Returns Management Process: Workflow & Best Practices

A recent report revealed that India shows an average return rate of 17.6 % in the e-commerce industry, mainly in the fashion industry. This return rate can go as high as 40%, which could make a huge loss to the e-commerce brands.

You might be thinking, is running an e-commerce brand all you're set to lose?

The answer is "NO". Returns are a part of the business and do not always impact you badly. The thing depends on how you manage them.

Whether you are a new brand or an established one, for a satisfied customer, you will need a good return management system for your goods.

Thus, the return management system (RMS) concept has existed. In this blog, we will discuss the return management process, how it can impact your business, the return management system, and the eight best practices for a smoother return.

Let us delve into ‘Return Management Process: What It Is, How It Works, and Best Practices.’

What is Return Management?

Return management is the process of handling goods that a customer requests to return to the seller after the purchase. And for the returned goods, the seller gives them a refund or credits for the return. This return can occur because of:

• unsatisfied customer,
• wrong products delivered,
• size or fit issues,
• broken goods or change of mind.

The return management process includes everything from the initiation of the return to the refund made to the customer.

You might have heard the term reverse logistics. Both the terms return management and reverse logistics seem the same, but there is a difference between them.

Return Management vs. Reverse Logistics: Understanding the Difference

Many Indian D2C founders confuse these terms. Let us clear this up today!

Reverse Logistics is a broader concept. It is a process of moving goods from the customer back to the seller or manufacturer. It covers everything that happens after a product has been delivered—returns, repairs, refurbishing, recycling, or disposal.

On the other hand, return management is a part of reverse logistics. It specifically deals with the process of handling product returns from customers. The return management includes:

• Receiving returned items
• Inspecting and processing the items,
• Restocking, refurbishing, or discarding them
• Managing refunds, replacements, or exchanges

Why Returns Management is Critical for Indian D2C Success

The Indian e-commerce market presents unique challenges to the brands. According to a report, 62% of Indian online shoppers check the return policy before buying.

The e-commerce market has a higher proportion of COD orders, which is the most common reason for returns in India. Customers often order multiple items, try them out, and return what they don't like.

That is why D2C brands should have an effective return management system that can handle the entire process easily. It will help you:

• Handle large volumes of returns without disrupting operations.
• Provide faster refunds and replacements, which builds customer confidence.
• Track return reasons and let brands know about product quality, sizing, or delivery issues.
• It can help them reduce their costs by managing the inventory well without restocking or wasting items.
  

Why a Structured Workflow Matters for Indian D2C Brands: Benefits of Effective Returns Management

1. Major Impacts on customers and brands.

• On Customers:
  
  • A clear return policy or management builds trust among them, especially for new brands.
  • Doorstep pickup, prepaid return labels, or nearby drop-off points save customers time and effort.
  • It gives customers a better shopping experience without any hesitation or doubt.

• On D2C Brands
  
  • Confident customers buy more when returns are easy. It offers higher conversions to businesses.
  • Efficient returns reduce operational expenses.
  • Better return management helps to retain customers for your business.

2. High return rates in online retail vs. offline stores.

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• Online retail: 20-30% average return rate
• Offline retail: 8-10% average return rate

The online return rate is 2-3x higher than offline return rates. Thus, a streamlined workflow for the return management process is essential to tackle such things.

3. Promotes trust and loyalty by streamlining returns.

When you have a proper return management process and your customers know it, it will create trust and loyalty in their minds for the brand. They will:

• Make repeat purchases
• Try new products from your brand
• Recommend your business to others
  

Step-By-Step Returns Workflow- What Does A Workflow For The Returns Management Process Look Like?

Let's break down the complete returns management process into clear, actionable steps:

1. Return Policy Setup & Communication

The first step in the return management process workflow is to write and build a clear and proper return policy. Your policy should define all the necessary elements of returns. You should:

• Make use of simple and easy language
• Specify conditions for returns
• Displaying policies prominently on your website

2. Customer Initiates Return

The actual return management process begins from here. When the customer is unsatisfied with the product, they will request to return it through the brand's app or website. Here, the brand should have a good Return Management System that asks for:

• Why do you want to return this product?
• Is the item in its original condition?
• Do you want a refund, exchange, or credit to your wallet?

3. Reverse Logistics & Pickup

It's time to get back the product. The brands will coordinate with their delivery partners to pick up the returned item quickly and conveniently.

