How to Leverage Your Returns Process to Reduce Chargebacks
Returns are a headache for many businesses and can result in lost revenues. It might be tempting to skip returns or to make the return process difficult enough that customers will be dissuaded from using it. However, there’s a high risk that customers will simply turn to their bank and request a chargeback. For merchants, chargebacks can result in not only lost revenues, but also lost inventory, chargeback fees, and more wasted labor. If your business is suffering from high chargebacks, your return process may be (at least partially) the cause.
From the customer’s point of view, chargebacks function much like a return. They can contact their bank and essentially ask for a refund. If the bank approves the chargeback, the customer will not only get their money back, but they also might not have to return any products obtained. Obviously, a merchant will want to avoid such a scenario.
Returns are especially common after the winter holidays. January and February are sometimes referred to as “return season.” Still, your business will likely have to deal with returns all year round. Fortunately, the right return process can go a long way, helping you keep customers happy and chargeback rates low.
Make Sure You Offer Returns
If you don’t offer returns at all, customers may still be able to get their money back through a chargeback. Many customers who would have actually used your return process could instead turn to their bank. This is bad news for merchants.
Not only could you lose revenue from the sale, but you will get hit with chargeback fees, which typically range from $20 to $100. Further, if your chargeback ratio gets too high, you may face increased processing fees for every purchase made with a card. This includes purchases that don’t result in chargebacks.
The key takeaway? You’ll almost always want to offer some type of return process. There can be exceptions, but you should closely weigh the potential risks of refusing to accept returns.
Make the Return Process Easy to Understand and Use
Customers should be able to quickly find your return policy and the steps to initiate it should be easy to understand. Further, your customer service department should respond to inquiries and return attempts quickly. If your customer service department takes a few days to respond, the customer could turn to their bank for a chargeback in the meantime.
A responsive customer service department can help reduce chargebacks in other ways as well. For example, if a customer hasn’t received a product they ordered online, they may think that their order was never fulfilled or that it got lost in transit. They may contact your customer service department before their bank. If you can provide them with tracking information or otherwise reassure them that the order is being fulfilled, it could prevent them from seeking a chargeback.
Consider Offering Free Returns
For a long time, the biggest merchants have offered free returns, including online retailers. Especially for Internet shoppers, this is a big reassurance for customers who are ultimately buying a product without seeing it. Even if a customer finds the same or a similar product for less on a smaller merchant’s website, they might turn to the biggest sites because they offer free returns.
That said, some of the biggest online retailers are starting to charge return fees at least for some purchases. Some brick-and-mortar companies are likewise charging fees. This may make it easier for smaller companies to charge return fees themselves. However, offering free returns, or at the very least cheaper returns, could give you a competitive advantage. For now, it’s wise to consider offering free returns. Of course, free return policies must still be easy to understand and use.
Ultimately, the right return process and a responsive customer service department can ward off chargebacks, in addition to robust chargeback management platforms such as ChargebackHelp. Given how costly chargebacks are for companies, it’s crucial to be proactive.
This article has been published in accordance with Socialnomics’ disclosure policy.