Dealing with returns is a necessary part of doing business. Whether you are a B2B or B2C operation, eventually you will have a customer that wants to return merchandise. That’s why it’s important to understand what an RMA is, and the role it plays in your own business. In this article, we’ll cover what an RMA is, who needs one, and in-depth coverage of the process.
What Does RMA Stand for?
First things first: What does RMA stand for? The acronym “RMA” represents Return Merchandise Authorization.
In the overall process of returning a product to a business in order to receive a refund, the first part involves the RMA. In this phase, the organization and the customer discuss the problem and the business will determine the validity of the issue. This is made possible through a form that is usually included for the customer to express return reasons, which is documented later on (like a shipping label) to accelerate the process and let business owners know what is wrong with their goods.
This is important in the reverse order fulfillment cycle because it gives the business insight into product problems and allows them a chance to address the issues. Furthermore, an RMA gives the warehouse a heads up that products will be coming back, which will have an impact on warehouse processes.
What Is an RMA Number?
It all begins with an RMA number – the number assigned by a business to a particular order to authorize a product return. It’s used to track products as they are processed and update any ERP or warehouse inventory management software. The number will be scanned upon arrival which enters the product into the return system.
Why Do Online Stores Need RMA Systems?
RMA systems are helpful for any organization that wants to better track their return process and gain insight into problem areas, but especially for online retail. At least 30% of products ordered online will end up being returned. Online stores use RMAs because returns involve another set of employees and systems – and since they’re a vital part of keeping customers happy – it’s essential to streamline this process as much as possible.
RMA systems are also particularly important for businesses that provide servicing and repairs for product returns. That’s because such returns must be processed both as they arrive and as they leave. In these cases, tracking is vital so nothing gets lost and the products don’t get mixed in with new product shipments.
There are multiple benefits to having and optimizing an RMA system.
The RMA process keeps customers loyal
As customers increase their online shopping, they rely on the ability to return items that are ineffective or a bad fit. Since it’s not possible to produce 100% perfect products, it’s essential that you correct mistakes as quickly as possible. This means that you have a solution for addressing issues in the production process or sending the right goods to people who’ve received the wrong items.
Show customers in advance that you’re willing to take responsibility for your product and return goods, and you’re more likely to have people come back for return business.
RMA systems save time
Even if you tend to get very few returns, processing them manually is inefficient and leaves room for error. In fact, many organizations find managing returns on a case-by-case basis almost impossible. A comprehensive RMA system typically includes the RMA itself, which is generally some form of documentation the customer fills out to justify the return, a printable return label sent to the customer, and a backend processing system that plugs into your inventory system. Managing all of these items from one location is a big time-saver.
An RMA system offers transparency and consistency
Firms that use an RMA system enjoy having them! This is because this system can log returns back into inventory immediately so their record reflects the return.
In addition, an RMA will calculate the required shipping fees and the loss on your revenue and profit; this will ultimately enable you to see how the return negatively affects your financial statement. Having a go-to process each time there’s a return ensures uniformity in how they get done, as well as peace of mind, knowing things were done correctly and the numbers are reliable.
Understanding the RMA Process
The RMA system involves many moving parts, but your focus should be on keeping things simple for the customer. A streamlined process ensures that you realize the benefits we mentioned above like customer loyalty.
To create an RMA process, you can follow these simple steps down below.
Define return policies and processes
If you don’t have a solid understanding of what can be returned and why, you risk confusing customers, frustrating warehouse staff, and complicating things on the backend.
Establish not only firm timelines for returns, but also valid reasons for returns. Review any policies you have on returns and make sure they will be easily understood by customers. Your goal is to be accommodating and fair in your policy; while also avoiding ending up with a bunch of deadstock from excessive returns.
Create an RMA form
You need a form for customers to fill out that will provide the data you need. Think about what information you will need to help the warehouse management process flow better. At a minimum your form should include fields for:
- Customer information: like a name, phone number, and address
- Product data: order numbers, the items being returned, and how much (quantity being returned is especially important)
- Reason for return: we suggest offering a series of checkboxes to choose from
- Return or refund: you may only offer one or the other; if you provide both options make sure people specify which they are hoping for
Address shipping and handling
How will you handle shipping or picking up defective products? You may choose to include a packing slip and a pre-paid return slip with products. It’s also important to understand common box sizes and what to do with oversized packages. As you work through this process, ensure that you can actually afford to cover returns and that the information is included in accounting processes.
Don’t have an RMA?
According to a report by CNBC, returns are a costly function of operating a retail business. Only half of the previously returned goods will sell at full price; the rest will take a loss leading to financial concerns. With such an impact on your business at stake, it’s essential to have an effective RMA system in place. Doing so will help you to get items back into inventory as quickly as possible while satisfying your customer (and hopefully creating more loyalty).
If you don’t have the time or the bandwidth to create or manage an entire RMA system, you can rely on an experienced partner. A 3PL, like Print Bind Ship, can help you to streamline the returns process, leading to several competitive advantages. We can offer a convenient, centralized hub for processing returns; as well as scalable resources for busy times and parcel management to control package transportation costs. Many online businesses work with a 3PL to manage this critical aspect of their sales cycle.
To learn more about RMAs and other logistics processes that affect your online business, visit our resource center and read the latest insights from experts.