Writing an eCommerce Return Policy That Decreases Chargebacks
Believe it or not, your eCommerce return policy can play a crucial role in a customer’s decision to buy from you.
A clear, simple, and easy-to-understand refund policy says you stand behind your product and want your customers to be satisfied. If your policy seems vague or too complex, consumers may have doubts about your store. They might click away to another site as a result.
This actually makes sense; in the eCommerce space, the buyer doesn’t have the option of touching a product, analyzing the color, or checking the size. They must rely on the product descriptions you provide. They will feel much more confident about a purchase if they know they have the option to return it easily.
In this post, we’ll take a look at what makes a good return policy. We’ll see how to put that policy into action, and discover how a bad policy can lead directly to chargebacks.
What Is An eCommerce Return Policy?
Your products may be great, your customer service may be outstanding...but all businesses are subject to the occasional return. Online businesses are especially susceptible because customers can’t interact with the merchandise before they buy. That’s why your return policy can have such a powerful impact on sales.
How powerful? Look at some of the statistics from a recent report on product returns:
- 67% of shoppers will check your return policy before purchasing
- 92% of buyers will purchase again if returns are easy
- 27% say they’re willing to purchase items costing $1000 or more if no-cost shipping is offered
eCommerce Return Policy Requirements
Multiple factors impact the way you write a return policy. For starters, each state has its own specific rules for how a business discloses its return and cancellation requirements. We advise you to reference local laws, as part of this process.
The card networks, however, can have separate and stricter mandates. For eCommerce businesses, cancellation and return policies must be clearly stated on the website. You must have a link to your terms and conditions that can be easily accessed during the checkout process. Customers must tick a box indicating they’ve read and agree to the conditions before completing their purchase.
Beyond the outside requirements, you want a return policy that serves your best interests and those of the customer. That includes discouraging fraudulent chargebacks.
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Your Return Policy Influences Chargebacks
Of course, no merchant likes to deal with refunds. Making your return process more complex, however, won't stop customers from wanting to return merchandise. More likely, they’ll will simply bypass your customer service department by using a chargeback.
It's important to understand that friendly fraud—not criminal fraud—is the leading cause of chargebacks. Most consumers who file chargebacks do so out of convenience. The more complicated your return procedure, the more likely it is that the customer will skip it altogether and call the bank.
Consider the following statistics, based on our own internal studies:
With those points in mind, it’s easy to see why you should do everything in your power to provide easy, no-hassle solutions as part of your eCommerce return policy.
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Top 10 Tips to Create a Better Return Policy
So how can your return and cancellation policy help reduce the risk of chargebacks and return fraud? Here are 10 suggestions to consider:
Prevent Returns from Happening
Before you start editing your eCommerce return policy, take a step back and re-evaluate your entire sales process from start to finish. You might identify several ways to prevent returns from happening in the first place.
Review product and service descriptions for accuracy and detail. Do product images show details like size and color, and do they capture the item from different angles? Incomplete information can make customers feel like they’ve been misled. This will lead them to return merchandise.
It’s not practical to accept any and all returned merchandise. However, the more flexible your return policy, the lower the risk of chargebacks. If your restrictive policies mean someone doesn’t qualify for a traditional refund, that customer is more prone to commit friendly fraud.
Of course, in some situations—dealing with intimate apparel or seasonal items, for example—you may be required to prohibit all returns. In these cases, be sure the consumer clearly understands that the sale is final before you process the transaction.
Offer “No Strings Attached” Cancelations
Canceling a recurring payment can be embarrassing for the customer. If they feel duped, customers may even become angry. Such feelings can lead to chargebacks, as the consumer tries to avoid confronting you.
That said, “cancelled recurring transaction” chargebacks—even fraudulent ones—are usually hard to challenge. It often comes down to the customer’s word against yours. Since issuers usually side with the consumer, you should focus on prevention here.
Your customer is more likely to enter into an agreement when they know they can easily cancel. So, make your cancellation process clear, simple, and easy to navigate. Eliminate early termination fees or other penalties whenever possible.
Explain Refund Options
A typical refund policy offers multiple options for consumers. Returns may be limited to an exchange, for example. Debit card transactions may be refunded in cash, or perhaps store credit. Returns from credit card purchases may be issued directly to the cardholder's account.
