After the holiday shopping rush, it’s time for the next chapter: the season of holiday returns. The goals for a good return policy are to “minimize your cost of processes and optimize the customer service value,” said James Stock, co-director the Monica Wooden Center for Supply Chain Management & Sustainability at the University of South Florida’s Muma College of Business. Here are Stock’s top tips for navigating this period.

1. Have a clear policy in place.

A lot of small businesses don’t specifically state their return processes, and that’s a recipe for headaches down the line. “Clearly outline the time frame, conditions and processes for your return policy,” Stock said. And post them clearly in your store, on your website and even on receipts. The more upfront you are, the fewer difficulties you face later.

2. Consider an extended return window for the holidays.

In non-holiday times, many maintain a 15- or 30-day return policy. This might not sync well with the winter gift-buying time line. “Think about Black Friday sales,” Stock said. “If items purchased during this time are meant for Christmas, that’s over a month away. A 30-day return policy is not going to help very much.” For optimal customer service, he suggested extending the policy to 60 days during the holiday season, a considerate touch that elevates the entire shopping experience and demonstrates a dedication to customer happiness.

3. Make the return process as seamless as possible.

Customers often get frustrated when dealing with returns, especially if they have to wait in long lines or face a barrage of questions about why they’re returning something. Stock explained: “Customers want an easy, friendly way to get a refund quickly.” A smooth and enjoyable experience significantly increases the chances customers will come back, Stock said. “I get coupons from places like Jiffy Lube and other places all the time. I throw them all away. I’ve got this great mechanic who does stuff at a reasonable price and I get it back at a reasonable time, so why should I be going from place to place to get a few dollars in savings at some other shop? He added: “The value of a lifetime customer is immeasurable.”

4. Consider your cash flow needs when determining whether to issue store credit or refunds.

Stock leans toward refunds rather than store credit whenever possible to improve customer satisfaction. Refunds offer instant gratification and can shape significantly how customers view your business, encouraging them to return, he said. Yet, he acknowledges the practical side of offering store credit instead of refunds, particularly when preserving available cash is vital. “You can’t be overly generous to the point where it ends up hurting you,” he said. “You have to make money to stay in business.”

5. Make sure your staff is trained.

The success of a return policy depends heavily on your employees. If they aren’t familiar with the policies, delays at the counter can leave everyone frustrated. Subpar training also can cause financial losses, as employees might approve unauthorized returns unknowingly, creating opportunities for internal or external theft and financial harm to the business.  That’s why it’s best to be prepared well in advance of the seasonal rush, Stock said.

6. Put in place an easy-to-understand internal process for what to do with returned items, and sort items quickly.

Tackle returns fast, Stock said. You don’t want items hanging around — not selling or moving. Here are a few common ways to handle returned items:

• Reselling: If a customer returns an item in good condition — i.e., brand-new, unopened packages — simply put it back on the shelf for resale.
• Repairing or refurbishing: For an item that need minor repairs or refurbishment — think about a customer wearing a sweater for a day before returning it — clean, sterilize and fix any flaws before reselling to ensure it meets quality standards. If you have the capability, do these fixes yourself to decrease costs.
• Liquidation or Clearance Sales: Some small businesses opt to sell returned items at discounted prices through clearance sales or liquidation channels to clear out inventory quickly. The problem with this is that you don’t recoup your profits. They “just give you cents on the dollar,” Stock said.
• Returning to suppliers or manufacturers: Businesses also can return unsold or returned items to suppliers or manufacturers, especially if the return falls within a supplier’s specified time frame for a full refund. When customers return items, “a lot of small retailers oftentimes keep merchandise for longer than they should because they think optimistically that they’re going to sell it,” Stock said, yet you can get the full price back from the manufacturer. Stock believes that for any returned item that’s still eligible to send back to the supplier, that’s the best strategy. It allows you to invest those funds in more promising inventory, maximizing sales potential. “If someone hasn’t bought something in the first 45 days, they’re probably not going to buy it in the next 15,” he said.
• Donation or charitable giving: Items that are not suitable for resale or that are too damaged to be restocked might be donated to charitable organizations or used for philanthropic purposes.
• Recycling or disposal: In cases where items cannot be resold, repaired or donated, consider recycling or disposal as a last resort. Stock said landfills, however, are the worst option. In addition to the environmental implications, “you’re getting nothing for it and you may have to pay tipping fees to the landfill to get rid of” electronics or large items like mattresses, Stock said.

7. Collect data on returns.

“You’ve got to know what your customers want,” Stock said. Analyze customer feedback, understand the returned items and pinpoint the reasons behind those returns. This data holds immense value for making informed decisions in the future. Ultimately, the most effective strategy to minimize returns is to offer exactly what your customers are seeking from the start.