Enhance your small business return policy: How to balance costs and customer expectations

5 minute read

As a small business owner, it’s easy to feel frustrated or overwhelmed by the seemingly high cost and complexity of handling customer returns – especially in the ecommerce world. It’s just part of doing business in the digital age.

Your return policy is a critical component of how you manage customer expectations and, as a small business, a bit of a balancing act. You want to enjoy the benefits of offering convenient and flexible customer returns, but you also need to manage costs and volume – especially if you’re operating both an online and a brick-and-mortar store. You’re walking a tightrope between cost and benefit and will want to avoid any missteps.

Don’t underestimate the impact of your return policy on your customers. A whopping 63 per cent of Canadian shoppers cite concerns over a return policy as a reason for abandoning their cart, so it’s critical to ensure your return policy is on point.1

Craft and share a balanced return policy

Convenient returns drive conversions, reduce abandoned carts, increase average order values and build customer loyalty – but they come with potential risks. Make them too convenient, and your return costs can become too high for you to manage. Make them too restrictive, and you can fall short on customer expectations and discourage them from shopping with you again. So how do you strike the right balance between your costs and customer benefits? Here are some key things to keep in mind when crafting your return solution:

Put customer experience first

Happy customers make more purchases, so make sure your return policy keeps their expectations top of mind. Most customers expect ease of use, convenience and for their returns to be free or low cost.

When it comes to nailing down the specifics of your return policy, put yourself in your customers’ shoes. If they receive a defective or unsatisfying item from you, they’ll likely expect your business to rectify their issue without hassle or expense. There are tried-and-tested return solutions that make returns simple, convenient, affordable or free for customers – like the label-in-the-box return solution model. There are pros and cons to these common return solutions, so your business will need to determine what’s best for you.

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Choose the best return solution for your business

Your return solution, or how you give shoppers access to a return shipping label, impacts your customers’ return experience and your bottom line. The two most common solutions are label on demand and label in the box.

Label on demand makes the customer work a little bit harder to return their item than label in the box does because they will have to request and print their return label. This can work to your advantage when it comes to return costs as it may discourage the customer from making the return. This can also be to your disadvantage as the customer may find it inconvenient and off putting.

Label in the box is a customer-friendly solution because it simplifies the return process on their end by providing them with a printed return label in the box with their order. Making customers’ lives easier is great, but this method may make returns too easy – costing your business more over the long term. But keep in mind that just because you supply a return label doesn’t mean your customer will use it, and you will only pay for the labels that are used.

Leverage your partners’ return solutions

Your ecommerce platform and/or your delivery partner likely offer(s) return solutions and tools which you can leverage for your business. For example, if you ship with Canada Post you can use our free returns policy tool. This easy-to-use tool helps you save time and money by streamlining your returns processes and exceeding your customers’ expectations. It takes minutes to set up, enabling you to start offering your customers simple and convenient returns, while at the same time enabling you to better manage inventory and forecast expected returns.

Give customers flexible return options

Options and flexibility are key! If you have an online and offline store(s), consider enabling customers to make in-store returns. It will minimize return shipments, save your customers (or you) shipping and handling costs and give them a choice of convenient return options. If you don’t have the capacity to receive returns in-store, leverage additional resources from your delivery partners. If you partner with Canada Post, for example, let customers know they can take advantage of our extensive network and can return their items to their local post office or via street letter boxes instead. We have over 6,100 locations, so there are ample options for your customers.

Communicate your return policy and costs clearly

Return policies can be complicated, but the way you communicate them shouldn’t be. Customers care about them and want to be able to find and understand them without difficulty. They need to be accessible and user friendly. Display your policy prominently on your website – in high-visibility areas such as the footer, product descriptions view, at checkout and/or as a banner across your webpages. By clearly communicating your return policy, you can provide a good customer experience and make returns a competitive advantage for your business. Your customers will feel secure shopping with you, and you will instill trust in your brand.


Ecommerce enables you to sell to consumers near and far. This can be an important factor in the return costs incurred by both your business and your customers. Be clear and upfront about any return costs or charges that must be paid by your customers, such as shipping and handling fees, to avoid disappointment. Distance and parcel weight will factor into these fees.

You don’t have to bombard customers with your entire return policy, but you should at least make the basics of your return policy easy to find on your website. The basics include your returns timeline, costs and charges (if applicable) and how you provide a return shipping label (do you include the return label in the box, or does your customer have to contact you for a label on demand?).

Prepare for an increase in returns following key selling periods

A key selling period means higher volumes of orders and shipments for your ecommerce store – and tends to lead to a heavy returns period! Back-to-school, Black Friday, Cyber Monday, the holiday season – they’re all prime selling periods for your business.

To keep up with increased demand, and ensure you deliver the best customer experience possible, iron out your returns policy and promote it on your website clearly ahead of key selling periods. The more prepared you are – and the more informed your customers are – the better, as providing a good returns experience will increase your chances of earning a repeat customer. The numbers don’t lie – 80 per cent of Canadian shoppers will stop shopping with a brand after a bad returns experience.2

Give returns the attention they deserve

Many businesses treat returns as an annoying after thought, but when handled well they are an area of opportunity for your business. Your customers want to feel confident when shopping with you – especially if they’re buying from your store online or for the first time. That’s why a clear, customer-friendly and balanced return policy is an important part of your business. By being strategic about your return policy, you’ll build trust, drive conversions, reduce abandoned carts and build customer loyalty – without hurting your bottom line.

1Canada Post. 2021 Canadian Online Shopper Study, 21-205, April 2021.
2Canada Post. 2020 Fall Survey, 20-2014, October 2020.

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