According to a study by William Sherrard, professor of information and decision systems at San Diego State, retailers and e-tailers have almost universally liberalized their return merchandise policies.

Many retailers have adopted a policy that the customer is always right and, therefore, if the customer doesn’t want what they just bought, they should be able to return whenever they want. Some companies wear this kind of policy like a badge of honor. Rite-Aid tells customers to try a lip stick and, if they don’t like it, return it for a full refund.

Other companies, however, have decided to draw a clear line in the sand.

For L.L. Bean, that line began at death. When one customer decided to try to return their dead relatives work clothes, the clothing company informed the man they would not allow a return merchandise authorization.

According to a survey of etailers from 2005, the average returned item ended up costing between $6 and $10. It is clearly in etailers’ best interests to minimize the number of returns they have to process. But how exactly can they do that?

The best way to handle this aspect of risk management is to clearly delineate the company’s policy on returns. If the procedures and rules for RMA are laid out clearly, customers will not have much of a leg to stand on. Merchandise that is still in perfect condition (as per your hypothetical RMA policy) can still be placed back into stock but damaged items or items without a receipt (as per your hypothetical RMA policy) will be rejected.

It is inevitable that you will occasionally run into tougher customers. They might scream and they might cry, and, unfortunately, it might be best to give in. These customers can be handled on a case-by-case basis but if you feel that you are risking losing a paying customer, you should seriously consider giving in.

In order to reduce the cost of returned merchandise, consider implementing self service return software with your ecommerce store. According to the survey, 78.4 of etailers who participated in the survey use self service return tools. These tools cut the amount of work handled by the customer service department by 33-43 percent.

The best strategy for return merchandise authorization is to:

– clearly communicate policies

– handle difficult customers on a case-by-case basis

– enable customers to handle their own returns.

Return merchandise authorization can be a tricky beast, but if you can get this cost center under control, you’ll have happier customers and a healthier bottom line.