4 Types of eCommerce Returns and When to Offer Each Type
March 23, 2022
by Rebecca Fox

Knowing what types of product returns your online store can offer is important in order to provide the right return solution for each customer. 

60% of product returns are due to size or style issues, which can easily be solved by offering to exchange the product for the correct size or color. In other cases, a simple refund might be appropriate.

Understanding why customers return items and what types of return solutions you can offer can help you keep your customers happy and retain revenue. 

Whether it’s simply refunding your customers their money or offering a product exchange, you can keep your customers satisfied by fitting the right type of return to each situation.

What are the 4 Main Types of eCommerce Returns?

Returns are an inevitable part of eCommerce, and it’s important to be familiar with the different types of returns in order to optimize the customer experience and retain revenue as much as possible. 

There are various types of eCommerce returns, such as refunds and exchanges, and each serves a different purpose. 

It’s important to offer the relevant return solution for each situation, as this can have a significant impact on customer satisfaction and retention. 

By understanding the different types of returns, and offering the relevant one for each situation, you can improve the overall customer experience and encourage repeat business, leading to a more successful and profitable business in the long term.

1. Refund

Refunds are the simplest and most well-known type of eCommerce return. A refund is when your customers get their money back for returning an item. 

You can offer full or partial refunds and decide whether to charge a return shipping fee or not. 

Your customers’ return experience depends largely on them receiving their money back quickly and easily. 77% of customers are less likely to recommend an online store if it takes a long time to receive a refund. Providing a quick refund process will keep customers coming back to your store again and again.

Although refunds can be a simple and convenient form of return, they are less than ideal for your store since you lose revenue and, potentially, the customer’s return business. This is why it can be a good idea to convert refunds into exchanges as often as possible.

2. Exchange

A good way to reduce your refund rate and retain revenue is by offering easy exchanges as an alternative. This way if your customers want the same item in a different size or color, they can simply exchange it for the item that they need. 

Offering an exchange can in many cases save the sale and keep your customers happy since their needs are being met.

Types of exchanges you can offer include:

Variant Exchange

60% of product returns are due to size or style mistakes, meaning that more than half of your returns can be resolved by offering a variant exchange. A variant exchange involves swapping a product for a more suitable variant of the product.

For example, if a customer buys a dress that is too small, the ideal solution is to exchange it for the correct size. This gives your customer what they need, and helps you retain revenue since you’re not refunding any money to your customer.

Offering variant exchanges also strengthens your relationship with your customers, and a positive exchange experience makes them more likely to shop from you again. 

More than 50% of online retailers offer free returns, and 73% of online buyers think free returns are an important factor in online shopping.

Product Exchange

A full product exchange is when your customers exchange a purchased item for a completely different product from your store. 

When the replacement product is of higher value than the original product, you can have your customers pay the additional amount, and when it’s of lower value you can refund your customers the price difference.

For example, say a customer decides to try a style of shoe they thought they would like, although it’s a different style from what they usually wear, but when they receive the shoes they realize that they don’t actually like this style of shoe. They still love your brand though and might be happy to return the shoes and exchange them for a backpack instead.

3. Store Credit

While full refunds may seem like the obvious choice for dissatisfied customers, offering virtual currency such as store credit or gift cards instead can help you retain revenue and customers in the long run.

One of the main benefits of offering virtual currency instead of full refunds is that it incentivizes customers to return to the store to make additional purchases. 

When customers are offered store credit or a gift card, they are more likely to return to the store to use that credit, and potentially even spend more money than the value of the credit. This helps you retain revenue and fosters a sense of loyalty and satisfaction among customers.

Instead of losing the entire value of the sale, you can retain a portion of that revenue by offering store credit or a gift card.

Store Credit

Customers may like your brand but not the product they received, and if they don’t want to take the time to pick out a new item right now, it can be helpful to offer store credit that they can use later. 

While this isn’t ideal since your customers aren’t obliged to take immediate action, it’s better for your brand than a refund since your customers can only use store credit with your store, keeping them loyal to your store.

Another option is to use store credit as an incentive, offering an additional 10-20% credit on returns to encourage customers to use specific return methods or other solutions.

Gift Cards

Another form of virtual currency that you can offer instead of a refund is a gift card.

Offering gift card refunds can be a smart strategy as it enables you to retain revenue while also keeping your customers happy. When a customer requests a gift card refund, you retain the original revenue from the sale, while also ensuring that the customer remains satisfied with their shopping experience. 

Gift card refunds can be an effective way to retain customers, as it encourages them to return to your eCommerce store to use their gift card credit, potentially leading to additional sales. 

4. Warranty Return

Although it can be easy to overlook warranties as a type of return, handling a product warranty return is just like processing any other form of return. The main difference is that returns under warranty may be eligible even if they don’t meet your regular return policy conditions.

There are a few main types of warranties:

Extended Warranty or Service Agreement

When your customers pay for an extended warranty, the duration of the protection is extended beyond the manufacturer’s warranty. This provides customers with peace of mind, especially when purchasing high-value items.

Third-Party Warranty

Offering a third-party warranty policy guarantees that you will repair or replace damaged products even if they weren’t bought directly from your store but rather through a third-party retailer.

Although it can be difficult to verify orders that weren’t bought directly through your store, offering protection even on products that weren’t purchased directly from you can make you stand out with exceptional customer service.

Accidental Damages and Handling (ADH) Plan

ADH plans protect products that are damaged during the shipping process. Customers are likely to get frustrated when they receive a damaged product, and an ADH plan reassures customers that they can make high-value purchases because they know the product is protected in case of damage.

Implied Warranty

An implied warranty is a form of spoken or written assurance that guarantees that products will live up to basic expectations.

There are two kinds of implied warranty: 

  • Implied warranty of merchantability – Implied warranty of merchantability means that products are assumed to fill basic expectations. 

In short, products are guaranteed to do what they are supposed to, be of reasonable quality, and have nothing significantly wrong with them.

  • Implied warranty of fitness – Implied warranty of fitness means that a product is guaranteed for a specific purpose beyond the basic threshold of merchantability. 

The warranty of fitness is usually implied through the recommendation of an item for a specific use, such as quickly-drying paint as opposed to ordinary paint.

Different Types of Product Returns for Different Situations

Being familiar with the different types of product returns is essential so that you can provide your customers with what they need. 

Having a fast and easy return and exchange process that takes into account all the different types of returns creates a positive customer experience, making your customers more likely to buy from you again.

Using an automated return portal can help you easily provide your customers with relevant return solutions based on your return policy, and handle the whole returns process smoothly and efficiently.

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