Chargeback Prevention

Customer Return Policy Optimization Tips 2020

Return Policy

In the early days of ecommerce, returning a product you’d purchased online was a hassle. All the convenience of shopping from your computer seemed to evaporate when you’d have to repackage a product and wait in line at the post office to send it back.

Reusable boxes, pre-printed shipping labels, and other conveniences have taken a lot of the sting out of returning an online purchase, but some merchants find easy returns to be a double-edged sword. How can merchants create return policies that keep customers happy without putting too much of their revenue at risk?

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There’s no question that an easy, hassle-free return policy is a must in the current era of ecommerce. Consumers expect it, and positive return experiences can actually go a long way toward building loyalty—if a customer knows they won’t be stuck with a purchase they changed their mind about, they’re more likely to keep shopping with you.

According to a survey conducted by the ecommerce services company Narvar, 31% of first-time shoppers won’t make a second purchase at an ecommerce store if they have a bad experience making a return. Even longtime customers can be put off by a problematic return, and most retailers will have firsthand experience of this. Worse yet, many unsatisfactory return experiences turn into chargebacks, especially if the merchant takes too long to process the refund.

What Are the Downsides of Easy Returns?

The truth that must be acknowledged about easy return policies—and the thing that keeps many merchants clinging to more restrictive policies, despite the friction it causes with customers—is that they don’t come without a cost.

First off, any shipping materials, prepaid return labels, or other conveniences that you furnish your customers must be paid for out of the merchant’s own pocket.

The other part of it is that when returns are easy, customers will make more returns. When loyal, repeat customers are making those returns, it balances out somewhat, but easy returns also encourage practices like “bracketing,” where customers order multiple similar items and only keep the one they like best, and “wardrobing,” where customer purchases an item for one-time use (like buying a fancy suit for a big event) and returning it afterward.

Merchants can’t always resell returned items, and even when they can, repackaging and restocking costs often apply, and the merchant may have to mark the price down.

While some industries (such as apparel) are always prone to high return rates, merchants should always analyze their returns to try to figure out why they are occurring. If customers are returning products due to preventable problems, you can take action to fix those issues and lower your return rate.

How Can Merchants Offer Easy Returns and Still Protect Themselves?

The fact that easy returns can cause you to lose more sales and incur higher costs isn’t a sufficient argument against them. Today’s ecommerce consumers know that when they can’t resolve a product issue directly with a merchant, they can probably talk their bank into giving them a chargeback.

The merchant may be able to fight the chargeback, but many don’t, and so many consumers see chargebacks as an easy alternative to going through a merchant’s return and refund process.

When you factor in considerations such as chargeback fees and the consequences of exceeding your payment processor’s chargeback threshold, it’s clear that returns are a more manageable, less hazardous problem than chargebacks.

The solution is to create a return policy that makes it fast and easy for customers to resolve legitimate issues, without leaving too many loopholes that bad faith actors can exploit.

Many returns that are made in good faith can be prevented ahead of time by informing and communicating better with the customer. A frequent cause of returns—and chargebacks—is when a product does not match the description provided.

Download the eGuide, 4 Reasons to Hire a Chargeback Management CompanyThe product descriptions on your ecommerce site should be thorough, detailed, and accurate. Supplementary information, such as how to install or use the product, should be provided whenever possible. Misleading marketing copy that makes promises the product can’t truly deliver should be avoided at all costs.

Another common cause of returns is when the product is damaged upon arrival. This is especially frustrating for customers who would have been happy with the purchase otherwise. If this becomes a recurring cause of returns, you must determine whether the damage is occurring because of handling by the shipping company, or because of the way you are packaging the product.

If customers are returning orders because they received the wrong item or the wrong quantities, that speaks to internal problems with the merchant’s staffing or procedures. With better training and oversight, they shouldn’t be hard to fix.

And remember: to avoid chargebacks, always credit a promised refund to the customer’s account as soon as possible. If there are any unavoidable delays, communicate that to them ahead of time.

Conclusion

Your return policy can be one of your most powerful weapons in the fight against chargebacks. You want your customers to hold the following beliefs about your business:

  1. Customer service is easy to reach and always available.
  2. They’ll work with me to resolve whatever issues I’m having with my purchase.
  3. They’ll make it was painless as possible for me to return the product.
  4. Once my return is accepted, I’ll get a refund right away.

When a merchant can be counted on to deliver that level of service, chargebacks seem like a much less attractive option.

Returns are always less than ideal—when is it ever a good thing to lose a sale?—but they are nevertheless an important part of building confidence and trust with your customers.

An easy return policy shows your customers that you respect their time, you’re listening to their concerns, and you want them to have a positive experience shopping with you even when a purchase doesn’t work out.

From there, you can analyze your return data to see what’s causing them and how you can remedy those problems, much as you would with chargebacks. By carefully refining your return policy according to the insights gleaned from the data, you can minimize abuse and overuse of your generous return policy without inconveniencing your loyal customers.

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