By Tom Caporaso

As a small business owner, you know full well the inherent challenges you face when trying to compete with larger retailers, which enjoy economies of scale, larger error margins, and other size advantages.  There is, however, at least one online retail issue that all companies struggle to address, regardless of size:  What to do about online returns.

Returned purchases can generate a variety of losses:  Lost sales; lost time in resolving the issue; lost inventory (in some cases); and perhaps worst of all, lost customers — especially those consumers who hate paying for return shipping as much as you do.  These concerns are magnified during the holiday season, which typically increases the number and size of shoppers’ orders but also drives up return rates significantly.  Nevertheless, there are a few things you can do to help minimize these holiday hits to your bottom line.

If your business has a physical location, offer in-store returns.  In addition to eliminating shipping charges altogether, you’ll have an opportunity to “save” sales, either via exchanges or by selling different items altogether.  In-store returns will also allow you to meet shoppers face-to-face and make a strong, lasting impression with your stellar customer service.

Even if you don’t have a brick-and-mortar store, you may still have an advantage over bigger retailers:  Greater flexibility.  While national chains rarely, if ever, “customize” their policies for individual shoppers, you can analyze your sales data and audience behavior to decide, for instance, whether a loyal customer with a high lifetime value (LTV) might merit an exception to your current return policy.

Frankly, large retailers almost uniformly require their customers to pay for return shipping.  Offering free return shipping to your audience, even if just for the holiday season, could help boost your sales and cover your added expenses.  Alternatively, you can point your customers to Return Saver, a program that offers shoppers unlimited free return shipping for online purchases throughout the year for a small annual fee.

Clearly, there’s no “one-size-fits-all” retail solution to the problem of online returns.  As a small business owner, you need to perform a cost-benefit analysis on a free return shipping offer (including the risk of return fraud) to determine whether it will hurt or help you in the long run.  One thing’s for certain, though:  Crafting a customer-friendly approach toward online returns will set you apart from the vast majority of your competitors.

Tom Caporaso is the CEO of Clarus Marketing Group, which builds and customizes subscription programs, including, Return Saver, Travel Plus, and others. Tom has over two decades of direct marketing experience, specializing in continuity, subscription and custom loyalty programs. He’s held senior management roles in e-commerce, subscription programs, site optimization, SEM and SEO, product, marketing, sales, and client services.