How Return Policies Affect Chargeback & Dispute Ratios
Competition is fierce in the world of eCommerce and attracting new customers is harder than ever. One good way to make customers feel a little more at ease about spending their money someplace new is the promise of a “hassle-free return policy.” But what does "hassle-free" mean for you and your customers?
If the customer feels like they can easily get their money back if they’re dissatisfied, then they’ll be much more willing to take a risk on a place they’ve never shopped at before. Your regular customers like easy returns, too, so it’s a win-win situation—assuming that you and your customers have the same idea of what “hassle-free” really means.
Some merchants’ idea of “hassle-free” is anything but for consumers. This poses a problem not just when trying to attract new customers, but for chargebacks as well. When customers feel misled by confusing or complex return policies, they may believe they have a legitimate reason to request a chargeback, and customers who find it too difficult to obtain information about returns or cannot get ahold of a live person to speak to may get impatient and file a “friendly fraud” chargeback simply because their bank is easier to deal with than the merchant.
The best way to avoid return-related chargebacks is to devise a return policy that makes sense both for you and for your customers, removing any stumbling blocks that make it difficult for them to resolve an unsatisfying purchase.
Handling Refunds On Perishable Goods
When you sell perishable goods, one way to make returns hassle-free is to not require them at all. It’s a waste of money to have customers return products that cannot be resold, especially if you’re using a fulfillment company that’s going to charge you for receiving and destroying returned goods.
A better practice is to simply tell customers who want a refund on perishable goods to keep or destroy the product, then go ahead and issue a refund right away (or ship a replacement, if that’s what they want).
Requiring that the product be returned in order to “prove” that they weren’t happy with it is just pointless busywork for the customer and an unnecessary expense for the merchant.
Not only does this resolve the customer’s issue in the easiest way possible for them, it also builds trust. Naturally, there’s a risk that some customers will abuse that trust, but it’s better to deal with customers like that on an individual basis rather than making all of your customers jump through hoops. Use return-tracking features in your customer management system so that you can identify those who attempt to repeatedly request refunds on items. You can then choose to negotiate directly with those customers or simply block them from placing future orders.
Handling Returns On Durable Goods
When a customer has a problem with an item that can be reused or resold, then you do want them to ship it back to you before issuing a refund. The best way to make this as painless as possible for the customer is to provide them with a prepaid shipping label so that all they have to do is box the item back up, stick on the return label, and either drop it off with the carrier or arrange for pickup.
Figuring out the best and cheapest way to ship a bulky item back is the very definition of “hassle” for most online shoppers. On average, it takes up to an hour for a customer to return an item if they have to go to the post office themselves. That’s added frustration on top of whatever disappointment they’re already feeling over the unsatisfactory product.
It will often occur to customers that it’s much faster and easier for them to just call their bank and pursue a refund through the chargeback process.
There’s no good reason to put them through that.
Instead, make it easy for them to print out a prepaid shipping label from your website, or include the return label with their order. Track your return label numbers so that when a customer returns an item, you can issue a refund immediately instead of waiting for the item to arrive, and be sure to email the customer to let them know that a refund has been issued.
It can take up to 10 days for a refund to show up in a customer’s bank account, so notifying them that the process has been initiated is important. It’s not uncommon for customers to file a chargeback because they’ve been waiting for a refund that’s working its way through the banks and nobody told them it was coming.
Being Available Like Amazon
In terms of what consumers expect from eCommerce sites, we’re living in a world that has largely been shaped by Amazon, and they’ve set an extremely high bar for smaller merchants to reach. If you need to return a product purchased from them, it can be arranged with just a few clicks, from any device, at any time.
Availability prevents chargebacks. When you can make your customer service available 24/7, you greatly increase the chances that customers will deal with any issues they’re having directly with you, rather than asking their bank to step in. The more ways you can make yourself available, the better—phone, live chat, even email if you respond quickly enough.
If you’re only reachable during regular business hours, consider that many of your customers are likewise working during those hours, and it’s hard for them to make time for personal matters. They know they can get assistance from their bank after hours, but bank assistance just means chargebacks. Provide your customers with ways to reach you during hours that are convenient for them, either with your own staff or through a call center, and the vast majority of them will make a good faith effort to do so.
Customers love returns that are truly hassle-free, but remember that the accommodations you offer to reduce chargebacks can also work against you by inviting fraud. As mentioned above, the best defense against this is to track customer returns so you can see who’s making a habit of returning items and abusing your generous return policy—if you see more than two returns, you might have a problem.
Blocking these customers is important because many fraudsters are all too happy to let others know where to find merchants who are easy to take advantage of, so blocking one can preemptively stop other fraudsters from targeting you. They like low-hanging fruit—if they know your company isn’t an easy mark, they’ll move on, and the rest of your customers will appreciate the ease and convenience of your hassle-free, common-sense return policy.
- Return Item Chargeback - Definition & Explanation
- Pre-Compliance Chargebacks & Reason Code 98 Explained
- Understanding Mastercard’s Dispute Administration Fee
- Fighting Friendly Fraud with Ethoca Eliminator
- Visa Dispute Monitoring & Visa Fraud Monitoring Programs (VDMP & VFMP)
- Don't Run Out the Clock: Understanding Chargeback Time Limits
- Chargebacks vs Refunds: What's the Difference?
- Acquiring Bank & Issuing Bank - Chargebacks Explained
- Gaming Chargebacks - How to win in 2020
- 2020's Official Guide to Fighting PayPal Chargebacks