It’s a familiar story each year. The holiday season spells good news for sales – but come January, a flood of returns can chip away at your margins. While billions of parcels¹ are shipped across Europe during the peak shopping period, the new year brings with it unwanted gifts and regretted impulse buys.

For small and medium businesses (SMBs), this isn’t just a logistics issue – it’s a test of your operations, your customer experience and your cash flow. So how do you keep momentum going? These practical strategies can help you stop returns from putting a dampener on your profits.

While European online spending reaches new heights over the holiday season,² with that comes an increased likelihood of returns as customers send back gifts or are hit with buyer’s remorse. Research shows that, on average, the number of customers returning online purchases made over the holidays was 17% higher than the rest of the year.³

In this busy, potentially stressful period, it’s key to make the returns experience as seamless as possible. For instance, adopting a clear and highly visible returns policy helps reduce confusion for gift givers and recipients, helping lower the number of customer queries you receive. This in turn frees up your team’s time to focus on higher-value tasks, such as restocking your returned inventory.

• Make the policy simple and clear. Ask yourself, could your neighbour understand it? Is anything left open to (potentially problematic) interpretation?
• Be clear what can be returned and in what condition to help fraudulent returns of worn or used items. For example, try using a term like “The product must be unused, without assembly and in perfect condition. It must include accessories and original packaging.”
• State how long it will take to process a refund or exchange, for example: “You’ll receive a refund within 14 days of returning the item to the same payment method you used.”
• Specify returns deadlines, shipping methods, and any costs to the consumer. If the customer needs to arrange a pick-up or your returns shipping partner offers multiple drop-off locations, provide links with the information the customer needs.

Items purchased as gifts are a key driver in the post-holiday returns rush, so it’s a good idea to be clear about what recipients should do with gifts that weren’t right.

Clarify whether refunds will be issued to the original purchaser or whether the recipient can receive store credit or an exchange. For example, “Once you have sent a gift back to us, we will send the refund through to the person who made the original purchase, using the card or payment method they used.” By offering exchange-only options for gift receipt purchases, you can keep the sale within your business. You might want to consider a term like: “If you wish to return an item that you have been gifted, you will only be able to exchange it for another item or a voucher card.”

A common change that businesses make over the holiday season is offering an extended returns window. Many e-commerce retailers allow customers to return items purchased between October and December within 60 or even 90 days, while others opt for 31^st January the following year as the deadline.

In fact, lengthening the timeframe in which customers can return goods could relieve some of the burden on your business and help to avoid delays in restocking. This is because a short timeframe to return goods could end up putting more pressure on your supply chain when returned items come back to your premises.

Technology can be a real asset here. Consider personalised AI product recommendations based on customer behaviour and preferences, or virtual try-on experiences made possible with augmented reality. These tools are often built directly into e-commerce platforms.

You could also try:

• Encouraging user-generated content and reviews – and using AI tools to summarise them.
• Addressing common customer questions with FAQs, product buying guides and product maintenance tips.
• Optimising your packaging and delivery process so that the correct goods reach your customers in perfect condition.

Returns can be wasteful if they are not sold on to another customer. And with such a sizeable proportion of returned goods disposed of, it’s one of the easier areas to make improvements. One thing you can do is use reusable packing for your shipment, enabling your customer to return the item in the same packaging it was shipped in.

Automating your returns can allow you to focus on higher-value tasks, like building customer experiences that reduce returns in the first place. In periods of high return volume, such as the holiday season, small businesses can look to automation tools to reduce the burden on key parts of the returns process, including tracking, invoices, labels and refunds. For example, supplying pre-filled returns labels that customers can print themselves can be a valuable time-saver for small businesses.

Another way automation can help is by protecting your business from fraudulent returns. Research shows a staggering 99% of retailers in the US, the UK and Australia have experienced some type of returns fraud or policy abuse.⁷ And in the holiday order rush, it can be harder to identify high-risk orders and fraudulent returns such as worn, used or even substituted items.

To help spot red flags and protect your business from financial risk, businesses can look to automated returns tools in e-commerce platforms. These can verify reasons for a return, track return history and identify suspicious order behaviours, so you can concentrate on getting those all-important orders out of the door.

For SMBs, the post-holiday returns process can influence your reviews, and for businesses using marketplaces like Etsy or eBay, your seller rating. Research found that almost half of customers who leave a negative review did so because of issues around getting a refund.¹⁰ By encouraging reviews after a positive return experience you could attract both new and existing customers to hit ‘checkout’.

The inevitable surge in post-holiday returns can be a daunting prospect to SMB owners, but it does not need to overshadow a successful holiday shopping season. There are steps you can take that could help reduce returns or mitigate their impact on your business. With a clear, simple returns policy for the holiday period, and by using technology to improve the shopping experience, avoid fraud or automate the returns process, you could take returns from business headache to competitive advantage. Find out more about returns solutions from FedEx that help streamline the shipping process at any time of year.

Disclaimer: The information provided on this page does not constitute legal, tax, finance, accounting, or trade advice, but is designed to provide general information relating to business and commerce. The FedEx Small Business Hub content, information, and services are not a substitute for obtaining the advice of a competent professional, for example (but not limited to) a licensed attorney, law firm, accountant, or financial adviser.