Episode 49: How to Handle Drop Shipping Returns


Charles:            In this episode of Business of eCommerce, I talk about how to handle fraud shipping returns. This is the Business of eCommerce, episode 49.

Charles:            Welcome to the Business of eCommerce, the show that helps eCommerce retailers start, launch and grow their eCommerce business. I’m your host, Charles Palleschi.

Charles:            I’m here today to talk a bit about the topic of how to handle returns for drop shipping, for drop shippers, anytime where you’re as an eCommerce retailer shipping products where it’s not coming directly from your warehouse. It’s coming from a third party warehouse. What’s the best way to handle those?

Charles:            I found an blog [inaudible 00:00:46] actually that given an outline that I wanted to kind of start with, and I kind of go into each topic a little bit, give my own kind of comments on it. I thought it was a good place to start, so I’ll also link to that in the show notes, that blog [inaudible 00:00:59] which was great.

Charles:            First, two parts. Let’s talk about what’s going on, what the issue is. So, you’re a drop shipper or you work with some manufacturers, that sort of thing, ship directly from their warehouse, however you want to define it. But essentially, when you’re shipping product, it’s from a third party. They have a return policy. It’s not your return policy. What do you do? This is a totally common issue. Lot of folks have this.

Charles:            What also makes this a bit more difficult that you have to always think about is you might ship from multiple suppliers, so it’s not just one, one warehouse, one supplier, multiple. So, how do you handle that?

Charles:            First, let’s say two things. First part we’ll talk about how to actually get ready for it ahead of time, how to start, and then when it actually happens, how to actually handle the returns themselves.

Charles:            So, how to [inaudible 00:01:54]. First, talk to each supplier and learn their policy. Each supplier is gonna have a different policy, right? Where some might allow 90 days, others 60, others 30, some maybe not at all. Some are gonna have a restocking fee. Some of them who pay shipping costs, also that might depend on if the product was defective, if it was the wrong size, damaged, there’s a lot of different things. You need to go through each one of their return policies before you even start down this road, just to get an idea of what are you working with here and what are they willing to do for your as your supplier.

Charles:            Once you know that, then it’s important to understand your return policy. The goal here is you’re working with multiple suppliers, let’s say. It could be simple. You’re working with one. If you’re working with one, we’ll do the simple case first, you might honestly might just want to copy their return policy. That’s the easiest, right? They offer 30 days, you offer 30 days. You know it’s in that window, easy, right? If there’s a return, can you get the return? It’s the supplier’s return policy, yes. Very easy answer.

Charles:            But what happens when you work with multiple suppliers? The goal here is there’s some wiggle room and it really depends on how you want to handle this as a retailer, where you’re comfortable, but the goal here is to try to come up with your return to closely merge this and it ends up being kind of the lowest common denominator of all their return policies. For example, if one offers a 90 day window and another one offers a 30, you might only want to offer a 30, right? Cut yours down so that you know any product sold in your stores will be covered under your manufacturer return policy.

Charles:            If you want to go over, now you’re in the gray area. It’s up to you. There might be some manufacturers that offer 15 day or shorter, so once you get below 30 it starts to get a little dicey, so you do want to think about this, think about your customers, and know that ahead of time. Plus, things like who pays the shipping costs if it’s just a wrong size. Let’s say the customer gets it, and they just didn’t like it. Does the manufacturer pay? Does the customer pay? Who pays? You want to build that into your return policy ahead of time so you’re not dealing with that when it happens. You want to already know, customer service knows, so it really helps to smooth the process, right? Once you have your return policy tight and you know it’s gonna be covered under the manufacturer’s.

Charles:            One thing you don’t want to do up front, though, in your return policy is provide a return address, right? Because there might be multiple manufacturers, and you don’t want to tell them at the beginning, hey, here’s my place of business, because it might not be going there. That’s not always the case, right? You don’t want to provide in your return policy. You want to say, “To get a return, email us at returns@whatever.” That way, your team, the customer service teams, looks up the order number, they have understanding at that point which manufacturer was it shipped out from, and now they’ll start the process based on that manufacturer’s return process. It’s something you don’t want to give them ahead of time because it’s manufacturer A, it’ll go to a completely different place. It might even be a split order that five products in the order, they want to return one, so this is something that customer service is gonna need to work through. It’s honestly more complicated with drop shipping just because it’s not a one to one. You do want to know that up front.

Charles:            You also want to let them know that they need to initiate the return. They can’t send the stuff back to you, and there has to be a tracking number, and this has to be a formal policy where if you want to return this, email us at tracking, and what happens next, and it’ll kind of walk them through it. Because this happens where you generate the shipping label, you pay for it, you send it to them, but that has to be clearly defined and at the end of the day, you always want to make sure there’s a tracking number, right?

