How To Handle Retail Returns And Establish Online Return Policies

We’re sorry to report that no brands are perfect. Even those closest to perfection are likely to encounter occasional returns. Preparation for those returns is crucial for beauty companies to protect their bottom lines and reputations with retailers as well as shoppers. “It’s a given of business that brands will be asked for returns, exchanges or refunds. They need to plan for it,” stresses Mia Bell, a retail broker with Mia Bell Brands. Planning for hitches includes discussing return procedures with stores, writing reasonable online return policies and adjusting to marketplace demands for product givebacks. Amazon is increasingly establishing return standards, but Amazon isn’t the only player coping with returns. Beauty Independent solicited experts to weigh in on essential aspects of the return rigmarole that brands should take stock of when setting expectations for the inevitable.

Retail return rates
Retail return rates
In traditional retail environments, which span department stores, boutiques and big box chains, return rates in the beauty industry typically range from 6% to 10%. According to data from the National Retail Federation, the average return rate across the retail industry clocked in at 8% for 2015. The holiday merchandise return rate was 2% above the annual rate. Home shopping channel return rates can be lofty, soaring to as much as 20%, but are generally between 12% and %15. Murphy Bishop II, founder of the agency BLEU Brand Development and co-founder of The Better Skin Co., says, “When we do home shopping, into my cost of goods sheet, I put in 15% right off the bat.” While e-commerce purchases overall are subject to high returns — the rate rises to 30% — online beauty product returns aren’t as frequent as web returns in other categories such as apparel. “We have been in Dermstore for two years, and I’ve never had a return,” says Bishop II. “It’s your brick-and-mortars of the world that just hammer you with it.” In the beauty segment, inexpensive color cosmetics are less prone to returns, and skincare devices are plagued with towering return rates. Return rates for “devices are absolutely higher. It comes down to user adaptability, user error, mechanical failure and not meeting expectations,” says Bell. “Three out of the four things brands don’t have control over.”
How to handle retail returns
How to handle retail returns
Brands that don’t budget for returns could find those returns upsetting their balance sheets. Sonia Summers, founder and CEO of retail sales rep specialist Beauty Barrage, underscores returns “must be part of the P&L.” Bell recommends, “When you have sales, put some of that aside for potential returns. You have to do the best you can to keep a reserve for returns because a bad day of returns can set you back as a young brand.” Generally, Summers explains retailers deal with returns by marking down the inventory or requesting a so-called return to vendor (RTV), a term for the process of sending back goods to brands. Bell points out retailers can charge brands for costs incurred for managing returns. “You have to understand returns aren’t a straight dollar for dollar for what they’ve paid. They may take out additional fees for handling those returns at the customer level,” she says. Retailers will ship returns back to brands or opt to Destroy In Field (DIF). DIF refers to retailers disposing of the merchandise. “If you have the option, I would advise don’t take your product back. It’s going to come back a mess,” says Martin Okner, president and COO of hair care brand dpHUE. “It’s going to cost you more money in most cases to rework it and do the QA on it to resell it. Don’t let them ship it back to you. It’s just not worth it.” Bishop II concurs, recalling an experience in which 13 boxes were shipped back to his former employer. “We didn’t have the staff to look at it,” he recounts. “It just sat there for six months because we were like, ‘What are we going to do with it?’” If there’s anything unclear in retailers’ return policies, Bell counsels brands to broach the topic with their retail partners. She says, “It’s a very important question to ask when you’re at the table talking about how your relationship is going to work.”
Deciding on a brand return policy
Deciding on a brand return policy
Return policies for indie beauty brands’ e-commerce sites vary greatly. Hynt Beauty sits on the restrictive end of the return policy spectrum by allowing only an exchange or store credit within seven days of delivery. Herbivore Botanicals is on the lenient end with a 30-day horizon in which customers can demand store credits or refunds in instances of product reactions or defects. The brand stipulates jars or bottles must contain half of their formulas to qualify. Herbivore Botanicals replaces any damaged item that it is notified about within 48 hours of order delivery. Photography is required to provide proof of product damage. To compensate for damage, Bell figures a brand could stretch to a 72-hour period to ensure customers have removed a product from the shipping box. Skincare brands tend to have longer timelines for permitted returns to leave room for possible reactions to products. Pai Skincare, for example, has a return horizon of three months. Makeup brand Clove + Hallow took an easygoing stance on returns by offering exchanges and full refunds within 30 days of purchase dates. “What builds customer loyalty is knowing that you are going to take care of them, and you are going to give them good customer service,” reasons founder Sarah Biggers. “It was about eating the short-term cost for the long-term benefits.” Devin Donaldson, founder of cleaning and personal care brand The Optimist Co., believes brands shouldn’t forget about the consumer connections they’re cultivating in the return process. For damages, “I always write a little note that says, ‘We are sorry you had such a messy experience with us.’ Providing as much great service as you can for them is important,” she says, adding, “I really try to give the customer the benefit of the doubt. Sometimes they can become your best customers down the road because you turned a negative into a positive.” Bell emphasizes brand return policies aren’t etched in stone. “Return policies are consistently being rewritten and enhanced because you don’t know what you don’t know,” she says. “You can start with a policy and don’t fret too much over it because you can change it as you get more savvy with your business.”
Improving in the return department
Improving in the return department
If a brand notices its return rates are inching higher than normal retail return rates, it should take deep dive to examine the problem. Bell suggests a brand have conversations with retailers and shoppers about why returns are occurring. “Really get as much information you can about the user and why they decided to return the product,” she says. “You may discover a formulation issue or a fulfillment issue is causing caps to get broken. It’s going to be the users who can lead you to the answer.” Summers directs brands to identify hero stockekeeping units for retail buyers. “Brands shouldn’t be tempted to call all their SKUs high performers because it will only hurt when the stock doesn’t move. Then, instead of having a great relationship with the buyer, now you have compromised that relationship,” she says. “Be smart and share high performers and, if there are seasonal highs and lows, they will appreciate [knowing] it.” With its tolerant 30-day return policy, Amazon is raising the bar for return policies throughout the e-commerce and retail landscape, and beauty brands could endure heightened return rates going forward. To date, however, there doesn’t appear to have been a jump in beauty product returns. In fact, Summers indicates returns have diminished. “Most retailers are reducing the buy-ins, and that helps reduce the returns,” she says. Bell is hopeful beauty product return rates won’t dramatically swing upward. She says, “I don’t believe there will be a significant increase in returns, but we will see what happens as retailers compete with Amazon.”