Dropshipping Returns
Next, you’ll need to implement a workflow for handling dropshipping returns. This process is slightly more complex than in a traditional retail business model, as the retailer does not have direct control over the inventory or the shipping process.
Generally, there are two options for processing dropshipping returns.
- The product is returned to you, the retailer. You can have the customer ship the product to you, assess the condition, and make an assessment of the product’s condition. This can give you more data about your supplier partner and inform your product descriptions. However, it does mean you will have to repackage the item and ship it back to your supplier.
- The product is returned directly to the supplier. You will adopt the supplier’s returns policies as your own, and as the retailer, your dropshipping business will still be the conduit for the return process. In practice, that means customers will make refund requests to you directly, so you can deliver a painless customer experience.
Both options have pros and cons — and there are plenty of tools, which we’ll explore in a later section, that can make handling dropshipping returns easy. And, regardless of how you structure your returns logistics process, you will need to provide exceptional customer service. Here’s how.
Make the Returns Process Easy and Straightforward
Most consumers don’t know what dropshipping is, let alone how it can impact the returns process. Your job as the retailer is to make the returns process as easy as possible for the customer.
To do this, empower customers to provide feedback quickly, ask for a return or exchange, and get a prepaid label. It could be worth creating a dedicated returns portal or a specific email address for the customer to contact where you can provide them with step-by-step instructions for making the return.
Respond Promptly to Customer Inquiries
If a customer has a question about the return process, be sure to respond promptly and helpfully. The faster you can process a return, the happier the customer will be. Offer multiple ways to get in touch — through a contact form on your e-commerce site, a dedicated email address, social media, and via phone — with someone monitoring and responding to requests 24/7.
Show Empathy and Understanding
Empathizing with a customer demonstrates that you understand the customer’s perspective and are willing to help them find a solution. This approach can help to diffuse any frustration or anger the customer may be feeling and turn a negative experience into a positive one. It can even salvage customer loyalty.
Go Above and Beyond
Especially if you use a dropshipping model, some order errors or product quality issues are out of your control. What is in your control, as a retailer, is your response to the customer. By making every effort to resolve an issue and make the customer happy, you can build a great brand reputation. Offer to pay return shipping fees, provide an in-store discount, or send a new item for free to show the customer you care.
Follow-Up After the Return is Processed
To really go above and beyond, follow up with every return to make sure the customer’s ideal outcome has been reached. Ask for feedback and learn from the experience to see if the supplier is reliable. Keep track of the number and type of returns you see to understand if there’s a pattern, too.
Preventing Dropshipping Returns
The best kind of dropshipping return is one that never takes place. By avoiding high rates of dropshipping returns, a business can build profitability and a enjoy positive reputation with consumers.
Of course, returns are inevitable in any business. For drop shippers, there are parts of the order fulfillment process that are out of your control. Dropshipping business owners rely on suppliers and logistics partners to meet customer expectations. As a result, there is a narrow part of the customer experience on which to focus in order to boost customer loyalty.
Here are some steps dropshipping retailers can take to prevent returns from becoming an issue.
Choose the right products
A big part of running a successful dropshipping company is figuring out what customers want to buy. You’ll want to offer a product that will fly off the shelves, but also consider the return rate for those products. A bathing suit, for instance, will probably have a higher rate of return than a t-shirt, since bathing suit sizing is more variable. As you consider demand, also consider which products have a low return rate.
Vet your partners
There are two common approaches to setting up a dropshipping model. The first is to find a wholesale supplier using a supplier database like AliExpress or SaleHoo. In this scenario, you could visit the supplier’s warehouse or factories, speak to other clients, and check the product quality firsthand.
The other option is to use a dropshipping app that connects you and your online store to thousands of suppliers. For instance, DSers is a Shopify app that helps independent business owners find products to sell.
“DSers automates most of the dropshipping process. As the store owner, all you have to do is check that the details are correct and click the order button. The product is then shipped directly from the AliExpress supplier to the customer—wherever in the world they may be,” wrote Shopify.
With this option, you’re another step removed from the final supplier — making it difficult to vet the final product. You’re reliant on ratings within the app in order to find the best suppliers for your store.
No matter which option you choose, finding highly rated, reliable partners is key to minimizing returns. The better your suppliers, the higher quality product you can guarantee, and the better your customer loyalty.
Provide clear product descriptions
Help customers understand exactly what you’re offering with clear, accurate product descriptions. This will help to reduce the number of returns that are due to customers being disappointed with the product. Include the price, size and dimensions, weight, color options, care and set-up directions (if applicable), and shipping costs.
Set clear expectations
Make sure customers understand what they are getting when they purchase a product from you. In addition to your returns and refund policies, be transparent about shipping times and product restocks.
Offer five-star customer service
Finally, customer service is fully in your control and offers the perfect opportunity to solidify customer loyalty. Be responsive to customer inquiries, resolve issues quickly and efficiently, and provide a refund or replacement if necessary.
