A Complete Guide to Refunds and Dropshipping Returns In 2024

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In 2023 alone returns and refunds cost ecommerce sellers over $213 billion. 


This is why today I want to share some tried and tested strategies for handling, managing, and minimizing returns and refunds at your dropshipping store.


So, whether you’re a seasoned dropshipper or you’re just starting, keep reading because this article will shed light on several proven methods for handling return and refund requests, as well as tips to minimize them in your store. Let’s dive in.


I. Handling Refund Requests From Customers 

Handling Refund Requests From Customers

A. Best practices for communicating with customers about refunds


1. Have a comprehensive return/refund policy. 

To get the best results with your return policy, make sure it shares these key details:


The returns window: 

How many days do customers get to initiate a return? 


This stipulated period should match your supplier’s return policies. If your supplier offers a 30-day returns window, your store’s policy should reflect that. Or, to play it safe, it should even be shorter (20 days, maybe) so most customers send their products back on time. 


If you have multiple suppliers, model your policy after the strictest one so all customers are assured of a standard experience.


Items that can’t be returned: What products do not qualify for returns in your store? For example, socks and underwear for hygiene reasons.


Return address: It’s best not to specify a return address as it depends on your supplier and suppliers if you have multiple. For every return, ask customers to contact you for further details.


Quality conditions: What condition does the product have to be in to be returned, i.e. unused, with the seal intact, no visible signs of use, etc?


Shipping methods: Encourage your customers to use reputable and trackable shipping options so all parties – you, the customer, and your supplier – can actively monitor the location and progress of the return.


Grounds for refusal: Let customers know about any condition that will nullify their return, such as delaying past the return window, sending products without original packaging and manufacturer labels, or having no proof of purchase, etc.


As 67% of online shoppers search for a store’s return policy before completing a purchase, having clear refunds and returns policies that leave no room for curiosity is crucial for your dropshipping business.


2. Communicate in everyday language. 


Communicate in everyday language


While you need your dropshipping return policy to cover the necessary legal bases, you don’t want it to overwhelm shoppers with jargon and technical language. 

So. write how you speak. “If you aren’t an attorney, don’t speak like one.” Because using complex jargon will only confuse shoppers and result in more customer service requests.

Additionally, a best practice is to add a statement at the top and bottom of your Terms and Conditions pages that summarizes your Return Policy and provides a link to the full policy.


B. When to approve/deny refund requests


There are many reasons why customers ask for returns. It could be that they ordered the wrong size. Or the product delivered doesn’t match the description. 


As a dropshipper, you can only comply with a few valid reasons without affecting your profitability. So here are some valid reasons to accept returns and refunds, as well as some circumstances where you might deny refunds.


1. Approve returns and rends when:

  • The product arrives damaged or defective
  • The product that arrives doesn’t match the order: 
  • The product is lost in transit
  • In cases of clothes and apparel, it’s a wrong fit.
  • The purchase wasn’t made by the card or bank account holder.

2. Deny when:

  • The products match their description
  • The returns window has elapsed 
  • The item in question is a final sale product

One thing you’ll notice is that most ecommerce returns can be attributed to fulfillment errors. Sometimes, on your part. Most other times, on the supplier’s part. 


We understand that finding the right suppliers can be difficult, which is why we’re dedicated to providing sourcing support for dropshippers like you. 


We start by understanding your dropshipping requirements and then proceed to finding and vetting potential suppliers. After that, we request samples, inspect them for quality and negotiate prices with the suppliers that meet your standards – all of this so you can focus on growing your brand while we cover the nitty-gritty.


C. How to issue refunds quickly and smoothly


How to issue refunds quickly and smoothly


1. Assess the return request


This first step involves understanding why the customer wants a return and evaluating the expenses involved. 


2. Respond to the return request and establish a solution


Now it’s time to consider what solution your customer wants. A replacement? A refund? Either way, try to work out a solution that “satisfies” them but is viable for you. 


A good tip is to never offer a refund at first. Apologize for the inconvenience then propose alternatives like an exchange, a discount code, or store credit. If they say no, then offer to replace the item if it’s cheaper to do so. Either way, you don’t lose the customer and you benefit from what we call CLV (Customer Lifetime Value)


However, if they insist on a refund, provide their refund and avoid coming off as a hard sell.


3. Share the refund request with your supplier


If they approve the return, your supplier will then provide you with a RMA (Return Merchandise Authorization) number. This is the reference number used to identify the return. 


By this time, your supplier will also inform you how much they’re willing to cover. That is if they’re willing to cover any costs at all. Depending on who was at fault, your supplier may bear the shipping and restocking costs or require you or your customer to pay them.


4. Give the customer the Return Merchandise Authorization number


Once you have the RMA number, send it and the shipping address to your customer. 


For reports of damaged or defective goods, consider shipping the return to you first so you can inspect the supplier’s goods yourself and experience their returns process. Regardless, you will still need to send it to the supplier later on.


5. Wait for the return package to reach your supplier


Wait for the return package to reach your supplier


Wait for the package to reach your supplier and contact them regularly to confirm. 

When they confirm receiving the package, it’s time to execute the solution (refund, replacement, exchange) agreed with your customer.


6. Facilitate a refund or exchange with your customer


If the customer asks for a refund, send them their money back. 


But if they want a replacement or exchange, reach out to your dropshipping supplier for tracking details and pass that on to the customer. 


This time, encourage them to actively track their package and offer prompt feedback on the shipping experience to prevent another refund or return request.


