Refunds vs Exchanges

Refunds and exchanges are two of the most common options for product returns. Each has its pros and cons that are important to take into consideration.


A refund is when a customer returns a product and receives their money back. 

This can be done through the original payment method or to a bank account. Refunds are the simplest type of return and are often the first thing people think of when it comes to returns.

It’s important to have a clear refund policy in place, outlining the conditions under which a customer can receive a refund, such as a time limit for returns or certain restrictions on the condition of the product.

Pros and Cons of Refunds

Pros of Refunds

Refunds provide a clear and straightforward solution for customers who are dissatisfied with their purchase. They provide a sense of security for the customers as they know they will get their money back if they are not satisfied. 

Refunds are also good for stores that sell non-returnable items or items that have already been used, as they are often the only option for handling customer returns.

Cons of Refunds

Refunds can have a negative impact on your store’s bottom line, as you lose the revenue from the original sale. 

Additionally, customers who request a refund may not return to your store in the future, negatively affecting your store’s growth.


An exchange is when a customer returns a product and receives a different product in exchange. 

Exchanges can be for another variant of the same product in a different size or color or a completely different product.

Pros and Cons of Exchanges

Pros of Exchanges

Exchanges help retain revenue and encourage repeat business. Exchanges benefit both your customers and your store since you retain more revenue and your customers get the products they need.

Making it easy for customers to exchange an item for a different variant that fits better or is the right style for them shows that you care about their satisfaction.

Cons of Exchanges

Exchanges require your store to have enough inventory on hand to fulfill exchange requests, otherwise you may have to issue a refund instead.

Additionally, exchanges may not provide as much of a sense of security for customers who are dissatisfied with their purchase, as they have to go through the process of returning the item and choosing a new one that they may not be sure they’ll like either.

Which are Better, Refunds or Exchanges?

Exchanges and refunds each have their own pros and cons. Ultimately, exchanges are more beneficial for your store because they help you retain revenue and encourage repeat business.

In contrast to customers who request a refund, customers who exchange are still engaged with your business and are more likely to buy from you again.

You can offer incentives or discounts to encourage customers to request an exchange instead of a refund.

By understanding the difference between refunds and exchanges, you’ll be able to offer the best solution for your customers and your business. Having a clear and transparent return policy in place will help you to manage returns effectively.


What is considered a return?

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Returns vs. exchange

Product Returns Factors

Returns Best Practices

Returns Metrics