Don't refund shipping charges: If followed our advice and you're now making a decent profit on your shipping charges by using cheaper materials, then you might still be able to come out ahead with returns. Just refund the charge of the items but not the shipping. I know sellers who make $1 profit on the sale and $2 profit on the shipping. If they get a returned item then they don't really mind: they still get to keep two-thirds of their profit.

Charge a restocking fee: You're perfectly within your rights to charge a restocking fee, and that's nothing but profit for you. Bear in mind that this will get customers very annoyed, however.

Resell with a better description: Now that you know if there's something wrong with the item, you can write a more honest description. Surprisingly enough, items can sometimes sell for more the second time around, simply because word has had time to spread that you were selling the item and there might be a few people looking out for another.

Take their packing materials: Inexperienced buyers will send back your items using all sorts of expensive luxury packing materials – take them and re-use them the next time you want to give a buyer an extra special service. Incidentally, this also applies when you buy things on eBay – you'll find that you can save a lot on packing when you re-use every piece of packaging that comes your way. Make sure to take off any labels first, though.

You know what they want: Remember that every buyer who buys something from you and then returns it was at least interested in it. They're a potential sales lead, and you should add them to your mailing list to follow up later – if you were nice to them when they returned the item, they might be willing to give you another chance.

Replace with a better model: Finally, if the buyer is returning the item for a replacement, then tell them that the only replacement you have in stock at the moment is a slightly more expensive model – but you'll send it to them if they pay the extra. Again, more profit for you.

Of course, it's up to you whether you want to use these techniques: you might think it's more valuable to refund the shipping on returns as a gesture of goodwill, as part of your perfect customer service. I would tend to agree with you: your reputation is invaluable. If what you're interested in is making as much profit as possible in the short term, then go right ahead – but remember that in the long-term you might be sacrificing some repeat business for the sake of a few dollars.

In the next email, we'll look at the myths and magic of drop-shipping vendors, and what they can do for you.