“There was a customer who spent $17,000 in one day. The next day, she came back with a note from her therapist that said she was a shopping addict and needed to return the items.”

BCBG’s account of one in-store product return attempt.

Bizarre stories asides, in-store product returns has become an essential part of many retail operations. The in-store product returns process can be divided into 5 steps, and we’ve got 5 tips to help you make the most out of this process for you and your customers.

The 5 steps of a typical in-store product returns process

Step 1: Verify product returns request

When a customer brings an item to the store and asks for an exchange/refund, the salestaff will need to verify this request. They’ll have to confirm that this product has been purchased from their store. The most common proof is a receipt.

For some products, there are additional conditions. For example, with video games, the original packaging has to be intact. Clothing items might need their tags and labels still on, show no sights of wear or stains…

H&M's return policy, which explains the conditions for return and how customer can request a return easily.
H&M’s return policy, which explains the conditions for return and how customer can request a return easily.

In some cases, the customers may request a return without a receipt. They can still show some proof such as bank statement or confirmation email. Some business might reject the return request in this case. However, depends on the consumer right laws in your location/industry, you might be required to provide return for faulty products, whether the customer has the receipt or not.

If the customer is eligible for a refund/exchange, the cashier will create a return request in the system.

Step 2: Create return request

In order to process an in-store product return, the salestaff usually have to find the past order in their Point of Sale (POS) system. Different system will offer different options to find this order, including:

  • Scanning the customer’s receipt;
  • Input the order ID/number;
  • Search for the order with customer or product information.

Cashier can then select the order and start the refund/exchange process. They’ll have to select the product to exchange/refund in the order and the quantity to return. Some POS also let staff return the product to stock right on the screen.

An example of in-store product refund on Magestore POS
An example of product refund on Magestore POS

When the customer wants to exchange what they brought for another product or the same product in different size/color, the staff will need to add the new product to cart.

If the customer doesn’t have the receipt with them and you cannot find the order in the system, you’ll have to start a return request that’s not associated with any order. You can read more about refund and exchange without receipt here.

Step 3: Process payment & complete return

In the case of product refund, the cashier will have to return payment to the customer. Different POS system might offer the following options:

  • Refund by original payment method: Most customers prefer to get a refund via the original payment method. Some POS systems let you issue payment while others require extra steps on the payment device. If you are using a terminal to process transaction, make sure your cashiers get the training they need to handle it efficiently.
  • Refund by cash: If the customer paid for the original order by cash, they might expect cash refund. In some cases where the POS system cannot return payment to the original credit card, business owner might also opt for this method.
  • Refund by reward points/store credit/gift card: Some stores offer refund in the form of points, store credit, or gift card. Cashier can add the refund value to the customer’s account or gift card balance. Customers can redeem store credit/gift card the next time they purchase from the store.
An example of refunding payment on Magestore POS
An example of refunding payment on Magestore POS

In the case of product exchange, the POS system will need to calculate the price difference between the old and new item:

  • For item with the same price, there’s no need for additional payment process.
  • If the new item has a higher price, the customer will have to pay the difference.
  • If the price , the cashier should be able to refund the difference to the customer.

In addition to product price, some in-store product returns may include an additional cost. For example, customers might choose to have their new items delivered later and pay for shipping. Some brands also place a restocking fee on opened items. The staff should have the ability to add these additional fees during the return process.

Step 4: Complete in-store product returns

Once payment is complete, the staff should also note down the reasons for return. This is invaluable data that will help retailers make merchandising decisions in the future.

When the staff completes the return request, the POS should synchronize data into the rest of your system. There should be changes in the details of the original order, as well as updates to your revenues, profit, tax, and so on.

In some systems, refund/exchange information will appear directly in the original order. If you’re using a Magento system, the situation might be a bit different. Magento’s default settings don’t support editing order or adjusting negative quantity for products, so some POS may create a new order and cancel the old one.

Step 5 (optional): Return item to inventory

Most POS systems allow returning item to inventory/stock. This means when the return process is complete, the quantity of the returned items will be added back to inventory. Depending on product conditions and your business rule, you may choose to resell these items as open box or refurbished products.

5 tips to optimize the in-store product returns process

In-store product returns may sound simple in theory, but the real life situation can be complicated. Many retailers are struggling with returns where the staffs and customers ignore the return policy. There are also cases where the cashier cannot refund payment for the customer, or the refund doesn’t get updated into the system. On the other hand, returns without receipts can create serious inventory and accounting issues.

There are also cases where the cashier cannot refund payment for the customer, or the refund doesn’t get updated into the system. On the other hand, returns without receipts can create serious inventory and accounting issues.