4. Receipt & Logging

When the returned item arrives at the seller. They will:

• Scan and log the returned product in their system
• Update inventory records
• Give the item for inspection,
• and send confirmation to the customer.

5. Inspection & Grading

Before taking further action, every returned product is inspected and graded based on its condition—unused, used, or damaged.

6. The Final Action by Brands

Once the inspection is completed, if the brand is satisfied, the product will be approved for refund or exchange.

7. Inventory Update & Processing

For every approved return, the brand will:

• Update their inventory levels
• Give items to appropriate locations (resale, refurbishment, disposal)
• Process refunds or prepare exchanges
• Update their financial records

8. Customer Communication & Refund

Once the return is approved, the brand will inform the customers about the approval of their return or exchange. Will provide the timeline for the refund or the delivery date of the exchanged product.

9. Analytics & Continuous Improvement

The last step in the return management process workflow is to analyse the data and take the necessary corrective actions.

Brands use the data to:

• Identify problematic products
• Improve return policies
• Optimise logistics partnerships
• Enhance customer experience
  

A Practical Example of the Returns Management Process

Let's look at the returns management process with an example to better understand.

Priya orders a size 8 shoe from an online fashion retailer but receives a size that's too tight.

Step 1: Priya visits the website and clicks "Return Item." She selects "Wrong Size" as the reason and chooses "Exchange" for size 9.

Step 2: The system generates number #1189 and sends Priya a return label via email or message.

Step 3: A courier partner picks up the shoes from Priya's home the next day.

Step 4: The shoes arrive at the warehouse and are logged into the system with RMA #12345.

Step 5: Quality team inspects the shoes - they're in perfect condition (Grade A).

Step 6: The System approves the exchange and automatically orders size 9 shoes for Priya.

Step 7: Original shoes are restocked, and new shoes are prepared for shipment.

Step 8: Priya receives SMS updates throughout the process and gets her size 9 shoes within 5 days.

Step 9: The retailer notes that this particular shoe style has frequent size-related returns and updates the size guide on the product page.

Some Popular Return Management Systems for Indian D2C Brands

1. Pragma

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100% Automated Return Management System- handles the entire returns lifecycle, from pickup and quality checks to exchanges. Includes:

• Automatic AWB creation for reverse shipments
• Media Upload and verification of products
• Integration with 200+ logistics partners

2. Zoho Inventory

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Offers built-in returns management with automated workflows

3. Shiprocket

This RMA helps Indian D2C and small businesses by automating pickup requests, inspection workflows, and refund tracking.

4. Reverse Logix

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Widely used in global markets, Returnly is known for offering instant store credit even before the return is processed.

9 Best Practices for Smooth Return Management

1. Write a Clear return policy- First of all, ensure that you have a properly defined return policy that covers all aspects of your brand's return.
2. Make Returns Easy for Consumers- Always ensure that the return process is easy, so that a customer can do it quickly. Unnecessary steps will confuse them, and they will drop the idea of buying with you.
3. Process the Return Quickly- Keep in mind that the customer is the king of the market. Prioritise them always!
4. Automate Where Possible- Use return management systems to handle approvals, labels, and refunds faster. This saves time and reduces mistakes

5. Update the Inventory- Always update your inventory as soon as possible, so that you are aware of which items are in stock again.
6. Offer Multiple Options- Instead of only refunds, let customers exchange, get store credit, or pick another product.
7. Check for Return Abuse- Put controls in place to prevent fraud (like too many returns from the same customer).
8. Keep Clear Communication With Customers- Always keep your customers updated with real-time information. Give them updates regarding their refund, timeline, exchanges, or delivery dates of the exchanged item.
9. Analyse the Data for Improvements- Look at why products are being returned and fix the root problems — sizing, packaging, or product quality.

What Are The Most Common Return Management Challenges, And How Can They Be Overcome?

As a D2C owner, you can face some of these challenges while doing return management:

High Return Rates

According to a report, brands can lose up to $20-30 billion due to the returns, which is 1.67 lakh crore- ₹2.5 lakh crore in Indian Currency. To avoid such high costs, you should include better product descriptions, correct size charts, and clear images of products, so that a customer knows exactly what they are buying.

Frustrated Customers Due to Complex Policy

If your return policy or process is too complex, then the customer will get irritated with it. Always ensure that you have an easy return process. For this, you can use efficient Return Management Systems like Pragma to ease the process.

Slow Refunds or Exchanges

Delays in refunds damage customer trust. You should automate approvals and integrate payment systems for faster refunds or store credits.

