Why an effective RMA return process is important for eCommerce retailers, brands and 3P sellers?

eCommerce sales have skyrocketed since 2020, propelled by global lockdowns and store closures due to the COVID-19 pandemic. Online retailers experienced a remarkable shift, witnessing a substantial 26.4% surge in global eCommerce sales. Nearly four years later, the retail and supply chain industries see that this trend is here to stay as the “not-so-new” normal.  

Despite the resurgence of in-store shopping, the online shopping experience continues to be an integral part of our daily lives. At the start of the pandemic, eCommerce consisted of 11.4% of total retail sales in the U.S., and in just a few short years has nearly doubled to 19.9%, as of January 2024.  

This also means that competition in the eCommerce market has grown and businesses need to consistently stay ahead of the curve in order to thrive. When eCommerce retailers set up their businesses, the main focal points are sales and forward logistics. Returns management and reverse logistics are often overlooked or a hindsight tactic rather than a strategic process built into the business model. As consumers continue to take preference to eCommerce shopping, they also subsequently contribute to surmounting return rates with more than 20% of online purchases being returned in 2023. With nearly 72% of retailers acknowledging returns as a pressing issue, building a thoughtful returns strategy has become essential.  

A Return Merchandise Authorization (RMA) is one of the most important parts of a systematic approach to managing product returns in the eCommerce industry. An RMA is a number that is assigned to each item that has been approved to be returned. The RMA allows that item to be returned, so that the retailer or vendor can track the return throughout the process as well as review and assign a specific path to the item (a disposition) for it to reach its final destination in the most profitable and efficient way possible.  

In today's world of consumption where consumer preferences change and evolve amidst unpredictable market shifts, returns management solutions for retailers, brands and 3P marketplace sellers has become a pivotal business decision, impacting a company’s profitability, reputation and customer loyalty.  

Efficient RMA return processes are a cornerstone for eCommerce businesses in today’s oversaturated market. Sellers are tasked with the intricate balance of offsetting processing costs against anticipated recovery value before authorizing a return. Previously, companies may have chosen to handle their returns management process manually, but in our modern era it is extremely inefficient and burdensome for any business to handle returns manually. To survive and thrive in today’s competitive market, it is highly recommended to use a returns management service provider who can offer a cutting-edge returns management and RMA software, or if at the enterprise level, a full-turnkey reverse logistics solution.

In this article, we will delve into the significance of the RMA return process and offer guidance on optimal practices for managing RMAs. Furthermore, we'll explore the functionalities and advantages of innovative RMA software solutions designed to simplify and optimize the entire return procedure. You’ll discover how integrating the RMA returns process into a company’s overall sales operations will provide a strong and lasting competitive advantage in the eCommerce sector.  

Understanding RMA returns and processes

The Return Merchandise Authorization (RMA) process is an essential part of a product’s return journey. An item may be returned by a customer with the intention of receiving a refund, a replacement or exchange, or requesting a repair for a product that is still under warranty. It is important for eCommerce businesses to have an efficient and effective RMA return process in place to enhance customer satisfaction, foster trust, boost their overall operational effectiveness, and increase revenue.

To effectively tackle the economic and operational burden of returns, eCommerce sellers must streamline the entire post-purchase journey, from the initiation of a return to the item's reintroduction into the sales cycle.  

Implementing an RMA system will simplify the returns process and establish a consistent structure for managing product returns. An RMA return process is comprised of several steps. Our returns experts have laid out the following step-by-step explanation along with five best practices to guide you through each part of the RMA process so you can best serve your customers and your bottom line.  

RMA Return Step 1: Retailer and Vendor/Manufacturer Contract & Policies

The RMA return process begins even before a customer makes a purchase. The DNA of a product’s potential return journey is written when the retailer and vendor or manufacturer enter into a contract for the purchase and sale of a certain number of products. Generally speaking, there is a section in each contract which outlines returns and how many items and in what condition the retailer is allowed to send back to the vendor in order to receive credit.  

For example, if a retailer purchases 100 iPhones from Apple their contract could stipulate that the retailer is allowed to get full credit back from Apple on 5% of the overall stock purchased if the iPhones end up being returned or end up being overstock items. The Return-to-Vendor (RTV) policy and contract allows for a certain allotment of returns and there is also a cadence for how often retailers can send the returns. Each contract has unique specifications depending on the retailer vendor relationship and type of product. Thus, the DNA of the RMA process is first planted in the retailer vendor contract, which lies dormant until it is activated by a customer requesting a return.  

RMA Return Step 2: Customer Initiates a Request to Return an Item

A customer may change their mind and want to return a product for any number of reasons such as wrong size, not as described, defective item, change of mind, and the list goes on.  

For the RMA process to be officially triggered, the customer must take action by notifying the seller via requesting a return. This is the first and most important stage of the process. If a customer does not initiate this step, a business cannot process their return.  

The return policy should be clearly communicated so the customer understands the terms and is clear on what can or cannot be returned, as well as how to initiate a return. The customer initiates the returns process via the brand’s website or a marketplace. Utilizing RMA automation ensures that each request is captured accurately, reducing the likelihood of errors and delays.  