Charles:            What you don’t want, and this will happen, people just email and say, “Hey, I returned it 30 days ago. Where’s my refund?” First time you’ll never talk to them, you won’t even know they want to return it. This is the first [inaudible 00:06:14], right? You didn’t receive anything, you don’t know which manufacturer it came from, and some say “Well, there was so and so address on the label. I just sent it back to that.” The manufacturer got it, they have no idea where it even came from. It’s just a ripped box, so you want to clearly define, “Hey, you want a tracking number, you have to email us it first. This is our policy.” You really want to do that up front.

Charles:            Now, let’s actually talk about how to actually handle the returns themselves. The first, why are the products getting returned, right? Three common reasons. They ordered the wrong item, so wrong size, wrong color, whatever. Very common, and with that typically, it’s the end user paying and some people might not do this, but this is up to you. A lot of times it’s on the buyer, they pay if they ordered the wrong thing.

Charles:            Next, and this is a little dicey with the manufacturers, the item didn’t match what they thought it was supposed to. So, they said, “Hey, it was supposed to be this item, and it came, it’s completely not that item.” Here’s the difficult part with drop shipping. You’re not 100% sure, right? If it’s a manufacturer you work with, you sell a ton of these products, you know what it looks like most likely at this point. But let’s say it’s this manufacturer you haven’t done a lot of work with. Maybe it’s some part, some obscure type of product, SKU you’ve never sold before. You don’t know actually what it looks like, so it’s actually hard to tell.

Charles:            With that, one little tip, have them send it back to you. That might be your quality control. First, understanding how does it look? Does it look bad, does it look good, should you stop selling this? Have an understanding of that, and the easiest way is to have them just send it to you. If it’s something they’re complaining, “Hey, I ordered this microphone stand. It’s really flimsy. It doesn’t work well.” Is that true? Maybe you don’t want to sell them anymore. Maybe that is true and that’s gonna be something if you actually start promoting those, you’re gonna drowned with returns. You might want to go back to the manufacturer and have a talk with them and say that, but that’s something it’s better off if you look at it. That’s a common issue.

Charles:            The other thing, and this is the easiest one to handle, it’s defective. They went, they tried to take out a package, just broke in their hands, complete damaged product, that’s your fault, manufacturer’s fault. Typically the manufacturer will just pay for that. Right? It’s pretty obvious. It’s either product’s defective or it was damaged in transit, and that usually [inaudible 00:08:47] some sort of UPS, FedEx insurance, a claim needs to be filed with them, but a lot of times they do know about that because if it is damaged in transit, the shipper needs to initiate the claim, and the claims goes completely [inaudible 00:09:04]. There’s a whole other process.

Charles:            You want to understand was it defective, like they started using it and it broke? Or was it damaged in transit? I’ve seen that happen before, the product showed up and it just got ran over by the truck, and half the box was crushed. That immediately, manufacturer typically files a claim with the shipping company. UPS, for example, and it just starts happening. But then that’s up to the manufacturer to do. You want to understand that, at least.

Charles:            One important thing to note, I thought this was an interesting tidbit, you don’t want to tell a customer, “This was drop shipping. This was a different manufacturer, a different,” you don’t want to explain to them the whole story. Honestly, it’s not their problem and they don’t care. They bought something from you. You’re the retailer. They see the retailer as one company, one organization. Trying to explain to them, “Hey, we ship from different manufacturers and different warehouses.” Don’t bring that all into the mix, honestly. It just confuses things. It makes people frustrated. They don’t want to hear it. They just want to hear, “Hey, here’s the return policy. We have your covered. This is what to do next.” Just don’t bring them into explaining what exactly happened.

Charles:            The thing to note about sending it back is some folks do this every time. They have returns sent to them, or even just for the first time they’re selling a particular product so they get to have eyes on that product. I’ve also seen all returns go to one warehouse, and they’re all stored there, and then resold from that warehouse. Let’s say it’s a wrong size. Depends on the technologies on the backend. We have some customers who do this. Then they have their own local inventory, and it goes into their inventory. Maybe it’s a random shirt, a size XXL. You’re not gonna sell any for the next two months, but it’s fine. It just does in the inventory, and now it’s sold out of your local warehouse because you might also get dinged with a restocking fee and all things like that, and if you can avoid that and avoid passing it on to your customer, all the better.

Charles:            Some folks first have it for those reasons, and also for quality assurance. You want to be checking the quality of the manufacturers, of the products you’re actually selling, right? Where those products are coming in. You might have never laid eyes on them, never had your hands on them, never touched them. You actually want to get them and understand is this a good product? Is this something I want to sell more of? Or is this kind of a not very well built item. Maybe this isn’t something. Maybe the manufacturer doesn’t do a good job. It’s nice to have at least the first round sent to you, so I always recommend doing that and if you have a place to store them and send a few more, all the better.

Charles:            How to actually run through the return process. I thought this was good, this little outline here. First, the customer needs to request a return to you. They initiate a return, honestly just do it something basic. Email returns at your email address, to start. There are some return management systems, depends on your volume. Until you get over some pretty decent numbers, you don’t even need to look into this. Unless you’re really looking at tracking this and pushing them back into inventory, you’re doing some big number return each day, just have emails returns at.

