Navigating Returns and Refunds

The E-Commerce Merchant's Guide

Written by Rebekah Moss 02 Sep 2020 - 4 minutes reading time

Encountering returns in business is something that e-commerce merchants are undoubtedly more susceptible to than in-store merchant retailers.

While returns rates in-store sit at an average of 8%, they're higher at 25% for e-commerce goods.

However, dealing with refunds and returns is an inevitable business practice no matter what commerce channel you operate in.

Discovering the best practices to dealing with returns and refunds will allow you to turn your checkout flow and returns policy into successful parts of your customer journey.

First, let’s look at what can lead to an increase in high return rates:

Your Payment Strategy

Facilitating a checkout with high order values can be a bad thing, depending on how your customer decides to pay.

A perfect case study - Germany’s above-average return rate of 70% in some sectors, coincides well with their preferred payment method of invoices.

Germany has one of the highest return rates in Europe - up to 70% in some sectors. Combined with 70% of Amazon.de’s consumers still choosing to pay via invoice despite Paypal overtaking as the preferred payment method in other sectors, it is clear why this is a dangerous combination.

Additionally, with a 14 day, no-reason returns policy acting as the mandatory standard across the EU, paying by invoice and instalments can create a pattern of false positives for merchants across a majority of their transactions.

Not only is a customer given leniency on when and if to pay, this ‘no down payment’ invoice ethos encourages a dangerous behaviour of ordering in bulk to the tune of a high purchase value - with every intention of making a return.

Reasons for this could include:

Their isn’t a clear sizing guide online for clothing items. 19% of shoppers order goods in various sizes or forms in order to make a decision upon delivery.

The customer wants the choice to decide later at home. In fact, more than 30% of e-commerce shoppers over-order goods with the intention of returning items.

The customer later doubts their purchases.

The customer has used and wants to return their product within the return time frame.

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Your Return Policy

More than 60% of shoppers thankfully will review a returns policy before making a purchase online. However, for a merchant - using a generic returns policy either leaden with loopholes or equally full of legal jargon, can lead to disputes later on.

Fashion retailers and department stores experience return rates of nearly 16% and up.

As mentioned, a dangerous rise in a dispute related returns can lead to a lack of customer retention and chargebacks.

Regardless, a surge in returns due to an ineffective returns policy can also contribute to false positives in conversion rates and revenue.

What can you do?

Amending your returns policy

Your returns policy should form part of the customer journey in remaining consistent with your tone of voice and brand authority. Although returns and refunds can spell false positives for your company, this process needs to remain frictionless for your customer, and your policy and terms should be reflective of this.

Assessing your inventory

Alternatively, as a merchant, you should be aware of the point in the checkout process wherein you limit order cancellations or modifications to prevent any unnecessary returns.

You should regularly take stock of your sales history to see which items sell well, and which items are more subject to returns - requesting reason codes upon returns.

Customer Service

Much like any established brand authority on your site, any customer service given to assist with returns and refund should be seen as an extension of the customer journey.

Shipping Costs

A key factor in high return rates might come down to your shipping costs. Whilst some shoppers might spend more in order to clear free shipping barriers, it can ultimately lead to returns on last-minute basket fillers. Offering transparency on shipping costs before a shopper even gets to their basket will reduce the impulsivity behind these purchases and the customer is more likely to pay a small fee to receive their items faster.

Risk Mark-Ups

Covering the cost of projected losses made through refunds is common business sense. The two best practices behind covering these losses are through product pricing and shipping costs.

33% of e-commerce merchants ease the returns process by charging more than what’s required for delivery, whereas 20% of merchants will mark-up the price of their products in anticipation of potential returns.

Ultimately, 57% of merchants still found dealing with returns and refunds to have a negative effect on the cost of doing business on a daily basis. These steps should be considered the best practices for a merchant to start implementing in order to turn their returns processes into efficient rentention drivers online.

Discover more on streamlining your end-to-end checkout processes with Total Processing today!

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