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Consumer Returns

RMA Meaning: What is an RMA and why is it important for SMB retailers and marketplace sellers?

What is an RMA? A fundamental question in eCommerce

Small-medium-business (SMB) retailers and third-party (3P) marketplace sellers navigating through the exciting and dynamic world of eCommerce will inevitably encounter a critical consideration— “What is an RMA?”This question will certainly resonate with SMB brands who are scaling their independent online store, newcomers starting out on third-party (3P) platforms, or 3P sellers who are expanding and diversifying their presence across multiple eCommerce sites.

Grasping the nuances of a Return Merchandise Authorization (RMA) is essential to grow a retail business in eCommerce. An RMA is the cornerstone that supports customer satisfaction and operational efficiency in the post-purchase journey, which is equally as important as forward sales in a customer’s overall online shopping experience. An easy return process is vital to online shoppers since they are purchasing products they have yet to physically experience, try on, or test. Customers avoid shopping with retailers who have complicated, cumbersome and/or costly return policies.

However, free and flexible return policies are often taken advantage of or abused creating a financial liability for retailers. The stark reality that eCommerce sellers must deal with is that the rate of returns doubles when shopping online in comparison with brick-and-mortar stores. Typically, eCommerce businesses see a return rate ranging from 20% to 30% with contributing factors such as customer dissatisfaction with the product, incorrect sizing, or a mismatch between the actual product and the customer’s expectation.

With this high rate of returns in mind, having an effective RMA system in place to streamline your return process offers benefits to both your shop and your customers. Investing in an advanced RMA return management software and developing an RMA strategy is a testament to your brand’s commitment to customer satisfaction. It reassures customers that your business is responsible and professional, which in turn fosters loyalty and encourages repeat business.

An RMA software can also protect your brand and safeguard your revenue from the increasing prevalence of return fraud. Not all return requests are genuine and return fraud can significantly impact your bottom line. An effective RMA process helps detect and mitigate return fraud by requiring validation of purchases prior to authorizing a return request, thus deterring fraudulent activities, as well as flagging abnormal behavior.  

An innovative RMA software will also include additional capabilities such as defining a trusted customer by allowing you to preset specific criteria customized for your specific business as well as other features to deliver the best shopping experience, save the sale, and recover lost return revenue.

In this article we'll explore what an RMA is and examine how an effective RMA strategy coupled with advanced returns management software, can significantly contribute to the growth and resilience of your eCommerce retail business.

RMA meaning and why it matters for eCommerce returns processing

As mentioned above, RMA stands for Return MerchandiseAuthorization. When a customer decides they want to return or exchange an item they bought online, they must request a return from the merchant. An RMA is the official permission a customer receives to return or exchange the item.

An RMA encompasses a system, typically utilizing a software, that manages the return or exchange of products sold. Once a return is initiated by the customer and confirmation is given by the merchant, an RMA number is issued to track the return transaction and ensure that the customer’s return is handled efficiently and within a seller’s return policy guidelines.  

The RMA process begins when a customer requests a return and ends once the claim is closed. However, there are many routes that can be taken to get from point A to B, and just because the claim has been resolved doesn’t necessarily mean that the returned product has reached its final destination. When it comes to RMA, just as with many things in business and in life, the journey is justas important as the destination.

The RMA lifecycle

The RMA lifecycle starts when a customer decides to return a product and ends when the returned item is processed, restocked, discarded, or replaced. The RMA process involves several steps:

1.    Return Request: A customer requests a return through an online customer service channel, such as a returns or resolutions portal on the original marketplace.

2.    Return Authorization Form: The return authorization form is a key document and an essential step, detailing the reasons for a product's return and giving clear instructions to the customer. It also collects vital data on the customer and the product, which can inform future improvements for the brand.

3.    RMA Number Issuance: If the return is warranted, an RMA number is issued along with a tracking number and printable shipping label.

4.    Product Return: The customer sends the product back with the RMA number enclosed. Depending on the merchant’s returns policy, shipping may be covered by the merchant, or already built into overall product pricing, or there could be an additional charge for the customer. Alternatively, the customer may be incentivized to partake in BORIS (Buy Online, Return In-Store) and bring the product back to the store, if the merchant has a brick-and-mortar establishment.

5.    Reception and Inspection: The returned item is received and inspected for compliance with the return policy.

6.    Return Processing: Depending on the return reason and item condition, actions like refunding, restocking, repairing, or issuing a direct exchange are taken. At this point the claim is closed and the RMA process is complete.  