A returns management platform can help you streamline the returns process by tracking returns, generating return authorization numbers, and communicating with customers.
Dropshipping Platforms and Returns
There are a few popular dropshipping platforms through which retailers can identify products from third-party suppliers and offer them to customers directly. These platforms enable the retailer to offer inventory without having to hold stock.
When it comes to returns, the policies and procedures vary depending on the platform. Here are a few of the most popular platforms, and their pros and cons.
Shopify is known as an e-commerce platform, and it also offers integrations that enable dropshipping.
Shopify is a relatively easy platform to use, even for beginners. This makes it a good option for entrepreneurs who are new to dropshipping. This platform’s wide range of features, such as product management and shipping integrations, can be helpful for dropshipping businesses. Plus, tools like Rich Commerce integrate directly into Shopify to make managing dropshipping returns super easy.
However, Shopify is a paid platform, so you will need to pay a monthly fee to use it. It also charges a commission on each sale that you make. This can eat into your profits, especially if you are selling low-margin products. And, Shopify is extremely popular; especially for drop shippers. This can make it difficult for your business to stand out.
EBay offers access to a large audience and a ready-made platform, but it also comes with intense competition, fees, and potential limitations.
EBay has a massive user base, providing a wide audience for your dropshipping products. It also offers the benefit of using eBay’s existing platform – meaning you won’t need to build an ecommerce storefront from scratch. eBay’s search functionality can help potential customers find your products more easily so you can get started selling virtually right away.
In addition, eBay’s reputation and buyer protection policies can instill confidence in customers, especially for first-time buyers. Building brand trust will take less time than setting up a separate e-commerce website.
However, like Shopify, there’s higher competition on eBay — and eBay charges fees. Due to fees and competition, maintaining healthy profit margins can be challenging in the dropshipping model. And, while eBay’s site will help you get started faster, it may limit your growth potential. EBay’s platform design and policies might limit your ability to fully customize the buying experience for your customers — and the site has restrictions on certain categories and brands, which might limit your product choices.
Amazon is an incredibly popular option for drop shippers. As one of the biggest e-commerce sites in the world, Amazon has lots to offer a dropshipping store.
First and foremost, like eBay, Amazon has a strong brand recognition and huge customer base, which can help you launch your online store quickly and build trust. If you’re new to dropshipping, you may want to take advantage of Amazon FBA (Fulfillment by Amazon) Amazon FBA is a service that allows sellers to store their products in Amazon’s warehouses and have Amazon handle the shipping and customer service. This can be a great way to save time and money as you learn the ropes.
Amazon charges a number of fees that can quickly eat into your profit margin. These fees include listing fees, referral fees, and FBA fees. And, when you sell on Amazon, you have limited control over the customer experience. Amazon sets the prices, handles the shipping, and provides customer service. This can be frustrating if you want more control over your business.
When it comes to returns, keep in mind that Amazon has a generous return policy, which means that you may have to deal with a lot of returns. This can be time-consuming and costly for you as an online business owner.
AliExpress is an online retail platform that is part of the Alibaba Group, one of the world’s largest e-commerce and technology conglomerates based in China. AliExpress is designed primarily for international buyers and offers a wide range of products at competitive prices, often directly from Chinese manufacturers and suppliers.
AliExpress has a wide selection of products to choose from. It’s a great place to find low-priced products. AliExpress dropshipping options can help you to make a profit even if you are selling products with a low margin. There are also thousands of reliable suppliers on AliExpress to choose from.
Because AliExpress is a Chinese company, shipping times can be longer than expected — resulting in frustrated customers and higher rates of return. And, returns can be difficult because you’ll have to send a product back to the supplier in China. This can be time-consuming and costly. Keep in mind that the quality of products on AliExpress can also vary. You need to be careful when choosing products to sell.
Dropshipping is an extremely attractive e-commerce order fulfillment model for many entrepreneurs. It’s easy to start a dropshipping business, with resources like AliExpress, Shopify, and Amazon providing the infrastructure to help you get up and running. However, once you start your online business, you’ll then need to manage returns and customer expectations.
Dropshipping stores have many of the same challenges in handling product returns, plus the added complication of being removed from the logistics process. Dropshipping retailers rely on their suppliers and shipping partners to deliver a product as expected, of high-quality, and on-time without damage. But, when something goes wrong, the retailer is the party in charge of dealing with an unhappy customer. It’s a difficult dynamic for many dropshipping retailers to manage.
Given this discrepancy, retailers that use dropshipping must be crystal clear to consumers what to expect. Write clear descriptions, implement a returns and refund policy, and proactively manage returns with a tool like Rich Commerce. Rich Commerce can optimize returns management, help improve the customer experience, and help merchants keep their costs down.
Learn more about handling dropshipping returns and why Rich Commerce stands out among other software providers.