This same scenario also applies to refunds. The customer needs to know: is a receipt required? Will a gift receipt work? In both cases, the least restrictive policy typically results in the fewest chargebacks. Offering more choices increases consumer confidence. You need to make sure they fully understand their return options prior to purchase, though.
Use Clear Language
Simple language works best for all policies. While a well-defined eCommerce return policy is essential, even a minimum of legal jargon can be confusing. Confused customers are far more likely to resort to a dispute. In particular, you want to simplify any regulations that relate to:
Extra fees (return shipping, restocking fees, cancelation penalties, etc.)
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Cover the Cost of Shipping
Yes, we just talked about fees like return shipping. But, while it might seem financially sensible to charge the customer for return shipments, nearly 80% of shoppers say they look for merchants who offer free return shipping.
Consumers view free return shipping as insurance. It can incentivize them to buy from you, rather than a competitor, even if they don’t plan to return the item. Plus, removing the cost barrier in the refund process will dramatically improve the odds of getting a return instead of chargeback. So, the long-term benefits are worth the extra cost.
If customers are going to be responsible for return shipping or restocking costs, be sure they understand that clearly from the beginning, before the sale ever happens.
Share Your Policies EverywhereYou may think that promoting your return policy will encourage customer returns. In reality, delivering a transparent, upfront policy gives consumers more incentive to make a purchase. This is because the customer believes they can have confidence in your brand.
Don’t be afraid to call attention to your simplified policies. Display a link on every page of your website, including product description pages. It’s especially important during checkout. Also, ask customers to “accept” the policies before processing.
Don’t forget to remind customers after the sale, too. Include return policy information in your order confirmation email, on the receipt, and even on the packaging, if possible.
Make it Quick
It matters how fast you process returns. According to a survey from Digital Commerce 360, 72% of eCommerce shoppers expect a refund within 5 days of a return. 40% of respondents said they’d limit their shopping with merchants who take too long to issue a credit.
Impatient customers may initiate a dispute if they think they will get their refund faster. That’s why it’s important to process return requests as quickly as possible and get the money back to the buyer.
Open Up Return Windows
There are pros and cons associated with longer return windows. For instance, delayed returns can cause restocking issues for you. The more time a cardholder has to make a return, though, the less likely they are to file a chargeback.
One option might be to consider varying the allowable return time under certain conditions. You can allow extended return timeframes for cases of damaged or malfunctioning merchandise, or during the holidays. And of course, the most consistent rule in this list still applies: clearly communicate all information to customers before the purchase.
Educate Your Staff
You might assume that your employees completely understand all aspects of your eCommerce return policy. You know what they say about assuming, though.
Be sure all staff members—from the sales team to the customer service department—understand the rules of the return policy. Don’t just lay out the rules, though; explain why those rules are in place. This can help keep employees from making promises the company can’t (or doesn't want to) keep.
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The best eCommerce return policy from a chargeback reduction standpoint boils down to three basic tenets:
- Keep it clear.
- Keep it simple.
- Promote it everywhere.
Developing a solid eCommerce return policy can seem pretty straightforward. There are certain “tricks of the trade” that may not occur to you, though. Tracking all return requests, for example, and checking for patterns that may indicate an internal issue (or a questionable supplier).
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What is an eCommerce return policy?
Your return policy refers to all rules and procedures governing how you handle eCommerce refunds. This policy should be comprehensive, yet adaptable, in order to optimize sales and prevent chargebacks.
How can my eCommerce return policy impact sales?
Up-front transparency with your return or refund policy lets buyers know that you stand behind your products and your service. Statistics show that consumers are much more likely to purchase from merchants who offer fast and easy returns.
What’s required by law for my return policy?
The minimum legal requirements for a return may vary by location, type of business, or other factors. The requirements issued by the card networks, however, are usually stricter.
How do I write an eCommerce return policy?
Flexible conditions, ease of use, longer return windows, and fast processing will all contribute to a good chargeback-preventing returns policy. The three key elements to remember are to keep it clear, keep it simple, and promote it everywhere.
How do you handle eCommerce returns? How do you promote your policies?
Put a link to your policy on every page of your website, especially during checkout. Ask customers to “accept” the policies before processing. Include the return policy in the order confirmation email and receipt. Another idea might be to create a separate FAQ page that exclusively applies to returns and refunds.