To avoid these problems, here are 5 tips for retailers looking to implement or optimize a product returns process:

Tip #1: Write clear return policies

Imagine bringing returning a product in-store only to find out that the policy on the website is outdated and your request is not accepted.

Having clear and easy-to-understand policies is the best method to prevent returns; and if the return is necessary, to speed up the process. Return policy should be communicated with customers across all sales channels, and consistently.

A return policy should clearly state:

  • The duration for return: Some retailers offer two weeks, others offer a year. Retailers also need to consider the legal requirements for their product, industry, and location. If you’re selling products with different policies (such as smartphone vs vacuum cleaner), make sure to state all options.
  • Conditions for return: Define the conditions of the item you can accept. For example, the item has to be in good condition, with the tags still on. Most retailers also require the original packaging and receipt. Items bought online may not have the same policy as items purchased in-store.
  • Exception: Customers need to know if the items they buy cannot be exchanged/refunded. This is especially true for discount items, undergarments, or perishables such as food or flowers. You should also state if there are exceptions related to defect products.
  • Options for customer to receive payment: How can customers get their money back? Inform your customer that they’re only eligible for store credit, or if they can get their money back in the same way as they paid.
  • Time to receive payment: Let your customer know if you’ll only issue payment when the items have been received and approved. You should also give customers an estimation of how long before the refund appears in their account.

Tip #2: Have backups to handle return without receipts

Consumer rights laws may dictate cases where customers can return products without receipt or past the return period. Accepting returns without receipt can also make for a better customer experience, and may encourage them to stay with your brand instead of switching to competitors.

Make sure you are prepared to process return without receipts by making it easier to find an order within the system. You can collect customer email/phone number to search their order history. There’s also the option to use unique serial number for each product.

If the cashier cannot find the original order, it’s up to the store manager to make the call on whether to accept the return.

Tip #3: Offer store credit & gift card in place of cash/card refund

Unspent store credit/gift cards can be excellent reminders of your brands, and encourage customers to return for more purchase. It’s also a good alternative to cash if you can’t find the original order in the system.

A customized product exchange solution by Magestore, where cashier can refund to store credit
A customized product exchange solution by Magestore, where cashier can refund to store credit

This is especially helpful if the customer is a regular of your brand but doesn’t enjoy a particular product. Instead of sending money back and forth between their bank account and yours, they get the amount added to their store account or a new gift card. More store credit makes it convenient for them in their next purchase. They can send gift cards to their friends and family, introducing new customers to your brand.

Tip #4: Track return rates

In-store product returns doesn’t have to be the end of the world. It’s an inevitable part of retail and an important data point for retailers. Tracking data on in-store product returns will help retailers identify potential problems in their business.

Here are some examples:

  • Many customers bought your products online, but exchange them in-store later because they got the wrong size. This means customers are struggling with choosing the right size online, and you probably should include a size chart on website.
  • There’s a spike in shirt returns. Turns out the fabric is irritating for some wearers. You should change the fabric and improve your product.
  • Customers keep asking the staff to explain your return policy. Perhaps part of your policy is full of jargon or the customer simply can’t find it. You can rewrite the policy to make it easier for the customer, and have your staff explain it clearly during checkout.

Tip #5: Use integrated software/POS

If you’re selling both online and offline, or running multiple stores, it’s essential to have a POS system that’s integrated into every part of your business.

You can create a seamless shopping experience when customers buy online and return in-store. In addition, in-store product returns is way more convenient when customer can return in any store, and not just the one they bought from. The staff should be able to view and process all orders of different stores, created from their checkout counter to the self-checkout kiosk in another location.

An integrated POS system will also ensure that data is updated in real time and correctly. When the return is complete, the change in order, inventory, customer,… should be reflected in the rest of your system. No one wants to re-enter the in-store product returns manually in their warehouse/inventory management software separately.

With an integrated POS you can eliminate double entry and keep all records of sales, stock, and customer under control.

Last words

Retailers can turn in-store product returns into a good shopping experience for customers, and get valuable data along the way.

An efficient POS system is the key to implement and optimize this process. It should help you handle order history, payment, customer, loyalty programs, and more. It needs to work seamlessly with all parts of your system.

Your next steps should be working out a list of requirements for a POS system, and research providers accordingly. Here’s 7 questions to help you in your POS research.


Jackie writes about industry trends, tips & tricks, and everything in between to help retailers start and grow their awesome business.

1 Comment

  1. Dennis Walters Reply

    Hi Jackie,
    I like to read well-written articles. It looks like you spent a lot of time and effort on your blog.
    I learned a lot from your article and will definitely try these things out in upcoming projects. Also, I have already bookmarked and am waiting to read a new article.
    keep up the good work!

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