How to deal with product returns and refunds

Product returns and refunds are inevitable. In addition to losing that sale, you may have to cover delivery charges, restocking fees, plus extra employee hours. There’s also a dissatisfied customer on the other side of every return or refund. This means you could be losing future sales from that user – not to mention all the word-of-mouth marketing that individual might have shared with others.

Although refunds and returns may be unavoidable, it’s possible to reduce their frequency and severity. This article explains how to do that with a killer return and refund policy.

What is a return policy (and how do you create one)?

Although there are many types of return policies, they all exist for the same reason. These agreements explain how the business in question handles refunds, exchanges, and other types of customer complaints.

The challenge of designing an effective refund policy lies in being fair to yourself (as a business owner) while still addressing the needs and expectations of your customers. One simple way to accomplish this is through transparency. Rather than bury your refund policy in dense legalese, be upfront with the terms and conditions of every purchase.

Here are some of the details you’ll want to define – in plain English:

Do you even offer returns and refunds – or are all sales final?

How should customers formally request refunds and returns?

How do returns work (e.g., store credit or money back)?

Is there a grace period for exchanges (e.g., 30 days after purchase)?

Are there expiration dates on vouchers and credits?

Who covers shipping charges for returns and exchanges?

Are there restocking and handling fees for returns?

There are no wrong or right answers here. The goal is to manage your customers’ expectations so that they understand the who, what, when, and how of any product returns – in advance. The best return policies eliminate unnecessary confusion and surprises.

How eCommerce merchants should approach their refund policies

Having a clearly worded (and highly visible) return policy is a good idea for all business owners. If you’re an eCommerce merchant that sells to anonymous online customers, there are a few additional considerations that should factor into your return policy. That’s because card-not-present (CNP) transactions are often more prone to returns, exchanges, and refunds:

Online customers must buy before they try, which makes it harder for them to be 100% confident in their purchases.

Because you seldom meet customers face to face, it’s difficult to verify their authenticity. This makes it relatively easy for thieves to make unauthorized purchases using stolen credit card data.

Legitimate customers often knowingly buy items online with the deliberate intention of reversing the charge while keeping the goods. This phenomenon is known as chargeback fraud, with online merchants losing an estimated $20 billion annually.

Not only are returns more likely to happen in the online world, but eCommerce merchants often have to cover the shipping costs of returning the item. If there is an exchange involved, that online business must also pay to have the replacement item delivered to that customer.

A $1 widget could easily translate into $50 or more once you factor in all these additional delivery charges. How you handle this is ultimately up to you. Some small business owners have their customers pay for “reverse” shipping. Other businesses will cover these costs, but they factor these expenses into their overall pricing.

Either way, transparency is essential if you want to keep that customer returning.

Where should you post your refund policy?

Avoid the temptation of hiding your refund policy:

As a brick-and-mortar retailer, you should place your return and refund policy next to every POS system in your business. It’s also a good idea to include it on any electronic or hard-copy receipts so that users don’t need to “search” if and when they need to return an item. Clover makes this process even easier by allowing you to show and customize what you want customers to see on their receipt.

As an online merchant, you should place your refund policy on the checkout page – plus any confirmation pages and emailed receipts. Since some of your customers will look there, be sure to include a link to your refund policy in the footer of your homepage.

Even with all these extra precautions, your growing business will still have to deal with the occasional return, refund, or exchange. By quickly addressing user complaints (and improving your operations), you can turn dissatisfied customers into repeat buyers.

To learn how Clover POS solutions can help you better connect and engage with customers, schedule a free consultation with a Clover Specialist today.