Find out what a returns policy is, how to write a returns policy, and why your business needs one to win and retain customers when selling online or in-store.
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.
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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 is too complicated or restrictive, it can put customers off, so it is 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 providerAVG expects customers to log in to their website and apply for a refund or credit.
The consumer laws businesses must follow are the Consumer Rights Act 2015 and the Consumer Contracts Regulations 2013, which cover online returns. These two laws cover the return of unwanted goods bought online, and a consumer’s right to return faulty goods bought online or from a store.
According to these laws:
- You must accept a return if an item was faulty when it was sold, or is not as your business described it.
- You must cover the cost of the return of a faulty or not-as-described item.
- Items bought online can legally be returned for any reason, not just if they are faulty.
- Online shoppers are entitled to a 14-day grace period in which they are allowed to change their mind and initiate a return.
You must adhere to these laws, but many businesses go further to improve customer relations, build trust, and provide their customers with more flexibility by following a ‘goodwill’ returns policy. For instance, some offer longer return windows and allow customers to change their minds and return products for any reason, not just when they are faulty.
Businesses are not legally required to have a returns policy unless their policy offers more than their minimum legal requirement, but it is good practice to have one in place for the sake of clarity and transparency.
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 do not 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.
Here are 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 did not 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.
Mary Jane Pettit is the founder of Pioneer Clothing, an online-only business that has recently launched and has been through the process of designing and implementing a returns policy.
Startups.co.uk spoke with her to find out what has informed their policy, and how they manage customer expectations.
How does Pioneer Clothing deal with refunds and returns?
“We have an agreed returns policy that states that unless a product is faulty or tags have been removed, full returns will be processed once garments have been received in the original packaging.”
How does your business manage returns made when a customer changes their mind, vs. returns made when there is a fault or issue with the goods sold?
“We understand that customers will change their mind from time to time and we are happy to issue full refunds if the items are returned, unworn and with the tags still attached within 14 days.
“All our clothing is quality checked so it’s unlikely there will be a fault but should one be identified, we escalate this internally, with our logistics supplier and with the customer to identify where the fault may have arisen. We would send out a replacement as soon as we have identified the problem or a full refund if the fault lies with us.
“We have a free customer service email that guarantees a response within 48 hours and customers are encouraged to contact our team in the first instance.
“All faulty goods are sent on to the Cowshed Charity so that we keep garments circulating for as long as possible.”
Do you only accept returns with a receipt, or do you accept returns if you can see some sort of online audit trail?
“We accept returns with a receipt and also via the online audit trail.”
Are there any types of goods you don’t accept returns on?
“Undergarments cannot be returned and this will be the same policy when our swimwear is launched later this year. Also, our seamless range, which changes shape to fit a specific body type, cannot be returned if it has been worn a few times which will be evident due to the nature of the material.”
What do you find are the biggest challenges around returns and refunds for your business?
“Getting used to volume returns is part of the retail industry, as customers buy in lots of items from various retailers and use the comfort of home as a dressing room.
“As a sustainable business, however, we hope our customers buy with purpose and the planet in mind and not as a fast fashion fix, so we hope volume returns won’t be an issue.
What is the most important piece of advice you could impart to other small business owners regarding this issue and consumer rights in general?
“Ensure everything is documented in writing and revisit it continually to eliminate any ambiguity regarding returns. Keep the language simple and clear, and have a legal specialist review all documents.”
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.
Benjamin Salisbury – business journalist
Benjamin Salisbury is an experienced writer, editor and journalist who has worked for national newspapers, leading consumer websites like This Is Money and MoneySavingExpert.com, business analysts including Environment Analyst, AIM Group and written articles for professional bodies and financial companies. He covers news, personal finance, business, startups and property.