However, just because the claim is closed does not mean that the product has reached its final destination, and so our journey continues and having an effective strategy to manage the RMA and post-RMA process is key to success and maintaining a competitive edge.

Solve returns with an effective RMA strategy and software

Having an RMA strategy empowers eCommerce shops to transform returns into profitable opportunities for growth and customer satisfaction. By implementing a returns management strategy backed by sophisticated RMA software, eCommerce businesses of all sizes can simplify the returns process.

This modern approach not only alleviates the logistical challenges associated with returns but also provides valuable insights into consumer behavior. These insights can then inform product development and enhance customer service approaches. When the post-purchase experience is managed effectively through professional RMA software, rather than manual methods like email, it elevates a brand's image and promotes customer loyalty and repeat business.

goTRG offers two types of RMA software: ReturnPro is an AI-powered RMA software for SMBs and 3P sellers that can be configured, white-labeled and ready to go in as little thirty minutes; and R1, a more nuanced RMA software for enterprise retailers. Both products provide end-to-end returns management solutions with Value-Add Services to bring returned items back to pristine sales condition and ReCommerce capabilities to increase profit recoveries for sellers while reducing waste and environmental impact.

When developing an RMA strategy, you should first consider your immediate and long-term business goals and choose a software with the following features to build brand longevity and create an optimal post-purchase experience:

Marketplace integration

A proficient RMA software should have the capabilities to integrate into any eCommerce platform and 3P marketplace account. You should use an RMA software that can seamlessly connect with multiple marketplaces in one portal.

The issue many sellers find, especially as they start to scale and diversify platforms is that most RMA management software will allow a merchant to connect to only one platform per account. If a seller has a presence across more than one, this may pose an inconvenience as they would have to individually manage the returns separately across each platform.

Sellers expanding their presence across multiple online marketplaces frequently encounter this bottleneck since many RMA management systems are designed to interface with just one platform at a time. This limitation forces merchants to handle returns for each marketplace individually, which is an inefficient and time-consuming process. 

The ideal RMA software should offer a unified solution, allowing sellers to centralize their returns management across all marketplace accounts within a single system. Such a solution would eliminate the need for multiple accounts and the hassle of separately managing returns on each platform, streamlining the process and saving valuable time and resources.Therefore, it's crucial for sellers to seek out RMA software that supports integrated, multi-platform connectivity, ensuring a more cohesive and efficientRMA returns process.

Post-purchase experience

A cutting-edge RMA software can empower your business to elevate above your competitors by enhancing your customer’s post-purchase experience. Systems that offer customization, such as branded returns processes, language and currency options, and editing tools, significantly improve the customer's post-purchase journey.

With 91%of shoppers making online purchases using their smartphones, it is also vital to create a seamless post-purchase experience that is mobile friendly as well ensuring that your website and returns portal looks and functions well on mobile devices.

Furthermore, a sophisticated RMA platform will enable you to recognize and reward 'trusted customers' with immediate refunds, fostering a deeper sense of trust. By adopting a strategic RMA approach, including fraud detection and streamlined drop-off solutions, you not only secure customer loyalty but also increase retention rates. These features, along with proactive communication, are essential for a thriving e-commerce presence.

Tactics to save the sale

A well-designed RMA strategy provides a selection of options and incentives for customers to choose anything but a full refund, aiming to retain sales and protect your profits. Intelligent RMA software supports this by offering adaptive refund solutions, encouraging repurchases, and simplifying the exchange process, including store credit and 'keep it' alternatives.

The ideal RMA software offers flexibility for sellers, allowing you to customize refund methods, promote repeat purchases with incentives, and facilitate smooth exchanges. This allows for efficient handling of returns, tailored to enhance the customer experience and sustain business profitability.

Trusted customers and instant refunds

An efficient RMA strategy is key for maintaining customer satisfaction and loyalty. It should allow you to identify 'trusted customers' and provide them with instant refunds, leveraging algorithms for a seamless experience. Effective management of these customers involves customizable settings for swift refund activation. This intelligent approach to RMA not only helps to secure customer satisfaction but also aligns with business objectives, offering repurchase incentives and streamlined exchange processes that can convert returns into strategic opportunities for growth.

Efficient logistics handling

Select an RMA system that streamlines the complexity of returns with a broad network of drop-off points and competitive shipping arrangements, including adaptable carrier options. An exemplary RMA platform offers savvy financial management and geolocation features, balancing profitability with logistical accuracy.

