Handling returns for your dropshipping business in the UK
Samir Kamnani
·July 8, 2024
Want to sell products to customers both throughout the UK and internationally without the hassle of storing and shipping inventory? Dropshipping may be a good option for your ecommerce business—so long as you’ve developed an efficient returns management policy for your shop.
What is dropshipping?
Dropshipping refers to the practise of selling products that you never physically have possession of. As a merchant, you’ll market products in your ecommerce store, but only pay the supplier and place the order at the time you receive a customer order.
Challenges and benefits
To be successful at dropshipping, you’ll need real-time inventory data from your suppliers for all of the third-party products you’re selling, so you know you can fulfil your customers’ orders. It may take considerably longer for customers to receive their parcels than if you had direct control over the process: One leading dropshipping service, AliExpress, says its average shipping time is anywhere from 15 to 45 days.
Although customers traditionally expect shipping within two or three days, they are often less concerned about shipping time when they’re realising a significant savings over traditional retail value. Because your shopfront expenses are very low in dropshipping, you’re able to pass those savings onto your customers.
Is dropshipping right for you?
Dropshipping accounts for as much as 23% of all ecommerce sales, and it’s a viable and profitable business model that merchants can launch quickly.
By choosing trusted suppliers who can provide high-quality merchandise on time, building a marketing strategy for driving visitors to your site, and using an ecommerce platform like Shopify to handle your payment processing and order tracking, you’ll be able to build a successful dropshipping store in virtually any product category, from dog supplies to athletic apparel to Christmas decorations.
Managing returns in dropshipping
Part of delivering a successful customer experience today comes down to the returns process. Customers expect their returns to be easy and cheap (ideally free)—or, if they’re not, the prices should be low enough that they feel like the gamble is worth the risk.
It’s easier to manage the reverse logistics process when you have full control over your inventory in your own warehouse, or are working with a domestic 3PL partner. But how can you make sure that you live up to customer expectations around returns if your business is based around dropshipping?
Develop effective return policies
Before drafting a return policy of your own, it’s important to look at your suppliers’ policies to see what conditions they’ll accept returns under.
Some suppliers may not accept returns at all, or may charge a return stocking fee. They’ll rarely offer free return shipping. They may also have a limited window of time for accepting returns.
When you’re setting up your store in the first place, you should evaluate your potential suppliers’ return policies as a part of your assessment criteria for who to partner with. Once you’re clear on your suppliers’ policies, you can draft a return policy based on their standards. If you source products from multiple suppliers, you may need to develop separate policy standards based on the type of product, or provide exceptions to your returns policy.
Communicate with your customers
Remove friction from the returns process by giving your customers a streamlined experience.Using Loop, they can select the item(s) they want to return, and get details on the relevant return policy at a glance. You’ll be able to easily modify the workflow based on the conditions you’ve set for returns.
Customise your reverse logistics flow
- Consolidate returned products in bulk
Rather than asking your customers to ship back to an international warehouse or supplier, consider accepting return orders as they come in, and then use your bulk rate to ship the items back to the supplier. Handling returns in-house also enables you to inspect items first-hand, and see if there are any quality issues to bring up with your suppliers. - Provide real-time updates on refund status
Because customers want their refunds processed quickly, you’ll likely want to process their refunds once you receive their items, rather than making them wait until you receive the refund from your supplier. When they request a return, send them a timeline of when they can expect confirmation of their refund, using tracking solutions to help them understand where their parcel is. - Set special conditions for bulky items
With larger items, such as furniture, you may want customers to send the item directly back to your supplier, rather than paying large shipping costs twice. Evaluate the costs involved in shipping back overweight products, and develop a policy that includes conditional logic based on an item’s size or weight if necessary. - Offer “returnless refunds” when it makes sense
In cases where the product is expensive to ship back, it may be worthwhile to let the customer just hold on to or donate the item and receive a refund for the cost. After all, in some cases, the cost of processing returns can be between 20% to 65% of the total item cost, and around 11% to 13% of returns cost twice as much to send back as the original purchase price. - Incentivise exchanges
When customers request a return, it can often mean the end of the customer relationship. By offering your customers the opportunity to exchange the item without needing to request a refund, you can maintain the relationship, driving more lifetime customer revenue.
Coordinate with suppliers
Ensure that you gather customer feedback to understand exactly why they’re returning an item – whether it’s too big, too small, the wrong fit, flawed, or defective. Loop’s Insights tool will help you analyse your data to identify trends in your returns data.
This feedback will ensure that you’re able to address issues in a timely manner with your suppliers when necessary, or can make changes to your product description pages for more accurate representation. For example:
- If a product is damaged or defective
In this scenario, your supplier should be on the hook for sending the customer a replacement, if they so choose, or refunding you the purchase price of the item so that you can offer them a refund or exchange. Make sure to track your returns data: Is the defective product an isolated incident, or are you seeing many products reported as defective? If so, the entire shipment may be damaged, and you’ll need to reach out to your supplier to discuss a resolution. - If a product is the wrong fit
Track how often customers request returns because a product is too large or too small. You can use this data to inform your product pages, offering recommendations like “customers say this product runs small, order one size up.” Providing more accurate sizing data will help you cut down on your return rate. - If the customer receives the wrong order
Receiving the wrong order can seriously damage the customer experience, especially given the long shipping times they can expect for a replacement item. In this case, you may wish to offer them additional store credit to compensate for the mistake. If this happens frequently, you may need to evaluate your suppliers and find more reliable partners.
Dropshipping is easier with the right technology
In order to make the most of a dropshipping business model, you need great suppliers, a transparent process, and the right technology. Using an ecommerce platform like Shopify makes it easy to market your products and complete customer transactions, and when customers need to make returns, Loop can help you deliver a great customer experience that helps you keep more customer revenue in the returns and exchange process.Want to test out Loop Returns UK?
In this article
Stay in the loop
Subscribe for product updates and Loop's biweekly newsletter.
Retain more revenue with Loop today
With Loop, your brand can offer everything from refunds to direct exchanges to shopper incentives and more. Even better? These exchanges build your business.