What’s the sweet spot for your return policy?

Designing a return policy for your small business can be tricky. If your margins are thin, you may be worried about creating a too-generous policy that leaves you stuck with unsellable inventory. On the other hand, making returns too difficult can discourage potential customers from making a purchase in the first place.

Surveys have consistently found that return policies factor into consumers’ shopping decisions, particularly when it comes to shopping online. About 4 in 10 shoppers say that a free return policy influences their online buying decisions, according to an NPR/Maris poll.

Still, most consumers don’t return online purchases very often. Only about 9% of consumers say they return online purchases often or very often. Those prolific returners could be abusing the system, but they could also be a retailer’s best customers. Some of the most desirable customers—younger, more affluent, and female shoppers—like to buy multiple sizes or styles of the same item and return all but one, according to a recent survey by Narvar, an online retail technology provider. In fact, Zappos found that their most profitable customers returned half of their orders.

So how do you create a return policy that’s just right—neither too generous or too restrictive? Read on for tips and comments from small business owners like you:

Do make your policy easy to understand.

“It’s important to keep your returns and refunds policies simple. Customers do not want to jump through hoops if something doesn’t work out for them,” says Vladimir Gendelman, the founder and CEO of Printwand, a custom printing and promotional item business.

• Good to know: A good experience with a return builds customer loyalty: 95% of customers who were satisfied with a return said they would buy from that retailer again, according to Narvar.

Don’t give customers too much time to return items.

“As a small boutique that carries a limited number of garments in each size, when a customer brought back an item back 30 or 60 days later, the season was over and I would have to put it on the 50- to 75-percent-off rack. Plus, we missed a chance to sell it to someone else two or three times in that period,” says Richard Ignatz. His five Boutique Emmanuel stores in Michigan now offer a 10-day return period.

• Good to know: Almost 75% of customers made their last online return within a week of purchase, according to Narvar, so even a fairly narrow return window should work for most customers.

Do leave some room for flexibility.

“Officially, our return policy is 30 days with the right to charge a restocking fee. In practice, we’ll take things back pretty much whenever as long as it is sellable and current. We are more restrictive on special orders as far as restocking fees if we have to send something back to a factory. But if it’s something we think we can easily sell, we’ll waive that fee. It is not worth the bad vibe with the customer to play games with the return policy, and it provides peace of mind with them if they don’t like their selection,” says Brad Schweig, vice president of operations at Sunnyland Patio Furniture in Dallas, Texas.

• Good to know: Consumers hate restocking fees—84% say such a fee would prevent them from buying in the first place, according to Narvar.

Do consider what your return policy signals about your product.

“We know that whatever we sell will retain, if not grow, in value. [Our] return policy allows our customers the ability to upgrade if and when they are ready. They can trade it back for something more important, rarer, or more prominent,” says Bill Rau, the owner of M.S. Rau Antiques in New Orleans. His store accepts returns on jewelry with no restrictions, and even allows customers to exchange an item for a more expensive item, taking into account a 5% annual appreciation on the original purchase.

• Good to know: A lifetime return policy can buy you a lot of good press, as it has for Patagonia, but be aware that some customers may take advantage. LL Bean recently restricted most returns to one year after purchase because about 15% of customers were abusing the policy.

Don’t be afraid to create a no-return policy if that’s what works for you.

Magnolia Emporium, a curated home decor, gift, art, and gourmet shop in Charlotte, North Carolina, says: “We actually solved that [problem of designing a good return policy] by not offering any returns. Printed right on our Clover receipts. [We] have tried many options over the last several decades and this is the only thing that works correctly.”

• Good to know: Transparency is key when it comes to a return policy—according to Narvar, consumers say they’re happy with the Amazon returns process, even though it involves several steps, primarily because the process is transparent from beginning to end.

A generous return policy, particularly for online sales, can help attract customers. Many retailers have found that people who make returns are actually their most valuable customers in the long term. But you’ve got to keep an eye on your bottom line and design a policy that works for your products and your business.

Editorial Team

Biz ops, Customer service

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