28 Oct 2025

E-Commerce Fundamentals: Handling Order Returns and Exchanges

E-commerce is booming, there is no doubt about it and people are starting to sit up and take notice. Like it or not, e-commerce is here to stay and will continue to change the way consumers shop.

The global e-commerce industry is projected to bring in US$3.4 trillion in revenue by 2019. 1 Closer to home where we are based, a report by Temasek and Google stated that the e-commerce market in Singapore was “valued at US$1 billion in 2015, with online shopping making up 2.1 percent of retail sales – the highest proportion of all Southeast Asian countries surveyed”. The growth of e-commerce in Singapore is not unique. It is the next wave of consumer behaviour.

As e-commerce retailers toil to meet surging demand, the pitfalls of e-commerce are becoming apparent – product returns and exchanges and the challenge of providing good customer service.

Without the tactile experience of brick-and-mortar shops, consumers are returning their online purchases at an alarming rate. According to data by Invespcro, “at least 30% of all products ordered online are returned compared to only 8.89% bought in brick-and-mortar shops.”

Why Should We Care About Returns – the real cost of order returns

Imagine that – one-third of all orders online are eventually returned at some point. One third. That is a mind-bogglingly high statistic. It is also an operational hurdle that we e-commerce retailers have to solve before taking our business to the next level.

To any e-commerce retailer, returned products mean additional shipping cost, which we know can constitute a pretty significant portion of any retailer’s operating margin. And this is just the tip of the iceberg. Orders returned also require more effort in terms of inventory management, accounting treatment, and the tricky issue of customer service.

More importantly, every order returned implies disappointment and expectations unmet. That, in our view, is an intangible, but very real, cost to the brand and reputation of the business. As such, the minimising and appropriate handling of order returns should be a priority for all e-commerce retailers, or any retailer, for that matter.

Minimising Order Returns – Accuracy First

The main disadvantage of any e-commerce retailer is the lack of opportunity for a potential customer to physically touch and feel the product before committing to a purchase. This requires customers to take a leap of faith and add to cart based on pictures, product descriptions, and customer reviews.

What this means for us, as e-commerce retailers, is that we need to relay product information accurately and honestly. Customers deserve to know what exactly they are getting before the delivery man shows up at the door with their order.

Product descriptions and specifications should be detailed. Product photography should be illustrative of true-to-life colour editing. Product reviews written by actual customers after they have had the chance to use the product are also immensely helpful in conveying information and perspective often overlooked by us.

In short, whatever customers perceive with their eyes and hands in a physical store, we have to deliver with words and pictures on a digital platform. The bottom line is this – whatever it is that customers think they are getting should be matched with what they will actually receive. Accurate and honest product information is the first step to minimising order returns.

A customer wants to return an order, what now?

We all strive for 100% customer satisfaction. We know this is the aspiration and the ideal, but I am not sure if this is, in fact, possible. Try as we might, there will always be customers who request to return or exchange their order. This is inevitable but that does not mean it should be a painful experience for both the business and the consumer. If handled well, every request is an opportunity for us to show that we care. This is where we, as e-commerce retailers, can really shine.

Product from Perk by Kate – Mae Maternity Padded Bralette Black

Fuss-free returns policy

Having started and managed an e-commerce site for over five years, I am now a firm believer in treating your customers like friends by being generous and kind (as you would any friend!).

This begins with a well thought out and fuss-free return and exchange policy. This means making it easy for customers to return or exchange. This means not hesitating to offer a solution if you sense that a customer might be dissatisfied with a purchase, even if this might cost your business more. Statistically, 24% of shoppers will abandon their shopping cart if return policies are not clearly stated and 67% of shoppers will check the return policy page before making a decision.

At Perk by Kate, we communicate a fuss-free exchange policy and a 60-day returns policy, with refunds back to the mode of payment, not store credits. This removes the initial barrier of doubt, encouraging first-time customers to shop with us and repeat customers to keep coming back. Straight-forward and fuss-free return policies that are communicated clearly should be worn as an e-commerce business’ badge of honour and sign of its commitment to transparency and customer satisfaction.

We tend to underestimate the effectiveness of such an approach because we are often too focused on the immediate cost of executing a return or exchange. But experience has shown that a generous return policy builds consumer confidence and goes a long way to converting a first-time customer. It also gives our business another shot at retaining the customer after a less than perfect experience.

Service recovery as a way to win over (more) customers

When I first started, I was always badly affected by customer complaints. It really did hurt. But gradually I realised that every complaint was an opportunity to evolve and grow. While we may not get things right the first time or the next, we always learn from our customers.

With an adjusted mindset, we looked at each individual case as an opportunity to solve someone’s problem. We listen and then take the initiative to raise solutions, with the ultimate goal of making our customer’s day.

For instance, if a return is due to fit issues, we offer to make alterations to the order and send it back to them at no extra charge. We always pick the option of going the extra mile, just as anyone would for a friend. This dedication results in word of mouth and adds to the trust bank. Our satisfied customers became our most fervent supporters and marketers.

As we worked to keep our customer service top-notch, we found ourselves gradually handling fewer complaints and returns. Good reviews and words of encouragement started to pour in. It was a whole positive feedback loop. Customer service became easier and it gave us the time to focus on issues that really mattered.

Getting all of the above right is no easy task. It requires steadfast commitment to maintain an honest dialogue with customers, an open mind to feedback and criticism, and a good level of generosity to nurture long-lasting relationships with its customers.

We truly think that this approach is the only way for any e-commerce retailer to win and retain customers in a highly competitive retail landscape. At the end of the day, treat your customers right, say what you mean, and mean what you say. Build trust and goodwill over successive good experiences and that will mean the difference between a one-time customer and a lifetime customer.

Written by Kate Low, Founder of Perk by Kate, Entrepreneur