Chargeback Prevention

The 12 Most Common Reasons for Returns

What Rights Do Merchants Have In Credit Card Chargebacks_Blog Image
Life would be easier for merchants if customers never wanted to return things, but returns are a fact of life and an inevitable cost of doing business. The silver lining is that every return is a potential chargeback avoided—if the customer hadn’t gone through the return and refund process, there’s a good chance they would have tried to get their money back from their bank instead.
 
In fact, returns and chargebacks often share the same root causes, and refunds are always preferable to chargebacks because they’re cheaper and less harmful to your business. What are the most common reasons behind customer returns?

New call-to-action

It’s good to have a generous return and refund policy. When customers know they can come to you with their problems, return an unwanted purchase, and get their money back, they have little reason to dispute the transaction with their bank instead. With a return and refund, you’re only out the cost of the transaction, and you may even be able to resell the returned product.

 

A chargeback costs you the product, the costs of selling it, and the related fees.

Returns and refunds also have the potential to make the customer feel positively inclined toward the merchant and more likely to shop with them again. Chargebacks, on the other hand, have the added downside of increasing your chargeback ratio, bringing you closer to the threshold at which you may suffer additional fees and risk losing your merchant account.

Why Do Customers Return their Purchases?

It’s important to understand why customers make returns, because these are often the same reasons behind chargebacks, especially friendly fraud. Analyzing these reasons can shed light on any chargeback problems you might be having and show you where you need to improve your customer service and other business operations.

The Customer Ordered the Wrong Product or Size

Customers often order the wrong thing—maybe it’s a peripheral that’s incompatible with their device, or clothes that don’t fit. In these cases, they might have benefited from considering their purchase more carefully, but it’s understandable that they wouldn’t want to be stuck with a product they can’t use.

The Merchant Shipped the Wrong Product or Size

On the other hand, sometimes merchants ship the wrong thing. In these instances, the merchant has a clear obligation to accept the return and ship the correct item.

The Product Was Damaged or Defective

Items sometimes get damaged during shipping, or they leave the warehouse in damaged or defective condition. Here again, the customer clearly has the right to receive an undamaged and functional product or get their money back. To avoid this, inspect items and pack them carefully before shipping. 

The Product Arrived Too Late

Download the eGuide, 4 Reasons to Hire a Chargeback Management CompanySome purchases are time sensitive, and if the merchant takes too long to fulfill the order, or if delivery is delayed for some reason, the customer will no longer need it. While some delays are unavoidable, it’s always best to ship orders promptly and use fast, reliable carriers.

The Customer No Longer Needed the Product

Occasionally, even when the merchant does their best to fulfill an order immediately, the customer no longer needs it by the time it arrives. While this may not be the merchant’s fault, it should come as no surprise that the customer will look for a way to get their money back.

The Customer Experienced Buyer’s Remorse

Another frustrating situation is when a customer buys something impulsively and sends it back for no good reason. Tempting as it may be to protect your revenue by insisting on a justification for returns, such policies rarely serve merchants well; buyer’s remorse is often the driving force behind friendly fraud.

The Product Did Not Match the Description

When there is a great chasm between the ways a product is depicted in the merchant’s website or catalog and the actual appearance or functionality of the product, customers often feel ripped off, and who can blame them? This is often judged to be a valid reason for a chargeback and merchants can avoid it by providing honest and detailed product descriptions and photos in their marketing materials.

The Product Did Not Meet the Customer’s Expectations

At times, the gulf between expectations and reality is not the merchant’s fault. Sometimes customers bring their own assumptions to the table and anticipate the product doing things that the merchant never promised. Offering a refund in these cases can avoid chargebacks and preserve customer loyalty.

The Product Was a Gift

Buying gifts for others can be challenging, and gifts are often given with the disclaimer, “you can return it if you don’t like it!” Oftentimes, that is exactly what happens.

The Customer Found a Better Price Somewhere Else

There’s no better trigger for buyer’s remorse than to see the item you just purchased offered for sale at a much lower price elsewhere. One way to avoid losses from being undercut by your competitors is to offer price-matching guarantees.

The Customer Was Wardrobing

“Wardrobing” is the practice of purchasing an item with the intention of returning it once it has been used for a specific purpose. It might be a specialty tool purchased for a single use, a fancy garment worn for a special event, or a huge TV bought for a Super Bowl party.

Customers who engage in wardrobing are clearly abusing merchants’ return policies, but refusing them may leave you stuck dealing with a friendly fraud chargeback.

The Purchase Was Fraudulent

Returns may also be used to launder money from stolen credit cards. The fraudster pays for an item with a stolen card, then returns it for cash. One way to avoid this is to offer refunds to the original card or store credit on card purchases, but it’s even better to avoid it altogether by using anti-fraud tools that block stolen card transactions.

Conclusion

Returns and chargebacks often happen for the same reasons. The only difference is the path the customer chose to take to get their money back. When merchants are accessible, easy to deal with, and quick to offer refunds when a customer is unhappy, they have a better chance of preventing disputes and avoiding friendly fraud.

No merchant enjoys having to give up revenue, but refunds are always a better alternative to chargebacks.

A return and refund policy that puts the customer first can be a very important part of any chargeback prevention strategy.

Thanks for following the Chargeback Gurus blog. Feel free to submit topic suggestions, questions or requests for advice to: win@chargebackgurus.com.

Get the guide, Chargebacks 101: Understanding Chargebacks & Their Root Causes