Proactive communication and notifications

In the digital commerce space, the importance of proactive communication and efficient notification systems cannot be overstated. Sellers need RMA solutions that offer thorough tracking and centralized messaging to maintain transparency and build trust with customers. A centralized system is particularly advantageous for merchants who operate across multiple platforms, as it consolidates communications and simplifies management. Such a system ideally supports diverse communication channels tailored to customer preferences, enhancing their experience.

Hassle-free setup and insightful reporting

User-friendly setup procedures and detailed dashboards for insights are also crucial, enabling easy onboarding and valuable data analysis.For any e-commerce business, the setup and reporting capabilities of RMA software are pivotal. Streamlining the onboarding process with user-friendly tools, such as a self-guided setup wizard, is essential. Access to a comprehensive dashboard for monitoring key performance indicators, standardized reporting, and the ability to perform on-demand data exports can significantly enhance a business's ability to analyze and respond to return patterns. Features like in-app messaging and robust customer support further empower businesses to efficiently manage returns. Implementing geolocation and customized routing rules can optimize the logistical aspects of returns, making the system more efficient. It's advisable to choose an RMA solution that simplifies these processes and provides these insightful analytics tools for your eCommerce business. 

Access to additional services for optimizing profit recovery

Beyond the standard RMA software functionalities, it is valuable consider a returns process that also simplifies your management of reverse supply chain services, which can significantly enhance profit margins.To achieve this, seek out a returns management and/or reverse logistics provider that can bring returned products back to life by offering services such as receiving, sorting, return-to-vendor (RTV), inspecting, repairing, sanitizing, refurbishing, data wiping, grading, testing, repackaging, and fulfillment.

In addition to preparing products for resale, employ a system with an AI-powered financial disposition engine to maximize profitability by distinguishing and choosing the most lucrative path that minimizes touches and maximizes profitability. This multifaceted approach in your RMA strategy promises to solidify a more streamlined and profitable business operation.

Maximizing recoveries by leveraging the circular economy and ReCommerce

To raise your RMA strategy to the next level, for items that cannot be resold in the original marketplace, you can re-list and re-sell returned products on multiple marketplaces to maximize chances for the quickest and highest recovery. Embracing ReCommerce tactics, including the strategic use of templates and pricing adjustments according to product conditions, can increase inventory turnover and aid in recouping revenue from returns and excess stock.

Many times, SMBs and 3P sellers may not have the extra resources to focus on the secondary market, as your first priority remains forward sales. There are secondary-market service providers who can handle the entire ReCommerce process efficiently on behalf of merchants including the management of catalog, pricing, listing, marketplace, velocity, returns, customer support and brand protection. These are great partners to have, not just for returned items, but also for excess inventory to optimize overall revenue recovery as well as promote environmental sustainability by proactively participating in the circular economy, ensuring returned products don't end up in landfills.

Conclusion: Scaling returns management in a booming eCommerce era

By 2026, it is expected that 24% of retail purchases will take place online. The eCommerce retail industry continues to grow and flourish through continuous innovations and integrations. However, the surge in online sales has also led to an increase in returns and return fraud, casting a new light on the importance of the post-purchase experience. Effective RMA management has become a critical component in cultivating brand loyalty and customer satisfaction.

Retail eCommerce sales worldwide have grown by more than 20% since 2021 from $5.2 trillion to $6.3 trillion at the close of 2023. With more than 26 million eCommerce websites worldwide, the United States is leading the way in eCommerce with 14 million sites, significantly outpacing other countries with the United Kingdom coming in second at only 1.24 million. New eCommerce businesses are popping up on the daily to meet the growing demands of 270 million online shoppers, as of 2023, with projections for the total number of digital consumers to reach 334 million by 2028, according to Statista projections

Key players in the market include companies such as Amazon,JD, Taobao, Tmall, Apple and Walmart. However, there are many SMB and individual 3P sellers that are leveraging innovative platforms like Shopify, Salesforce, Amazon, eBay, BigCommerce, Etsy, WooCommerce, Wix, AdobeCommerce, GoDaddy, or, just to name a few.

As the eCommerce landscape continues to expand and become more competitive with projections indicating that nearly a quarter of retail purchases will shift online by 2026, the role of Return Merchandise Authorization (RMA) strategies in fostering customer loyalty and satisfaction becomes increasingly prominent. Effective RMA management stands out as a crucial aspect of maintaining competitive advantage and ensuring sustainable growth.

The transformative power of RMA solutions like ReturnPro lies in their ability to streamline the post-purchase experience, mitigate return fraud, and harness the opportunities presented by the circular economy. Looking ahead, eCommerce businesses must prioritize advanced RMA processes to adapt to consumer needs, enhance operational efficiency, and ultimately drive the industry forward in this era of digital retail.

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