What is Sales Return?
Sales return refers to the process where a customer or retailer returns a product to the seller due to various reasons such as defects, dissatisfaction, incorrect shipments, or warranty claims. Managing sales returns effectively is crucial for brands as it impacts revenue, inventory management, and brand reputation. An efficient sales return process ensures that genuine products are accepted back while fraudulent returns are prevented, thereby safeguarding the brand from financial losses and supply chain inefficiencies.
Sales returns can be classified into:
Consumer Returns: When end customers return products due to defects, dissatisfaction, or wrong orders.
Retailer Returns: When retailers return unsold or defective inventory to the manufacturer or supplier.
B2B Returns: When businesses return bulk orders due to contractual issues, damaged shipments, or incorrect specifications.
Reasons for Sales Return
Sales Returns can occur due to many reasons depending upon the requirements of different types of customers; let us have a detailed glance at a few of them:
1. Wrong Product Specification
The most typical reason for sales return is the wrong product ordered by the customer. It may be ordered in the wrong size, quantity, or colour option. Due to such reasons, the customers prefer to return the product, which hampers a business in various ways. If the product is mishandled by the customer and returned inappropriately, it also affects the business. Hence, a clearly defined return policy helps the company and the customer deal with issues in such situations.
2. Wrong Product Delivered
The situation mentioned above often is vice versa. The company delivers the wrong product to the customer, which results in a sales return. It, too, hampers the profits charts of a business and hence should be paid attention to by a company to avoid such situations. Such situations can only be avoided when the employees are trained professionally along with the internal department.
3. Damaged or Defective Product
Another primary reason observed for sales returns is the delivery of defective or damaged products. It can happen due to mishandling while shipping the product. Hence, to avoid such scenarios, careful dispatch and shipping of the product should be taken care of. A company's return policy clearly highlights shipping the right product to the customer or returning their money under such scenarios. Secure packaging and special packaging for fragile items are essential to lower the product return scenarios.
4. Late Delivery
Many business websites display the date of assumed product delivery when the customer places the order. It helps the customer to take the date of delivery of their product and, hence, place the order accordingly. But if the product arrives late due to any reason a customer may return the product. The customer may not need the product after a specific date or expect it to come on the correct date for a particular occasion. Such circumstances too hamper the profits of a company. Hence, the company should also avoid such situations for smoother profits.
5. Unexpected Quality of the Product
A customer often orders a product by getting influenced by its high-quality image displayed on the website. It leads the customer to order a product without reading its description. Hence, many times, the quality of a product doesn't match the customer's expectations. Therefore, customers are always advised to read the product description and details carefully before placing an order. Hence, this is also one of the reasons for returning an order. In such situations, the company's policy comes to the rescue and helps the company to make the right decision without hampering the image and reputation of the brand.
How to Authenticate Sales Return?
Though sales return is a customer's right to allow one to replace the wrong product and get the right one, sometimes the return policy may have some loopholes, which many fraudulent customers can misuse. It can be a massive loss for a company and may hamper its reputation in the market. A well-structured authentication process ensures that returned products are genuine, returned for valid reasons, and do not re-enter the supply chain fraudulently. Below are the key steps brands should follow to authenticate sales returns in their supply chain.
1. Implement a Robust Return Policy
A brand must establish a clear and detailed return policy that outlines the acceptable reasons for returns, the timeframe within which returns can be made, and the required condition of returned products. This policy should be easily accessible to customers and strictly enforced to prevent fraudulent returns. A strong return policy also helps set customer expectations and reduces return abuse.
2. Verify Product Authenticity and Condition
Upon receiving a returned product, brands should first verify its authenticity. Counterfeit products often find their way into return channels, which can negatively impact the brand’s reputation and financial stability. Brands should use unique identification technologies, such as serialised QR codes, holograms, or digital fingerprints, to authenticate whether the product being returned was originally sold by them.
How Acviss’s Origin Helps:
Acviss’s Origin solution enables brands to track and trace products across the supply chain using blockchain technology. Each product is assigned a unique, non-cloneable identity, allowing businesses to authenticate returns in real-time. The product’s code allows brands to verify its authenticity and determine whether it has been sold through an authorised channel.
3. Match Return Requests with Sales Records
A crucial step in sales return authentication is cross-referencing the return request with the original sales transaction. Brands should maintain a well-organised database of sales transactions that include details such as invoice numbers, purchase dates, and customer details. If a return request does not match a legitimate sale, it should be flagged for further investigation.
4. Inspect the Product for Damage or Tampering
Returned products should undergo a thorough inspection to check for any signs of tampering, damage, or fraudulent return attempts. Brands can categorise the condition of returned items into:
Resalable Condition: Can be restocked and resold.
Repairable Condition: Can be refurbished before resale.
Non-Resalable Condition: Must be discarded or recycled.
Using digital tools and AI-powered image recognition, brands can streamline this process and automate the identification of return fraud patterns.