A frictionless returns experience is imperative as 84% of online shoppers reported they would cut ties with a brand following a negative return experience. Clearly communicated return policies and having a friendly user-interface are important first steps of a customer’s return experience.  Once the customer clicks the return button, and the retailer’s system accepts that the item is eligible for return, an RMA number is issued and they move on to the next step in the RMA return process.  

RMA Return Step 3: Collect return data via an RMA form

Rather than looking at returns as a problem, eCommerce retailers, brands and 3P marketplace sellers can leverage returns to improve their customer experience and products. The RMA form enables businesses to collect data for return reasons to help strengthen and improve their products and online marketing. By understanding who their customer is and the causes behind their returns, sellers can pinpoint opportunities for enhancement, streamline procedures, reduce return rates, and deliver an enhanced customer experience.  

Important customer and product data to aggregate includes:

• Customer information
• Product information
• Claim information
• Order information

After a retailer collects the above customer and product information, the next step is to find out the return reason. When the customer makes an RMA return request, it is valuable to find out exactly why the customer wants to return the item. While there are a multitude of variables and categories, we have found the following to be the most prevalent return reasons:  

• Not functioning
• Physically damaged
• Accessory not functioning
• Accessory missing
• Not as described
• It doesn’t fit
• Changed my mind
• Wrong item received
• Package never arrived
• Package arrived late
• Item is expired
• Unauthorized purchase

However, something important to keep in mind, according to our data, having custom reason codes based on the category of the item matters. While the above may be the most popular reasons in general for returns, it wouldn’t make sense to offer a customer the option to click on “item is expired” when returning apparel, nor would it make sense to have “it doesn’t fit” when returning a toaster oven. In addition, internal studies goTRG has conducted have also found that more often than not, customers will pick the first reason listed at the top for why they are returning items which leads to tainted data. Retailers should be aware of this tendency and semi-regularly rotate the order the choices are presented, as well as ask follow up questions to ensure they are capturing accurate data from their customers to accurately guide business decisions.  

The next best practice is to get into granular detail with subcategories for each return reason. For example, if someone selects physically damaged for an iPhone, the subcategories would include:  

• Liquid or corrosion evidence
• Damaged ports
• Display / cracked screen
• Physical button issues
• Missing or cracked camera lenses
• Hardware modifications

Another example would be if the customer selects wrong size, then the following subcategories to ask them to choose from would include:  

• Too small
• Too big

Beyond the above multiple-choice, drop-down menus, businesses can use this unique opportunity to engage with their customers and ask for their honest feedback. While honest feedback may be difficult to hear, it is an essential part of every company’s growth process and path to success. Offering an open ended, returns feedback text box can be a powerful tool for improving a brand and making customers feel heard.  

Depending on the size of your shop, it may prove to be extremely cumbersome to look through dozens, hundreds, or even thousands of return reasons and comments individually. We suggest for retailers to leverage and integrate AI tools to collect and read through responses and extract common themes and sentiments to objectively aggregate, analyze and assess feedback to make more informed strategic choices.  

At goTRG, our RMA return software has intelligent capabilities to do even more than just collect the above data. Our ultimate goal is to save the sale. It’s here that we offer the customer more options than just a refund, such as:  

• A direct exchange
• A store credit
• An incentivized BORIS (Buy Online, Return In-Store)
• A partial returnless refund

If shipping, processing and restocking fees are higher than the potential resale value of the item, our recent survey of more than 500 executives from leading American retailers found an increasing number of companies offering more ‘keep-it’ return policies for first-time returns and trusted customers. An advanced RMA return software will have the capabilities to make these types of intelligent decisions on the front-end, as well as through every step of the return path.  

RMA Return Step 4: Approve request and assign automated tracking number

Once the return data has been gathered, retailers have the capability to accept or decline RMA return requests. This can be done manually or automatically depending on a retailer’s preset return criteria or how their returns portal is configured. Based on preset criteria, the RMA returns software must then make an intelligent claim decision based on the retailer’s returns policy. For example, will a refund be initiated right away or once the product has reached the warehouse and been inspected? Will it be a returnless refund? Will there be a product exchange? Having a comprehensive and intelligent RMA returns software in place makes all the difference for both the customer experience and the retailer.  

goTRG's Returns Management SaaS Platform, R1, automates and enhances the returns process for clients, leading to increased operational efficiency, improved customer satisfaction, and revenue growth. While most items in the RMA process are dispositioned to the route stipulated in the contracts between the retailer and vendor/manufacturer (as mentioned above), AI powered software, like goTRG’s R1, offers added benefits to both parties by analyzing all of the factors of the return such as shipping costs, size/weight, seasonality of the item, market demand, resale value, refurbishment requirements, etc. R1 can recommend the most profitable path that the retailer can select for their returns, to maximize the value from every item and increase operational efficiency. This is why it is critical for retailers to choose the right returns management partner who can offer these data-driven, decision-making capabilities.