Charles:            You then generate a return authorization number, so you give them the number and tell them what to do next. That’s the point where you make the decision and say, will this get shipped back to us? Will this get shipped back to a manufacturer? If so, which manufacturer? You might need to file an equivalent return authorization with that manufacturer, if you decide to go to them. So, you want to do this all up front because ahead of time, you might need to get that from the manufacturer. They generate the label. They generate the return authorization number. You forward that to the user.

Charles:            First, if you’re having it go to your warehouse, you’re gonna generate the label, it comes back to you. It really depends and you want to know that up front. This is the part of the process that you want to understand for these products, these go to manufacturer A, this other set, manufacturer B. If it’s manufacturer A, here’s how you start the return process. That needs to be documented so that anyone can follow it, because these are coming in at all different times. Typically something customer service handles. They know, hey, they can look through whenever. It’s been within 30 days, that’s the return window. It’s from manufacturer A.

Charles:            Okay. Here’s how to file a return with manufacturer A. You first, same deal, generate an email. Email goes out. Give them the item. Give them the order number. They then file an RNA return, just return authorization number. Send that back to you. They might generate the label, but manufacturer B might have a totally different process. You want to document that so that someone in customer service can go through that and they don’t need to ask. It’s not a process of what do we do, what do we do, and we’re freaking out when it actually happens. You want to know ahead of time. Hey, we sold this. It’s from this manufacturer. Here’s where it’s going. Here’s how to handle it.

Charles:            Then you have to decide, and this is also part of your return policy, also depends on the issue, does the customer receive a credit? Do they receive a new item? Do they receive their money back? That depends on the case. You almost need a chart of understanding, hey, if it’s defective, you can do anything you want, right? At that point typically what people say is money back, item back, we’ll basically, whatever you want. This is the wrong size. What happened then? Do we just not like it? What happens then? Things like that.

Charles:            Typically, once you receive the item, or once the manufacturer receives the item, they’ll let you know, “Hey, we received it. We’re crediting you X.” At that point, you then credit back the buyer for their credit. You have to kind of flow through this process. It becomes something you have to track.

Charles:            There are systems that help you with this, but honestly unless you’re doing hundreds of these a month even, Excel is totally fine. Order number, status, manufacturer, and just kind of run through it in Excel. Keep it in a Google doc so everyone has access to it, and you just understand here they’ll scan returns, here we’re waiting for it, here’s ones we paid out, here’s a receipt. It was paid. Here’s a transaction number. Just so you understand, you’re not double paying people.

Charles:            If somebody says, “Hey, where was this?” You know the tracking number. You can look that up, and it’s all kind of stored, and you want this to be something accessible by all teams so that if somebody calls in also on the phone and says, “Hey, I returned this 25 days ago. Where’s my money?” You want to know, oh, “Give me your order number. Great. Here’s the tracking number. Great. Oh, that’s at the manufacturer. The manufacturer hadn’t triggered that return yet. We’ll let you know.” Call up the manufacturer, do the same with them. You’re basically, you’re now their customer, right? Now you’re following up with their manufacturer, their drop shipper. “Hey, this was returned. Here’s a tracking number, here’s the order number. What’s the status?” “Oh, sorry, we screwed up. We’ll do that today.” Then you can get back to your customer.

Charles:            You want to track this somewhere, and honestly, unless like I said you’re doing hundreds of these, just stick with a Google doc. Keep it simple, and that’ll really just streamline the process.

Charles:            Keep these documents also somewhere publicly accessible. Google doc, Dropbox, any of them where the whole team can understand here are the return policies for all the manufacturers. Here is the process on if you get it from manufacturer A, email this address. Call this number. Go on the website and fill in this form. There’s all different procedures, and you want to have that mapped out ahead of time so then when they crack open that order, understand they just go down a flowchart and the decisions are already made.

Charles:            That’s really the key here, that you don’t want to make these decisions during the return. This is the point where somebody purchased from you, they’re unhappy, something went wrong. Maybe they had a vacation planned and they were planning on using this thing they purchased from you on vacation, now that’s screwed up. Maybe they had to run to the store and purchase another one. Something’s gone wrong at this point, and the goal, if you want repeat business, is to just get this done as quick and as cleanly as possible, and just try to help these people solve their problem. Having this mapped out ahead of time really, really helps with that.

Charles:            Hopefully that helps. If you have any questions, email me at Charles@BusinessofeCommerce.fm. Also reach me on Twitter @CharlesPal. Happy to answer more questions [inaudible 00:18:07] on the show, and we’re bringing some guests back on next week, so hopefully if you like this format, if you like the format of the guests, let me know. Happy to do some of these, happy to do some more guests. But let me know what works for you.

Charles:            Thanks. Have a good one.

Sponsored by:

Spark Shipping – Dropshipping Automation 

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