Woman packing up mailing boxes and looking at her phone.
A survey done by FedEx of over 1,500 consumers found that 86% check an online retailer's return policy before placing an order. — Getty Images/Oscar Wong

Following the holiday season, many businesses see an uptick in returns from customers who want to exchange their gifts. However, handling returns isn’t just a post-holiday issue: Small businesses should balance a sensible, cost-effective return policy with modern consumer expectations all year round.

According to a FedEx report, “Building Loyalty Through Returns,” the total returns rate across retail categories reached 16.6% in 2021, including roughly $218 billion in online purchases. Small business owners should learn what customers want from their experience, ensuring that shoppers who return your product ultimately come back in the future.

“A good return policy can make or break an online sale,” said Elizabeth Malone, Sr. Marketing Specialist at FedEx. “It is imperative that retailers clearly define the ins and outs of their expectations for returns.”

Here’s what small businesses need to know about handling the influx of holiday season returns and optimizing the return process year-round.

The state of returns: Customer pain points and expectations

FedEx’s report found that 86% of online shoppers have checked an online retailer’s return policy before placing an order, and that nearly 74% believe that retailers’ returns experience needs to be improved. Over 1,500 consumers surveyed by FedEx cited these challenges as their biggest pain points with the returns process:

  • Paying to ship an item back (26%).
  • Having to drop off their package at a mail facility (25%).
  • Inconvenience when trying to exchange items (23%).
  • Repackaging items (12%).
  • Lengthy wait for a refund (8%).
  • Having to print a shipping label (6%).

FedEx data also found that 96% of shoppers would come back to a business that offered an “easy” or “very easy” return policy, so it’s in a small business’s best interest to craft convenient and seamless policies for customers. Of note, three in five online shoppers prefer to buy from retailers that offer free return shipping, and more than a quarter said the flexibility of a retailer’s return policy matters when choosing where to shop online.

How to handle post-holiday season returns

As your business processes holiday gift returns, here are a few important tips to keep in mind for a smooth and convenient customer experience.

Offer options for dropping off returns

Customers prefer to drop off returns, which lends to an experience that some find more trustworthy and convenient. In fact, a 2023 Gartner presentation reported that 96% of shoppers are willing to travel to make a return.

“We hear all the time that consumers prefer to drop off their return at trusted retail locations, whether that is your storefront or a FedEx Location that can print a label and package it up,” said Malone. “Providing your customers options is key.”

Make it easy to send returns back

Repackaging should also be a consideration for small businesses looking to make returns more convenient for customers. A 2023 Narvar report found that one-third of consumers cited repackaging items as their top frustration with returns.

Malone recommended that businesses explore printer-less and box-less return options through shipping partners like FedEx.

“FedEx has contributed to the success of many merchants and their frictionless returns policies with the easy use of a QR code for no-label and no-box services at 10,000 participating locations, including FedEx Office locations, FedEx Ship Centers, and Walgreens locations,” said Malone.

We hear all the time that consumers prefer to drop off their return at trusted retail locations, whether that is your storefront or a FedEx Location that can print a label and package it up. Providing your customers options is key.

Elizabeth Malone, Sr. Marketing Specialist, FedEx

Have the right technology in place to track returns

Insight and visibility into your returns process, as well as knowing what is coming back to you and when, is vital to your business. It allows you to make informed business decisions about things like staffing, refunds, and resource allocation.

“Knowledge is power when it comes to your returns,” Malone said. “Having the right information at the right time will not only help your business, but it will build trust and loyalty with your customers, as you are able to communicate with them about their returns and issue proper accommodations for their return.”

Use returns to reconnect with customers and improve customer loyalty

FedEx’s returns report indicates that repeat customers spend 33% more than new customers. With the right return policies, small businesses can create good experiences that encourage customer retention. Whether a customer needs to return an item because it doesn’t fit, wasn’t the right color, or wasn’t what they were expecting, a good return is your business’s chance to shine.

“Having a well-thought-out and convenient returns policy allows you to not only make a happy customer, but builds a loyal customer,” said Malone. “It’s a chance to redeem the sale or make a future one.”

Test out your own customer experience to find areas for improvement

One way to ensure efficiency and convenience in your small business’s customer experience is to go through the process from beginning to end and put yourself in your customers’ shoes. Then, ask yourself if this is an experience you would be willing to do again. You can analyze your customer’s experience from the initial delivery, to the unboxing, to the decision to keep or exchange the item.

Malone advised asking yourself the following questions about your small business inventory from a customer’s perspective:

  • Did this item match the description on the website?
  • Is it the right size?
  • Are reviews or size charts available for this particular item?
  • How did the item come packaged?
  • How was the tracking of the delivery?
  • Did it arrive in a timely manner?

Now, imagine the customer decides to return the item. Consider the answers to these questions that your customer will likely ask during the return process:

  • How do I initiate my return?
  • Do I have to print my own label?
  • Do I have to find my own packaging?
  • Can I drop it off somewhere convenient?
  • Is this return free?

As you explore your business’s return process, consider adding a step where your customers can provide a reason for their return, whether it’s a multiple-choice poll or an open-ended comment box when they initiate a return. Malone noted that this can help improve the initial purchase of the item going forward.

“Having the inside scoop on your own customers’ journeys will be important to understanding where there can be improvements or changes to current processes,” added Malone.

Improve your small business shipping and returns experience with FedEx

You may be concerned about the cost of offering convenient return options and free return shipping for your customers when you’re on a limited small business budget. However, working with FedEx provides you with options that don’t have to break the bank.

“We are here to provide you the tools to create a policy and process that is convenient and trusted … like our expansive retail network for drop-offs, free label printing, and QR code use,” said Malone. “These are the perks of doing business with FedEx.”

Ready to optimize your small business’s returns experience? Visit FedEx’s Small Business Center to explore shipping solutions. U.S. Chamber of Commerce members get exclusive access to big shipping discounts from FedEx. Learn more about the FedEx Advantage® program.