Once the RMA request is accepted, an RMA return number is automatically generated for each item or order. The customer is then provided with a unique return authorization number, facilitating efficient tracking and management of the returns process for both customers and merchants.

This stage of the RMA return process presents an excellent opportunity to encourage customers to pick a replacement product for an exchange. Customers often welcome this option and a straightforward exchange typically presents a more favorable outcome for retailers' bottom lines compared to issuing a full refund.

RMA Return Step 5: Shipping label automation

The RMA automation enables a seamless labeling process by providing customers with pre-filled shipping labels and clear instructions to reduce shipping errors and increase convenience.  

The shipping label contains a tracking number so both the customer and the seller can track and monitor the product return on its returns journey. With RMA automation, merchants can generate shipping labels, facilitating the return process and ensuring consistency and traceability along each step.  

In addition to traditional shipping labels, QR codes are being used more frequently and can easily be created through the RMA return software, eliminating the need for unnecessary label printing, making the returns process greener and more simplified.

RMA Return Step 6: Warehouse receives the returned product

Once the product is received, the warehouse team carries out inspection and processing. If a refund was the final conclusion of the RMA return process, then after the inspection is completed, the system will initiate a refund. Once the refund is completed, the claim is closed. Customers receive timely updates throughout the process, ensuring they stay well-informed and have a positive post-purchase experience that helps to build brand loyalty. Upon completion of the RMA return process, sellers should leverage the opportunity to send an email or text message encouraging customers to leave a rating and review of their overall shopping and post-purchase experience. 

While the RMA return process for the customer has come to a conclusion at this point, the journey for the returned product is still at its early stages. The seller needs to have a system in place that manages the reverse logistics work flow for each returned product. Reverse logistics is more complex than forward logistics because each returned item has not only accumulated several touches, from the consumer to the shipping carrier to the warehouse team, but many more variables come into play such as the product’s condition, its real time market value, and age (ie., how long it took for the item to be returned), among other factors.  

A traditional warehouse management system (WMS) is great for managing new inventory, but lacks the capabilities to deal with returned products effectively. In most cases, using a traditional WMS system to deal with the complexities of returns results in additional, unnecessary touches, which have a direct, negative impact on the product’s resale value. And, what’s worse, is that most of the time the item ends up in the waste joining the other 4.3 billion tons of returned products that end up in landfills.

The most crucial recommendation for retailers at this stage of their returns management process is to integrate with a reverse warehouse management system (RWMS) that can seamlessly handle the intricacies of a reverse supply chain workflow. A fully comprehensive RWMS system will enable a business to scale easily, maximize profit recoveries, optimize each product’s return path with intelligent decisions in real time, and choose the most environmentally sound course of action.  

goTRG's RWMS encompasses all standard WMS features in addition to offering the most comprehensive reverse logistics and returns management solutions and capabilities currently available on the market. Our RWMS SaaS equips retailers with the intelligence needed to make data-driven decisions at every stage of the return process to ensure each returned item has a second shelf and never has to contribute to the above environmentally detrimental statistic. Our RWMS allows for an effortless integration into any WMS with simple, no-code workflow builders to optimize any job function or process within a warehouse environment. With easy-to-use drag-and-drop software, facility operators can make instant, live updates from any device without the intervention of outside engineers to seamlessly govern all reverse supply chain activities.

To offer a specific example, if our intelligent disposition engine decides that the most lucrative path for a TV, is to refurbish and resell it on a secondary market, the RWMS will assign that television to our “Repair Workstation” module where it will receive nuanced services like refurbishment and repair. Our expert team of returns professionals breathe life back into each product so that they can be sent to a second shelf and achieve the highest recovery. Our value-add services also encompass taking reconditioned product and reselling it on our own ReCommerce sites, as well as 20+ additional secondary marketplaces to ensure our clients get the best possible ROI. goTRG is the only returns management and reverse logistics service provider that oversees a product from the point a return is initiated all the way through to its second life.

Ultimately, goTRG’S RWMS provides clients with the benefits of higher recoveries and faster velocity by continuously moving products through their reverse lifecycle, increasing revenue with disposition intelligence that drives each product down its most profitable path, and warehouse efficiency that minimizes costly touches.

Unlocking competitive advantage through strategic RMA return management

Recognizing that returns management is a pivotal factor impacting profitability, reputation, and customer loyalty, businesses are increasingly turning to returns management software and service providers to enhance the RMA process. To remain competitive and navigate the challenges posed by returns, brands and 3P marketplace sellers must adopt best practices in RMA returns management. These practices encompass customer-initiated return requests, data collection through RMA forms to understand customer preferences, automated approval processes with tracking numbers, shipping label automation, and streamlined warehouse operations.  

Moreover, retailers can leverage advanced technologies and software solutions like goTRG's AI-driven returns management platform, R1, to automate and enhance the returns process, leading to increased efficiency, customer satisfaction, and revenue growth. The integration of RMA automation and innovative software solutions is paramount in today's competitive eCommerce market.

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