Returns in DropShipping: A Complex Problem and its Solutions

As an alternative to classic online trading, DropShipping is associated with a whole range of clear advantages. In the area of returns management, however, DropShippers have to struggle with other problems than conventional shop operators. This article will tell you exactly what these problems are and how to get to grips with them. We will also provide you with tips and tricks to help you keep the return rate permanently low.

Returns in DropShipping: A Complex Problem and its Solutions

DropShipping as a system with optimal risk profile

Those who opt for DropShipping as their trading model usually attach importance to a particularly balanced risk profile. DropShipping is particularly convincing because it is associated with low start-up costs and low running costs. Since large sums of money never have to be invested in the company, the risks in the event of failure are also manageable. This is one of the most important features of the alternative trading model and is therefore considered superior to classic online trading in many respects.

A major advantage is that almost no seed capital is required. After all, it is not necessary to purchase your own inventory. Instead, the connected suppliers take over the storage and shipping of the offered products. Goods costs are only incurred when a certain product has been ordered and paid for by the end customer. You therefore never make any advance payments in relation to your products. In addition, you do not bear any commodity risk: If it turns out that certain articles are not well marketable, then this has no economic consequences for you.

As a DropShipper, you save a lot of money on running costs by eliminating warehouse logistics. You do not need appropriate premises, storage personnel or packaging material. All this means that your monthly expenses are kept within narrow limits. Even if your business is slow to start in the early stages, you will not accumulate large amounts of debt.

DropShippers therefore benefit from low costs during start-up and operation. This ensures manageable risks and a clear superiority over traditional online traders.

Returns put retail companies in difficult situations

One of the biggest problems in online trading is returns. Consumers have the right to return the goods without giving reasons within the cancellation period for purchases on the Internet. This applies even if the products have been unpacked or tried out. The retailer must accept that an article is tested. If the customer is not satisfied, he can send it back.

This situation gives rise to a number of problems. First of all, as a trader, you have to accept afterwards that an income that you have already believed to be safe must be refunded. Secondly, the incoming returns have to be accepted, checked and possibly reconditioned or repaired at great expense. Thirdly, the subsequent remarketing of the returns no longer allows the same prices to be obtained as for the original new product.

In addition, it must be checked in individual cases whether the use of the article by the customer actually corresponded to the legal framework conditions. In certain cases it is possible to charge the consumer a proportionate share of the costs corresponding to the deterioration of the product. This, however, needs to be very carefully examined and then, under certain circumstances, even legally enforced.

All in all, returns in online trading companies therefore represent a very undesirable, expensive and unpleasant situation. Every trader has an interest in keeping the return rate as low as possible. A problem in this context is that around 40 percent of Internet shoppers already plan to return part of their order while shopping. This applies in particular to certain product categories, in particular clothing.

Returns are a special challenge for DropShipping dealers

Returns are a special challenge for DropShipping dealers

For DropShipping dealers the situation does not look any better. After all, they are subject to the same legal provisions as classic online retailers. If a customer decides to make use of his right of withdrawal, he can easily return the ordered goods and reclaim his money.

For the DropShipper there is an additional problem at this point. The classic retailer sent the goods to the customer himself. The situation is different for the DropShipper. He did not ship the goods himself, but instead left it to his supplier. But what should happen in the case of a return? Does the DropShipper return the shipment to the supplier and does the supplier have the right to process the return shipment? This is associated with high costs.

Or will the goods be returned to the DropShipping dealer, who will then take care of the processing? Although this is generally cheaper, it leads to higher work and organisational costs. It is not easy to make the optimal decision here. Let’s take a look at the advantages and disadvantages of the different options below.

DropShipping returns management on your own?

If you, as a DropShipping dealer, decide that your suppliers should take over returns management, this always requires very clear agreements with your supply partners. First of all, they must agree to take over the costly processing of the returns. For this, of course, certain costs are calculated, which you as a dealer must be prepared to pay.

In this case, start by discussing the situation with the various suppliers and fixing prices for the processing. The problem here is that you have to disclose your returning customers to your suppliers. Finally, he should send the shipment to their address. It becomes very difficult when the customer has received goods from different suppliers at the same time. In this case, he must use different addresses for his returns.

A further problem with this type of processing is that you have to trust your suppliers with regard to the evaluation and further use of returned goods. And last but not least, of course, you have to plan for the costs that will reduce your profit.

The alternative is to process the returns yourself. The first advantage here is that you do not have to communicate any of your supplier addresses to the end customer. However, the question arises as to whether your premises allow you to accept regular returns at all. Many DropShippers work from home and have limited options to process returns and store products.

On the cost side, you are probably much better off with this model. After all, you don’t have to pay your supplier for the processing, but take care of the work yourself. You can also resell the returned goods yourself. Platforms such as eBay are ideal for this. The revenues to be generated can well buffer part of the cost of the return shipment.

Take a close look at the question of how you want to handle returns in your drop shipping company. Consider the advantages and disadvantages of the various options and especially the costs involved.

