What is an RMA: Meaning, Use Cases, and Best Practices

Successful retailers leverage the following product returns blueprint: they leverage ecommerce returns management and tracking software; they automate the process with returns merchandise authorization (RMA) rules; and they offer choice and convenience to ensure a smooth customer experience. With this foundation in place, retailers can uncover and act on return trends to increase efficiency and decrease the number of returns, where possible. 

At the start, it’s important to determine what items are eligible for a return and prevent unwanted returns from making their way to your distribution centers and stores. 

That’s where RMAs come in. Here’s how effective RMA rules and technology can support your company’s returns process.

What does RMA mean?

Short for return merchandise authorization, an RMA — also known as a return authorization (RA) or return goods authorization (RGA) — is a formal approval you issue to customers who have requested to return or exchange merchandise. 

What is RMA used for? 

An important part of the reverse logistics cycle, RMAs serve several purposes.

First, they allow customers to notify your company that problems exist with their orders. When customers request returns, RMA technology can ask for more details regarding their issues on your behalf. This information enables you to identify the most appropriate means of resolution.

For example, say a customer is returning a pair of jeans because they bought two sizes to try (also known as bracketing). If the item is likely in good condition, you may route the item to the nearest store to quickly re-enter inventory. However, if the zipper is broken, you’ll want to send it back to a primary distribution center where it will eventually be returned to the manufacturer with other defective items. 

RMAs may be issued manually or — depending on your ecommerce system — you may be able to set return criteria that can automatically approve or reject RMA requests. For example, with Narvar’s return solution, you can specify time-limited returns windows (e.g. 30 days after purchase), only approve the return of items received in damaged or defective condition, or automatically decline the return of ineligible items, such as swimwear, intimates, or final-sale goods.

If an RMA is approved and an RMA number is assigned using RMA technology, this process can also be used to notify your warehouse team that return merchandise is inbound. If you’re using an inventory management system or ERP, the existence of an RMA makes processing returned merchandise for restocking, recycling, or reselling seamless. 

One additional, often overlooked use of RMAs is to capture important data. With the right technology installed, you can leverage in-built analytics tools to gain insight into how product improvements or process changes could reduce future returns. You can also use these numbers to benchmark company returns data against other brands to better understand your performance.  

How does an RMA work?

To understand how RMAs work, let’s look at their role in context of a company’s broader order and returns processes:

• Step #1: Your company sets its own return policies, rules, and fees (if any). This establishes a framework from which the RMA system can determine whether or not products are eligible to be returned. Depending on the technology used, more stringent guidelines can be applied to different product types or customer segments as needed to ensure a high-quality, personalized experience. 
• Step #2: Your customer initiates the return. The easiest way to allow customers to initiate returns is through a branded returns portal on your site. This portal should allow customers to specify the reason for the return, as well as provide any other details that are needed for manual or automated review. Ideally, customers should be able to specify at this stage whether they’re seeking a refund, repair, exchange, or other type of compensation.
• Step #3: The request is approved or denied. If the product meets your company’s specified return criteria, an RMA will be issued. Typically, the customer is provided with an RMA number, an RMA form, or both, along with instructions for returning the merchandise. 
• Step #4: Your customer returns the item. Depending on the capabilities of your ecommerce software, the customer may be asked to ship the return on their own or to drop the item off at a network return location. Narvar’s network, for example, includes more than 200,000 drop-off locations, such as The UPS Store, FedEx Office, Walgreens, and Simon Malls. 
• Step #5: Your company processes the return. Once the package arrives at your warehouse, the information associated with the RMA enables warehouse staff to process it efficiently. After you’ve confirmed that everything is in order with the return shipment, the customer’s account may be credited for the return amount, a replacement order may be issued, or other follow-up steps may be taken.

Why is RMA important?

Though return merchandise authorization benefits inventory management and reduces labor costs associated with returns processing, the role it plays in customer satisfaction can’t be overlooked. An overwhelming 76% of first-time customers who had an easy returns experience said they would shop with that retailer again. 

In this way, instituting an effective RMA process can actually be a part of your company’s competitive advantage. Eliminating much of the friction involved with returns instills a greater sense of loyalty in your customers, some of whom may go from being dissatisfied to becoming repeat buyers. 

On top of that, a well-established return merchandise authorization process can help protect your business from fraudulent returns. Although the vast majority of customers are honest, the National Retail Federation classified nearly 6% of returns as fraudulent in 2020. Returns technology can help limit fraud by requiring customers to upload photos with their return requests. You can then inspect returns to ensure they’re legitimate before issuing approval or having your customer ship the items in.  

Do I have to pay shipping for an RMA?

There are no hard-and-fast rules on who should pay the shipping costs for returns. That said, be aware that sellers are typically expected to pay for return shipping as a courtesy if the product is damaged or defective, or if it doesn’t match the listing description. 

If you’re at fault, paying for shipping can be the olive branch that prevents dissatisfied customers from taking their business elsewhere—not to mention, it’s the norm to pay for shipping if the product is damaged. 

If, however, customers simply change their minds or want a different product, they’ll generally be expected to pay for return shipping. In fact, of nearly 200 retailers Narvar studied, only Fortune 50 retailers cover return shipping costs across the board. On the other hand, 45% of omnichannel retailers and 22% of direct-to-consumer (D2C) retailers charge for return shipping. 

Implementing RMA best practices

The effective use of RMAs involves so much more than saying yes or no to individual returns. In fact, when addressed as part of your holistic returns process, automated RMAs can help you recapture up to 35% in revenue by encouraging product exchanges over returns.

To see how Narvar Return & Exchange makes omnichannel returns processing seamless for your company and its customers, request a free demo with a Narvar Return Specialist.