5. Authenticate Return Reasons and Customer Claims
Customers often provide reasons for returning a product, such as receiving the wrong item, product damage, or dissatisfaction. Brands should validate these claims by analysing previous return patterns, customer feedback, and product quality reports. A high frequency of returns from a particular customer or region may indicate fraudulent activity.
6. Leverage Technology for Real-time Return Authorisation
A technology-driven return authorisation system allows brands to instantly approve or reject return requests based on predefined rules. These systems leverage AI-powered fraud detection to analyse historical return data, assess risk levels, and ensure compliance with return policies.
Machine Learning Algorithms: AI can detect anomalies by comparing return patterns with past transactions and flagging suspicious requests before approval.
Geolocation & Behavioral Analysis: Advanced fraud prevention tools can analyse the location of the return request and the behaviour of the customer to detect inconsistencies.
Automated Decision-Making: Integrated return management software can instantly approve or deny returns, reducing manual intervention and operational delays.
7. Track Returns in the Supply Chain
Returned products should be tracked through the supply chain to ensure they do not re-enter unauthorised sales channels. Brands can use blockchain-powered track and trace solutions like Origin to log each return event and ensure that returned goods are processed according to company policies.
Immutable Recordkeeping: Blockchain ensures that every return is logged transparently, preventing tampering or unauthorised resale.
Smart Contracts for Compliance: Automated smart contracts can enforce return policies by validating whether the returned product qualifies for refunds or replacements.
Integration with Logistics: Real-time tracking can help brands identify where returns are bottlenecking, improving supply chain efficiency.
8. Prevent Unauthorised Retailer Returns
Unauthorised retailers sometimes exploit return policies to push back unsold inventory, leading to financial losses for brands. To counteract this, brands should establish a return validation system that includes:
Retailer Authorisation Checks: Verifying if the retailer submitting a return is part of the official distribution network.
Product Serialisation Matching: Cross-referencing unique product IDs with sales records to confirm if the product was originally sold through an authorised channel.
Geo-fencing Controls: Restricting returns from regions known for counterfeit or unauthorised retailing activities.
9. Analyse Return Trends and Optimise Supply Chain Processes
Maintaining detailed records of sales returns helps brands analyse trends and identify patterns of fraudulent returns. By leveraging AI and data analytics, brands can:
Identify High-Risk Customers & Locations: Heat maps and behavioural analysis can highlight regions or customer segments with excessive return rates.
Optimise Inventory Management: Understanding return trends helps brands adjust stock levels and reduce overproduction.
Enhance Product Design & Packaging: By analysing defect rates and reasons for returns, brands can proactively improve product quality and durability.
Case Study for In-depth Study
Issues such as unauthorised retailing are also dangerous for brands in the market. They, too, can damage a brand's reputation in the market. The fraudulent brands in the market may damage the goodwill of authentic brands. Hence, keeping track of such fraudulent activities and maintaining authentic supply chain traceability is essential.
A global agrochemical leader faced critical challenges in managing its supply chain, including unauthorized sales returns, counterfeit infiltration, and a lack of visibility into product movement. To combat these issues, the company partnered with Acviss and integrated the Origin track and trace solution, enabling them to assign unique, non-cloneable identities to each product.
With the solution, the company achieved 100% visibility across its supply chain, drastically improving inventory control and fraud detection. The traceability reduced unauthorized returns by 30%, preventing revenue leakage. The solution also enabled geo-location tracking, identifying high-risk regions for counterfeit infiltration and restricting returns from unauthorised sources.
Is Recording Sales Return Important for a Company?
Recording sales returns is essential for a company to overlook its functioning, rectify issues, and keep track of various other elements. It also helps prepare growth reports and keeps track of the problems interfering with the company's growth.
Let us have a detailed look at some of the necessary points defining the importance of recording sales returns for a company:
1. Analysing Profits: One of the significant reasons for recording product returns is understanding the company's profit. Returns do not profit a business well. Hence, companies try to work on that aspect and lower it as much as possible. Thus, recording them helps to have a detailed glance at the company's profits.
2. Understanding Trends: If a company receives higher returns from a specific location than other places, then analysts study the cause and understand the reason. Changes in trends depending on the geographical area can also lead to returning of a product. Keeping track of such possibilities and understanding the trends also helps a business diversify. It also helps improve customer satisfaction and maintain goodwill in the market.
3. Improvement Aspect: Another important reason for maintaining the record is to make timely changes to a required product. For example- if a company sells huge packages of a particular product but people are searching for travel-friendly sizes, it may reflect higher sales returns. In such situations, records help to glance at the possible reasons and allow the company to make the necessary changes.
Conclusion
Acviss is one of the best companies to help you manage situations like counterfeit and fraudulent activities. With the help of their latest and updated technology, they help to trace such activities and allow companies to take a sigh of relief. Sales returns can become serious if unresolved at the right time. Hence, such aspects should be immediately taken care of and not procrastinated to lower the losses.