The objective must always be a minimum return rate

The objective must always be a minimum return rate

The best way to deal with returns is to keep their share as low as possible. If you receive only a few returns, the problem won’t hit you as hard. However, please bear in mind that returns to trading models on the Internet are part of the business concept and cannot be completely avoided.

If there were no easy way for end consumers to return goods, only a few consumers would be willing to shop in a web shop at all. The right of return ensures trust and security and makes e-commerce possible in its current form. If you as a dealer are annoyed about many returns, then you can comfort yourself with this thought.

It remains obvious: The fewer returns you have to process, the better for your business model and profit development. With regard to the concrete reasons for returns, there are various possibilities. These are different in all shops, so that you have to deal with the causes of the returns in each case in order to reduce their number sustainably.

Since customers can revoke their purchase without giving reasons, it is sometimes not so easy to find out the causes of the return. But this is exactly where you have to start if you want to permanently reduce the number of returns.

With these tips you can optimize your return rate

Apart from the very individual reasons why a certain customer sends his order back to you, there are a number of standardized reasons for an increased return rate. The following tips and tricks are designed to help you actively reduce the number of returns you receive. We recommend that you work through the individual instructions carefully and use them in combination as consistently as possible. We wish you every success.

Tip 1:
Record returns exactly

Every optimization of your return rate requires that you collect as much information as possible about it. Record every return very accurately. Record data about the customer concerned, the item, the product category, and the actual cost of the return. In addition, you should try to find out about the reasons for each return.

Only through a thorough collection of data and information can you draw accurate conclusions over time about the exact causes of the majority of returns. And these conclusions in turn enable you to develop and implement countermeasures. In this way you get the chance to counter the individual reasons for the returns by your customers and to reduce your return rate permanently and sustainably.

Tip 2:
Remove conspicuous products immediately from the assortment

If you take a closer look at the returns in your web shop, then you will notice in the course of time again and again products that are particularly prone to returns. Do not hesitate too long to remove such articles from your assortment. This does not mean that every return is reason enough for such a distance. However, you should not wait until a product has been returned to you five or ten times before removing it.

At the same time, it is important to intensively deal with these frequently returned products. Ask yourself the question, what specifically leads to the fact that certain articles are often sent back. Is it the product quality, the packaging or perhaps the description in your shop?

Tip 3:
Consistently optimize product descriptions

Practice has shown time and again that returns are primarily related to the fact that the impression a customer gets of a product in your shop differs greatly from the reality of the article. In order to get to the bottom of such causes, you have to deal intensively with the product description when returning the product. It is best to analyse them while the article in question is in front of you. In this way, you can quickly determine which components of the product text cause the customer to develop an inaccurate idea.

Optimize such product descriptions carefully before removing the item from the assortment. Be sure to give an honest description. Do not conceal weaknesses, disadvantages or limitations, but draw an objective picture of the product for the customer.

Tip 4:
Working with unique images

You are probably working with images provided to you by your suppliers in terms of product setup. If these originate from the respective manufacturer, then it is quite possible that the products presented will be shown more positively than they actually are. Here the tools of modern image processing are often used to improve the view of the product a little.

In everyday shop life this can be a cause for the disappointment of the customer. When he looks at the product for the first time in nature, this must not deviate too much from the impression your images have created on the customer. If this is the case, then you should consider making more honest shots of the critical products to show the customer from the start what they are getting into with their order.

Tip 5:
Optimize delivery times and packaging

Now we come to a point that many traders do not think about sufficiently. A possible reason for a high return rate is too long delivery times or unprofessional product packaging. If the customer waits significantly longer than expected for his order, he begins to think critically about his purchase on his own. This often leads to an increased willingness to return. The situation is similar for sloppy or dirty packaging. These generate fundamental mistrust and also increase the risk of returns.

As a DropShipping dealer you have no direct influence on delivery time and packaging as both are the responsibility of your suppliers. This makes it all the more important that you strictly control your supply partners and react immediately to critical feedback from your customers. In this case, the supplier must be asked to act better in the future. If this does not help, you will have to search for alternative suppliers.

Tip 6:
Avoid certain product categories

Let us come to the end of an area that is also associated with an increased return rate. We are talking about certain product categories, which stand out due to the large number of returns. In the very beginning, it is essential to mention the clothing sector. It is absolutely usual for customers to order items of clothing in different sizes, for example, and to know from the outset that they will be returning at least one product from the order.

As a cost-conscious and success-oriented DropShipping dealer you should avoid such products. If possible, then it makes sense not to include such susceptible product categories in the assortment in the first place. In addition to the known return categories, you will find additional categories through your own observations, which are associated with many returns and from which you should better separate early.

With these tips and tricks you can manage to keep the return rate permanently low. If you get this under control, as a DropShipper you have already taken an important step towards success. There’s still nor other ways to increase drop-shipping potential. You can find out in this article.

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