5 Types of eCommerce Returns and When to Offer Each Type
Rebecca Fox

December 31, 2023

Knowing what types of product returns your eCommerce 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. 

What are the Main Types of eCommerce Returns?

There are various different types of eCommerce returns and each serves a different purpose. 

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

The more you know about the different types of returns, and how to offer the right one in each case, you can improve the overall customer experience and encourage repeat business, leading to greater success and profitability in the long term.

1. Refunds

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. 65% of customers say the speed and ease of refunds affect where they choose to shop. A quick and efficient refund process will keep customers coming back to your store again and again.

While 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 business in the future. This is why it can be a good idea to convert refunds into exchanges or refund alternatives as often as possible.

2. Exchanges

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 Exchanges

A variant exchange involves swapping a product for a different variant of the product, such as size or color. Since many product returns are due to size or style mistakes, most of your return requests can probably be resolved by offering a variant exchange. 

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 makes them more likely to shop from you again. 

Product Exchanges

Product exchanges are when customers exchange an item for a completely different product from your store. 

For example, say a customer decides to buy a pair of shoes they thought they’d like, although it’s a different style from what they usually wear, but when they receive the shoes they realize that they don’t 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.

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.

3. Store Credit

While full refunds may seem like the most straightforward way to handle customer returns, offering a virtual currency like store credit instead can be a more strategic and beneficial approach for both your business and your customers.

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. The thing is, it works – 68% of customers who receive store credit buy again, according to ReturnGO data. 

Additionally, when customers redeem their store credit, they usually add more money, on average $20 more. So offering store credit helps increase your customer lifetime value and, as a result, your overall profits.

Something else you can do is use store credit as an incentive, offering an additional bonus credit to encourage customers to use specific return methods or other special offers.

4. Gift Cards

Gift cards are another form of virtual currency that you can offer instead of a refund. They can be a smart strategy as they enable you to retain revenue while also keeping your customers satisfied. 

When you issue a gift card refund, you retain the original revenue from the sale, while also ensuring that the customer remains satisfied and increasing the chances of them buying from you again.

Offering 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, potentially leading to additional sales.

An advantage of gift cards is that they can be used to pay for the entire amount of an order, including fees and shipping, and are treated like credit cards in terms of payment, as opposed to store credit, which can’t be used towards shipping or fees.

5. Warranties

Although it can be easy to overlook warranties as a type of return, handling a product warranty claim 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.

Using ReturnGO, you can provide customers with a self-service warranty portal through which they can submit warranty claims and have them automatically resolved based on the warranty eligibility criteria you define.

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 Cases

Refunds, exchanges, store credit, gift cards, and warranty claims each offer unique benefits to customers, catering to different needs and preferences. 

By providing a choice of return options, you can empower customers to select the resolution that best suits their situation, boosting customer loyalty and building a positive brand image.

Set up your return policy to offer different types of returns to different customers based on the product they’re returning or the reason they’re returning it. 

For example, if a customer returns a clothing item due to the wrong size, they’re more likely to want to exchange it for the right size. However, if a customer returns an appliance due to a malfunctioning component, they will probably want a full refund or a replacement product.

It’s recommended to encourage refund alternatives such as store credit, gift cards, and exchanges to reduce refunds and keep revenue in your store as much as possible.

Most eCommerce stores offer multiple types of returns, giving customers the option to choose, or offering different resolutions for different items or situations. 83% of eCommerce stores offer exchanges, while 66% offer refunds, 43% offer store credit, and 28% offer gift cards.

Tracking Your Return Resolution Analytics

By tracking the analytics of the different types of returns, you can gain valuable insights into return patterns and customer behavior, helping you make better decisions about pricing, products, customer experience, and more. 

ReturnGO offers advanced returns analytics that show you the breakdown of what your customers choose, including the most common return type per product. This information can help you identify areas for improvement in your returns process and make data-driven decisions to optimize your return policy. 

It is important to understand the different types of returns and their advantages so that you can empower customers with choice, enhance their shopping experience, and optimize your return policies for success in the long run.

Offer the Right Type of Return for the Situation

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

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

Use ReturnGO’s self-service return portal to easily provide your customers with relevant types of return solutions based on your return policy and handle the whole returns process smoothly and efficiently.


FAQs

What is the difference between a return and a refund?

The difference between a return and a refund is that a return is when a customer sends back a product to the retailer for various reasons, while a refund is a monetary reimbursement provided to a customer for a returned product. In other words, a return is about the product, while a refund is about the money. 

What is the difference between a return and an exchange?

The difference between a return and an exchange is that a return is when a customer returns a product to the retailer and gets their money back, and an exchange is when a customer returns an item and receives another product, whether a different variant or a different item altogether.

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

What is the difference between credit and a refund?

The difference between credit and a refund is that a refund is a general term for when customers get their money back for returning an item, while store credit is a specific type of refund that is given in the form of store credit that they can redeem later at the same store.

Store credit refunds can be an effective way to retain customers, as it encourages them to come back to your eCommerce store to use their store credit, increasing customer loyalty and revenue in the long run.

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