How to write a clear and fair returns policy in 2024

Creating and applying a returns policy helps businesses that sell products to win and retain customers.

A clear and fair returns policy motivates customers to buy with confidence, secure in the knowledge that they will be treated fairly if there is a problem with their purchase.

A returns policy also protects businesses as well as consumers, because it provides clarity for both parties about how disputes, faults, damaged goods, and other scenarios will be treated, for both in-store or online purchases. This makes resolutions easier to negotiate for businesses – saving you time and money on the administrative tasks needed to resolve issues.

This guide will outline what a returns policy is, why a business needs one, and what it needs to include, and explain how to write, promote, and maintain a returns policy.

What is a returns policy?

A returns policy is a list of rules telling customers how to return and exchange products bought from a business. It sets out what can be returned and for what reasons, and the time frames in which returns can be made after the original purchase.

Returns policies are often linked to shipping and handling policies. These policies should support and inform each other to maximise efficiency and increase clarity for customers.

A clear, well thought out policy can help improve sales and profitability – and reduce the likelihood of customers initiating chargebacks and other payment reversals – but if it’s too complicated or restrictive it can put customers off, so it’s important to research and structure it carefully for your business and customers to get the maximum benefit.

A returns policy can also be named as a returns and refunds policy, a returns and exchanges policy, or a shipping and returns policy.

Why does your business need a returns policy?

Although a returns policy is not required by law in the UK, refunds are legally mandated if a product is faulty, not as described, or does not work as it should.

This law means a viable, fair returns policy is a vital ingredient for a business’s relationship with its customers because it:

• Builds trust between the business and its customers
• Creates a flexible structure for returns that helps retain customers
• Sets realistic customer expectations
• Increases customer satisfaction
• Gives a business legitimacy
• Protects a business from fraudulent returns

It also sets out the rules for when, how and under what circumstances customers can return goods. This can help you spot a fraudulent return, for instance, if someone is trying to return an item that is not faulty – if this goes against your policy – or if the item has been shoplifted. The returns policy can include information clauses allowing you to refuse a return or take legal action against fraudulent returns.

What does a returns policy need to include?

A basic returns policy lets customers know whether you accept returns, and offer refunds, exchanges, or store credit, and under what circumstances.

It should be brief while also including all the relevant information, written in plain language, clearly formatted, and easy to understand.

It should also indicate:

• How a customer starts the returns process – should they email you first, or fill in an online form?
• Where customers should send or take their returns to
• How long a customer can expect to wait for a resolution
• What products are eligible for returns, and which are excluded
• In what condition products need to be returned to you – should they be unused?
• What fees customers have to cover for returning items – should they pay for return postage and packaging, for example?
• The time limit for customers to submit a return – does this run from the date of purchase or delivery?
• How you will reimburse or exchange items with customers
• Whether there is a separate returns process for lost or damaged items

Another aspect to consider is how to deal with international sales. With high shipping costs, international postage will affect your profitability, so offering a full refund can be more cost-effective than an exchange. It is also important to consider the different laws that apply to your international customers – for instance, unlike in the UK, in the US refunds and returns are not legally required.

You will also need a specific returns and refunds policy for digital products, for instance, when a download link doesn’t work. Most digital services’ policies include information about this. For instance, software provider AVG expects customers to log in to their website and apply for a refund or credit.

How to write a returns policy

Initially, you must consider the nature of your business, how purchases are made, and common issues before formalising a returns policy. The policy should be relevant and deliver the required outcomes for both you and your customers.

This allows you to offer consistency in dealing with returns, rather than tackling them on a case-by-case basis, which is less efficient and more expensive.

Startups don’t have to start from scratch when it comes to creating their own returns policy, instead you can follow a template. There are many examples of free online policy template generators online, specifically for ecommerce businesses or for shops that sell online and at a physical store. Analyse the types of returns policy competitors in the same sector use to find out the common pain points, how they structure their returns policies and to ensure you cover the areas your customers expect.

Ensure the template you use allows for a bespoke returns policy that’s relevant to your business. Always write original content, and ensure the policy is personalised to your business. Include FAQs at the end to cover anything that’s not in the policy, or to provide clarification.

Write clear, succinct, and brief paragraphs covering the points we’ve listed in the section above. Ask your customer service team what questions they are most commonly asked about returns and ensure these points are covered.

If your business is not able to financially support a free returns policy, then flex it so you can treat customers fairly but sustainably for your business. Once published, a business must adhere to its own returns policy.

If you operate an ecommerce business that sells through Amazon or other marketplaces, they will have their own returns policies that you will have no control over. You should inform customers of this in your own returns policy.

Returns policies: examples and templates

All businesses need a returns policy – from startups to multinationals – whether they sell through a ‘bricks and mortar’ shop, online, or via a combination of both.

There are many different examples of returns policies out there because businesses operate in different ways, serving specific demographics of customers, and selling different products – all of which will influence their returns policies.

Let’s take a look at some examples:

• High street clothes retailer Next used to have a generous returns policy whereby customers with an account could order multiple items, try them on, and send back what they didn’t want to keep for free. This policy was amended last year due to the cost for the retailer. It now charges customers £2.50 to send a return, or customers can return them free to a store.

• Electrical and computer retailer Currys’ returns policy offers an exchange or refund for faulty goods within 30 days of purchase or delivery. For online purchases, customers can return items within 30 days even if they have opened it for inspection. To obtain a full refund, the product must be returned as new and in a resalable condition.

• Interflora sells perishable goods. Therefore, it does not accept returns. Its returns policy allows customers to cancel and return an order for non-perishable goods within 14 calendar days after receiving the goods. Customers have to cover the costs of returning the goods.

Startups and SMEs have fewer resources than businesses like these to cover the cost of returns, but because returns affect customer retention, they must still create clear and fair policies.

Companies we’ve ranked in the 2024 Startups 100 Index are looking to strike this balance. For example, KatKin, number four on the latest list, sells premium cat food. Although it is a perishable good, KatKin’s returns policy does accept returns and does refund if specific conditions are met.

How to promote your returns policy

Returns policies should be easy to find as well as easy to read, so display them in areas the customer visits, either online or in-store when they are looking for information on returns policies.

It should be prominent on your website or on your app (if you have one), and be included on payment screens and checkout pages, in the company FAQs, and on any other website policy pages. At a shop, it should be displayed near the till, and at the entrance and exits.

The returns management process needs to be clear so staff can follow and apply it, and customers can easily understand it. This reduces disputes linked to the returns process.

Bespoke returns management software can help to quickly process refunds from credit card reader payments and digital payment options such as PayPal. Some businesses use a logistics management company to help resolve returns and shipping issues, and to decide which items can be resold.

When to refresh your returns policy

A returns policy should be reviewed every quarter, but a business may also need to update it when the rules change for a period, for instance, during a sale.

Any change needs to be communicated effectively to staff and customers. This could be via email, social media, text messaging, or through a notice on your website’s homepage.

Conclusion

A returns policy is a valuable tool to increase sales, retain customers, and improve your business’s reputation. It needs to be clear, fair, easy to apply, and have some flexibility.

Creating and applying a clear and considered returns policy can build trust with customers and instil confidence in them when they buy from your business. It can help businesses win and retain customers and improve profitability.