4 Types of eCommerce Returns and When to Offer Each Type

March 23, 2022
| by Rebecca Fox

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

60% of Shopify 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?

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. Ensuring 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 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.

Two types of exchanges you can offer:

Variant Exchange

60% of Shopify 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.

Example: If your 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.

Full Exchange

A full 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, your customers pay the additional amount, and when it’s of lower value your customers are refunded the price difference.

Example: If 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. However, when they receive the shoes they realize that they don’t actually like this style of shoes. They still love your brand though and might be happy to return the shoes and take a backpack instead.

3. Store Credit

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 you, 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 make use of their store credit.

Gift Cards

When customers make purchases using an online gift card, you can refund their purchase to their gift card and they can use it again at your Shopify store. Gift card refunds limit the credit to be used only at your store, making it more likely that your customers buy from you again.

4. Warranty Return

Warranties and product protection plans are service contracts that extend the return window and conditions.

Although it can be easy to overlook warranties as a return type, 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.

Four 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 get are damaged during the shipping process. Customers are likely to get frustrated when they receive a damaged product. An ADH plan reassures customers that they can make high-value purchases because they know the product is protected in case of damages.

Implied Warranty

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

Two kinds of implied warranty: 

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 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.

Conclusion:

Being familiar with the different return types is essential as a Shopify merchant 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 returns 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.

Automate Returns & Exchanges

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