Fraud Returns By Customers

Some people misuse the return policy. They use the product and return it before the window closes. To do this, try to track frequent returners and use fraud detection tools.

High Shipping & Reverse Logistics Costs

Sometimes, return shipping and handling costs more than the product's original cost. For this, you can negotiate better with logistics partners, set minimum order thresholds for free returns, and use local drop-off points.

This is how you can manage some of the challenges associated with return management.

Sustainability & Circular Economy Angle of Returns

Returns don’t just affect profits; they also impact the environment. Every time an item is sent back, it means more packing material and more fuel are used in transport, and sometimes the product even goes to waste if it can’t be sold again.

In India, where returns are already worth more than ₹1.5 lakh crore, this adds up to a big problem.

One way to solve this is by following a circular system; instead of throwing things away, companies can find ways to reuse them. For example:

• Selling returned items again at a lower price, such as “open box” or “like new.”
• Fixing or repairing slightly damaged products.
• Recycling parts from items that can’t be sold.
• Encouraging customers to exchange items instead of asking for a refund, so the product stays in use.
  
  

To Wrap It Up

So, as we know, returns are a part of the e-commerce industry, and winning over them requires great and efficient handling.

Indian D2C brands can increase their sales by 5-20% with a proper return management process.

To ensure that everything runs smoothly, you should opt for a return management system that can handle everything easily.

Pragma's Return Management System is all set for every D2C Indian E-Commerce brand.

FAQs (Frequently Asked Questions On Return Management Process: What It Is, How It Works, and Best Practices)

1. What is a Return Management Process (RMP)?

The Return Management Process (or Reverse Logistics) refers to the end-to-end handling of product returns—from initiating return requests, generating return authorisations (RMA), processing returns, to issuing refunds, exchanges, or restocking. It’s a critical component of customer satisfaction and operational efficiency.

2. How does the RMP typically work in e-commerce?

1. Customer Initiates Return: Via a returns portal or customer support.
2. RMA Generation: A Return Merchandise Authorization (RMA) is issued.
3. Returns Shipment: Includes prepaid label or instructions.
4. Inspection & Processing: Returned items are checked, sorted, and processed for refund, exchange, or restocking.
5. Resolution: Customer receives refund, credit, or replacement.

3. What are the best practices to streamline returns?

• Publish a clear, easy-to-find returns policy: Place on homepage, product pages, FAQ and checkout. Helps build trust.
• Use a seamless returns portal with instant RMA & labels: Customers can initiate returns easily and receive real-time updates.
• Offer flexible return options: Choices like exchanges, store credit, or refunds—preferably captured in a user-friendly dashboard.
• Encourage exchanges over refunds: Offer incentives (e.g., discounts, faster processing) to retain revenue.
• Enhance packaging & labelling: Proper returns packaging and return labels reduce damage and process delays.
• Automate communications: Send status updates via email/SMS to keep customers informed.
• Collect and act on return data: Analyse KPIs like return reasons, rate, and trends to improve product descriptions and reduce future returns.

4. How can technology improve returns management?

• Return Management Software (RMS): Automates workflows, label generation, RMA control, and carrier integration for speed and accuracy.
• AI & predictive analytics: Detects fraudulent returns (like wardrobing, empty-box scams) and helps optimise refund decisions.
• Smart returns portals: Offer QR code drop-offs, exchanges, label-free returns, and more efficient drop-offs. Also supports automation and user engagement.

5. What about return-related fraud and sustainability concerns?

• Return fraud (e.g., wardrobing, fake returns, removing parts) accounts for billions in losses and erodes margins. Companies are deploying analytics and RMS tools to curb abuse.
• Sustainability: Some brands (like Everlane) refurbish and resell returned items to reduce waste, integrating light repair into reverse logistics.
• Retailers are also exploring returnless refunds (customers keep low-value items) to cut costs, though the tactic raises policy complexity.

6. What do real-world retailers say?

On Reddit, a Reebok insider shared approaches to reduce refunds:

“Instant Exchange: the driver picks up the old item and delivers the new one in the same trip.”
“Offer gift cards with an extra 10% value—they keep the cash in your business while customers feel rewarded.”

7. Why should Indian D2C brands prioritise effective return management?

Because returns shape profitability, trust, retention, and brand reputation. By simplifying the process, removing friction, and leveraging data, brands can transform returns from a cost centre into a competitive advantage.