II. Managing Returns and Exchanges


A. Tips for setting policies for returns and exchanges


Tips for setting policies for returns and exchanges


1. Make your return and refund policy easy to find


We’ve already gone over what to include in your comprehensive returns and refunds policy. Now, do your business a favor by making it easy for customers to find your policy pages. 


As I said, 67 percent of shoppers make it a point to find your returns policy. So it is very important to place your refund and returns policy link on as many relevant pages as possible.


Since shoppers have come to associate legal information with website footers, it makes sense to position your returns and refunds policy on your website footer along with pages like Terms & Conditions, Privacy Policy, or Help Center.


2. Promote exchanges


When you have to refund a customer’s money, it can mean the end of a valuable revenue-generating relationship. 


However, by offering them the choice to exchange the item, you can maintain the relationship and minimize the financial impact losing a customer will have on your profits.


Here’s an example of how to suggest a return without sounding hard sell.


example of how to suggest a return


Of course, you can tweak it for a scenario where the product isn’t discontinued and the returns window hasn’t closed. The main thing is to propose an exchange that will keep them within your business.


3. Consider letting the customer keep the product


Sometimes, a return can cost more money than simply refunding a customer outright. When this happens, consider letting the dissatisfied customer keep their product regardless of the eventual solution, i.e exchange, refund, etc.


Imagine your customer wants to return a $5 hat. If the return shipping and your manufacturer’s restocking fee add up to $8, you can simply send the money back to save all parties the hassle of shipping and restocking.


4. Consider offering free returns


When shoppers know that they can get their money back as easily as they spend it, they will shop with more confidence and spend more. In fact, this Klarna survey reveals that 86% of customers say free returns will make them loyal and more likely to shop at a store.


However, understand that offering free returns is only a good tactic when you couple it with growth strategies like adding customers to your mailing list so you can retarget them with marketing campaigns later on.


B. Receiving and processing returned products


Below you can see the typical dropshipping returns process you’ll have to go through:


  • The customer contacts you for a return.
  • You respond and validate the refund request.
  • For eligible returns, you request a return merchandise authorization from your supplier.
  • Your supplier approves the return and provides the RMA number.
  • Your customer writes the RMA number on the address and sends the customer sends the back product back to your supplier
  • The package arrives at your supplier’s warehouse.
  • If the customer wants to exchange, the supplier sends the exchange product.
  • If not, the supplier may or may not refund you for the wholesale price of the product(s).
  • Regardless, you refund the customer for the full price of the product(s at the end of the day.

To effectively handle returns with various suppliers, you need the support of a third-party fulfillment service. Different suppliers might have different return policies and supply chains, which can lead to longer and more complicated wait times for customers. 


C. Working with suppliers on returns and exchanges

Working with suppliers on returns and exchanges


1. Determine whether a product is worth returning


Again, consider if it’s better to refund the customer outright or to initiate a return. 


If returning the product is worth enough to cover the return and restocking costs, then go ahead to initiate the process.


2. Automate your returns and exchanges


Consider automating your returns and exchanges (and even tasks like updating inventory and sharing orders with suppliers). This will go a long way in making your business operations more efficient and improving the customer experience.


For this, look to a Shopify returns app. These apps let you boost customer loyalty by streamlining the returns process for customers with features like self-service return portals and automated refund/returns systems.


3. Have products returned to you


Lastly, you might want to have the first couple of your store returns arrive at your address.  Doing so lets you monitor the quality and honesty of your suppliers as well as the honesty of the aggrieved customer. 


Plus, it’s an opportunity to experience your supplier’s return process firsthand. This allows you to assess how long and difficult it is for customers to make returns, which is great for evaluating whether or not you need to replace suppliers. 


III. Minimizing Refunds and Returns 


A. Choosing reliable suppliers and products


Oftentimes, the errors that lead to refunds and returns occur during the fulfillment stage. This is why you need to find a supplier or suppliers that:


  • Offer high-quality control standards.
  • Use quick and trackable shipping methods.
  • Send products in durable and high-quality packaging.
  • Offer a reasonable returns policy.
  • Perform in line with the service and fulfillment standards without defects.


B. Providing accurate product descriptions


Like your returns policy, ensure all product descriptions on your store are clear, accurate, and easy to read. Poor product descriptions might mislead customers into making wrong purchases, which will lead to higher return rates for you when they eventually send it back.


Remember, online shopping is different from physical shopping in the sense that customers can’t pick an item and try it on. Instead, they have to rely on the product description to inform their buying decision.

Here’s an example of a product description that understands the assignment. 


It describes the product in detail, the materials used, the weight and washing instructions, and the product specifications. In my opinion, the only thing that’s missing is a link to their returns and refunds policy.


accurate product descriptions


C. Use high-resolution images


Use high-resolution images


On the topic of accurate product descriptions, professional ecommerce images are also essential for communicating in visuals what exactly the customer gets when they buy.


So ensure to include plenty of high-resolution images that show your product in all possible angles, applications, and ideally, on models and mannequins. 


When it comes to achieving these high-quality product images, consider our ecommerce photography services for the perfect visual representation of your store goods.


V. Conclusion 


And with that, we’ve reached the end of this guide. I hope I’ve been able to cover how exactly you should approach dropshipping returns and refunds. 


As you continue to invest time and capital into your dropshipping venture, consider partnering with a trusted dropshipping agent to ease the hassles of fulfillment and secure the growth of your business. 


From sourcing and quality control to order fulfillment and shipping, we oversee all the intricate operations so you can focus on the right things – refining your products, designing your brand, and promoting your store. Contact our professionals today! 

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