How growing brands can build a returns process as sophisticated as Amazon’s: An expert guide

Thanks to Amazon nearly perfecting convenient returns for their customers, fast refunds and lenient policies have become the norm for ecommerce. As a result, smaller brands must rise to meet this higher standard even as their business grows and returns become more difficult to manage. Meanwhile, their most significant investment — inventory — becomes a liability.

As CEO of Chubbies Shorts, Kyle Hency saw a tremendous opportunity: transforming returns management into an asset that grows revenue and customer satisfaction.

We sat down with Kyle, now CEO and co-founder of GoodDay Software, to discuss how brands can soothe the headache of managing returns and turn the process into a competitive advantage.

The power of getting returns right in today’s marketplace

Efficient returns processing is a powerful growth lever for any business. By focusing on speed and accuracy, you can get resellable items back on the shelves faster, reducing the time inventory sits idle. For instance, Capacity, a 3PL servicing the apparel industry, sped up its return processing by 300%, tripling its customer base.

As your largest investment, optimized inventory should be a priority. However, many brands focus on refining their marketing spend or developing new products instead. Kyle says the problem with that strategy is these investments rely on factors that are largely out of your control, such as CPM.

In contrast, finding value from your returns is within your grasp — if you can get a handle on processing them.

Smaller brands often face an uphill climb when trying to align their returns process with customer expectations — a feat even more challenging for Shopify brands using 3PLs that rely on manual processes.

While visiting Chubbies’ 3PL partner a decade ago, Kyle recalls watching the returns processing folks digging through a thick binder of SOPs to understand how to handle returns for Chubbies’ 4,000 styles. “The steps were so manual that there was no chance it would get more efficient with time,” he said. “We didn’t get any useful information for the brand because we had no visibility into what’s happening.”

Brands now have access to new technology and data for faster (often automated) and more profitable returns processes. This creates a significant advantage in today’s business landscape, where returns account for around 20% of total sales, a figure which Kyle says can sometimes hit 40%.

While returns processes have transitioned away from manual operations in favor of more streamlined, profit-driven solutions, the current market pressures merchants to turn assets into cash even quicker. This causes many brands to look for new ways to shore up profits.

“It's not just that these are inventory investments and potential revenue — an asset you could turn into revenue — it's that in many cases, returns account for 40% of all of sales. So it's not an immaterial amount of the business.”

How Amazon’s return process stands out

Amazon’s customer-focused returns processing has become the gold standard for ecommerce by making it as easy as possible to return items. It is so easy that many customers now choose Amazon over Shopify brands for its convenient return process. This forces Shopify brands to look for new ways to profit from their returns — like charging customers for restocking or shipping fees.

Kyle estimates that up to 60% of brands require customers to pay for returns in some form, something he says was unthinkable 10 years ago. Back then, offering free returns was seen as a competitive advantage despite increasing customer acquisition costs (CAC). Now, merchants are changing their approach to balance customer satisfaction with profitability.

Brands now realize that it’s not just free returns making Amazon stand out. It’s the overall customer experience, which includes three core elements:

Dedicated returns facilities: When an item is sent back to Amazon, it is consolidated with other returned items in a dedicated returns center. These sites process the wide variety of products sold on the marketplace, from clothing and electronics to furniture and appliances.
Hands-on inspections: Inspectors carefully assess each item’s condition and categorize it into one of four conditions: Like New, Very Good, Good, and Acceptable. This hands-on review ensures resellable products return to stock with a clear understanding of their current state. Items not meeting reselling criteria are often donated or responsibly recycled, ensuring minimal waste.
Efficient processing: Perhaps most impressive is Amazon’s balance between speed and attention to detail. Standardized processes ensure that items are evaluated consistently every time, no matter the merchant or product type. This lowers the costs of returns and leads to faster refunds, which delights customers.

