Offering store credit instead of cash refunds is a simple yet powerful strategy for boosting revenue. By incentivizing customers to spend their refund in your store again, store credit keeps money in your business and leads to higher customer lifetime value.
68% of customers purchase again after receiving store credit, leading to much higher repurchase rates and average order values than regular refunds.
Read on to understand why offering store credit refunds are a winning strategy for your bottom line.
Why You Should Offer Store Credit for Refunds
Store credit offers a powerful alternative to traditional refunds by keeping revenue within your ecosystem and turning disappointed customers into repeat buyers. Here’s why you should consider implementing store credit in your return policy:
Keeps Revenue in Your Store
With standard refunds, the money leaves your business and goes back into the customer’s pocket with no guarantee they’ll spend it at your store again. However, store credit locks the refund into your ecosystem.
Even if a customer doesn’t spend their credit right away, you get to hang onto that money until they do, and the customer is motivated to return and spend that credit before it expires.
It’s worth noting that more than half (55%) of customers who receive store credit redeem it – and whether they redeem it or not, that money stays in your store. So it’s a win for you either way.
Additionally, store credit can be a more cost-effective solution for handling returns as processing cash refunds often involve transaction fees, especially if credit card companies or payment processors are involved.
Increases Customer Loyalty and Repeat Purchases
68% of customers purchase again after receiving store credit. When customers get store credit, they’re motivated to come back and use up that credit before it expires. This brings them back for another purchase, making them more familiar with your eCommerce store and fueling a positive feedback loop.
Customers who receive store credit are 50% more likely to buy again than customers who receive a regular refund, according to ReturnGO data.
These positive experiences solidify the customer relationship, making it more likely for them to choose you over competitors and return for future purchases.
Boosts Customer Lifetime Value (LTV)
Bringing customers back again and again is key to maximizing customer lifetime value (LTV) – the total revenue one customer will generate over their entire relationship with your brand.
ReturnGO data shows that when redeeming store credit, the average order value significantly increases, as customers tend to spend at least $20 extra per order when redeeming store credit.
Higher repeat purchase rates combined with increased average order value result in significantly higher revenues per customer over time.
Ultimately, more repeat purchases at higher values result in significantly higher revenue generated by customers over the course of their lifetime as a customer.
When customers redeem store credit, they aren’t just spending existing credit; they’re often adding to the purchase as well.
A staggering 90% of customers add a credit card to their store credit redemption order, even when the store credit covers most of the purchase and all they have to pay for is the added shipping and taxes. On average, customers add at least $20 to the order.
This new revenue is a direct result of offering store credit. Instead of simply losing the refunded amount, you’re gaining additional revenue and encouraging customers to spend more.
This creates a win-win situation for both parties: customers get to take advantage of their credit while your business generates additional revenue and builds customer loyalty.
A great example that demonstrates this is Silk & Salt, who saw a 24.9% increase in revenue after they started offering store credit through ReturnGO, due to the additional money customers add when redeeming their credit.
By strategically offering store credit, you can transform returns from a potential loss into a powerful revenue-generating opportunity.
Prevents Return Fraud
Store credit can be an effective tool for minimizing the risk of return fraud. Customers may try to take advantage of generous return policies by making purchases only to return items for a cash refund after brief use, which damages your profits.
When customers receive store credit instead, the value stays inside your business. Even if there is fraudulent intent behind a return, you maintain control of the money in the form of store credit, ensuring that the customer can only obtain the value by making another purchase.
So by offering store credit refunds instead of cash, you can deter abuse of your return policy while keeping revenue in your business.
Store Credit By the Numbers
The benefits of offering store credit refunds are clear when you look at the data:
- 68% of customers purchase again after receiving store credit.
- Customers who receive store credit are 50% more likely to buy again than customers who receive a regular refund.
- It takes an average of 9.5 days for customers to redeem store credit.
- 80% of customers redeem their store credit within the first two weeks.
- The likelihood of store credit being redeemed plummets over time, and after 1 month, redemption rates drop below 10%.
- Regardless of the size of the store, 90% of customers redeeming store credit enter a credit card, even if the balance covers most of the purchase.
- Customers tend to spend at least $20 more per order when redeeming store credit.
- 55% of customers who receive store credit redeem it.
- 13% of customers who receive store credit make another purchase, but do not redeem their store credit.
The statistics speak for themselves – offering store credit directly results in higher repurchase rates and order value than regular refunds.
How to Offer Store Credit Refunds
Now that you’ve seen how powerful store credit can be for your business, let’s take a look at how you can offer it to your customers easily and effectively.
Use a Returns Management System
A returns management system like ReturnGO can help you automate and track store credit refunds efficiently. This can help to reduce the workload on your customer service team and ensure that customers receive their store credit quickly and easily.
With ReturnGO, you can easily manage your eCommerce returns, refunds, and exchanges in one place. You can also customize your return policy, set up automatic notifications, and see analytics about store credit, returns, and exchanges. This will help you streamline your returns process and provide a better customer experience.
Chat with our experts to boost your customer return experience and LTV today.
Offer a Self-Service Experience
Offer a self-service customer portal for a seamless customer experience for requesting and redeeming store credit. This enables customers to request and redeem store credit on their own, without having to contact customer service.
With a self-service portal, customers can easily request refunds and track their returns. This can help to reduce the workload on your customer service team and provide a better customer experience.
Incentivize Store Credit With Bonus Credit
Incentivizing store credit by offering bonus credit for choosing store credit over cash refunds can help keep money in your business and increase customer lifetime value.
Think about it: A customer is considering returning an item and you offer them 10% bonus credit if they choose store credit over a regular refund. This extra incentive makes them more likely to opt for store credit, bringing them back to your eCommerce store for future purchases and increasing your overall revenue.
Remind Customers to Redeem Their Store Credit
It’s important to remind customers to redeem their store credit, especially in the first few weeks after they receive it, as 80% of customers redeem their store credit within the first two weeks.
The likelihood of store credit being redeemed plummets over time, and after 1 month, redemption rates drop below 10%.
Interestingly, 13% of customers who receive store credit come back to make another purchase, but don’t redeem their store credit. This could be because they’ve forgotten about the store credit, it’s complicated to redeem the store credit, or they just don’t think of it at the time.
So gently nudge customers with timely reminders through emails, text messages, or push notifications. This simple act ensures they remember their credit and encourages them to use it before it expires.
Offer Store Credit and See Your Revenue Grow
All the data shows that offering store credit refunds is a great way to boost your revenue and increase customer lifetime value. By incentivizing customers to spend their refund in your store again, store credit keeps money in your business and leads to higher repurchase rates and average order values.
Use ReturnGO to offer store credit now to increase revenue, reduce your team’s workload, and deliver a smooth experience to your customers.