Meeting Amazon’s standard without extensive resources is the primary challenge for smaller brands on platforms like Shopify, which lack the tools to boost return management. As Kyle points out, “With those smaller businesses, having a tool that can maybe liken their returns process to something larger like an Amazon is crucial.”

3 tips for improving reverse fulfillment

The good news is you don’t need Amazon-level resources to model your returns process after theirs. You simply need the right tools for the job. Kyle recommends prioritizing three strategies to improve inventory management and returns processing:

1. Use returns processing software

Great tools make for great processes. Kyle recommends using an RMA like Loop and an RPS like Two Boxes to automate returns processes, reduce manual errors, and speed up restocking times. These tools automate the returns process, reduce manual errors, and speed up restocking times.

RPS simplifies everything, Kyle says, and can boost efficiency by up to 50%. It helps your 3PL’s warehouse team assess returns more effectively by creating a simple workflow for determining whether an item is resellable. Plus, a great RPS can quickly identify high-priority returns to get them back in stock. It also gives you more visibility into your returns and helps you track KPIs by leveraging features such as:

Customer communications
Prepaid labels
Returns authorization
Package tracking
Fraud alerts
Restocks
Exchanges

If your 3PL doesn’t already use an RPS, Kyle recommends talking to them about adding one to their tech stack. The right RPS will reinforce your partnership by making data simpler to understand and access.

2. Commit to building a relationship with your 3PL

Effective returns management relies on clear communication and mutual understanding between your brand and the 3PL. Like in any partnership, miscommunications will pop up from time to time. Kyle says if you’ve already built trust, it becomes easier to work through any issues together and stay focused on the shared task at hand.

Many of those miscommunications are due to a lack of transparency. However, an RPS gives you more visibility into the data. You can see how each change in your process affects your partner and fix problems before they hurt your relationship.

For example, tech-enabled 3PL GoBolt transformed its entire returns process into a core part of its fulfillment sales pitch when it integrated an RPS with its warehouse management platform. They now track everything from fraud risk to value-added services and have made returns a streamlined profit center. As a result, they’ve increased revenue by 15% and achieved a 95% restock rate.

3. Ensure the 3PL is flexible and responsive

Returns can be unpredictable, and your needs will change over the course of your relationship with your 3PL. You want a partner who’s willing and able to adapt to those changes, whether from major challenges like ballooning order volumes to smaller ones like the condition of individual returns.

For Clove, its stylish yet protective footwear for healthcare workers was a boon post-pandemic, but finding a 3PL that could handle the subsequent increase in returns proved to be challenging. Clove needed a way to inspect items and get the resellable shoes back on the shelf. By switching to a 3PL that used an RPS, Clove increased its restocks by 500%, saving $10,000 each month and completely eliminating its backlog.

But you can only be sure how responsive someone is once you’ve worked with them. So Kyle suggests starting with a small-scale project to test how well they handle your returns process and respond to issues. This test run gives you a real-time look into their efficiency and problem-solving skills.

Manage your brand’s returns more effectively with Two Boxes

Getting a handle on your returns processing just makes good business sense, Kyle says. Having deep visibility into the whole enterprise allows brands to reduce waste and resell more products, which has a positive impact all around.

Two Boxes offers your brand a complete solution for managing returns by:

Preventing backlogs: We turn your SOPs into digitized checklists so your warehouse staff can effortlessly assess each product when it comes in. This prevents pesky backlogs and returns more inventory to your stock.
Prioritizing restocks: You’ll have all the data you need right at your fingertips, giving you visibility down to individual SKUs. This level of detail makes it easier to prioritize high-demand items and get them back into customers’ hands right away.

Plus, these solutions have been proven to drive results consistently. When Thursday Boots needed a precise reverse fulfillment process to resell its high-quality footwear, it was limited by the number of sales channels, each with its own returns process.

With Two Boxes, Thursday Boots and its 3PL partner created an easy-to-follow checklist to accurately process returns across channels and established one unified dashboard to manage all return data. In the end, Thursday Boots increased their returns efficiency by 3x.