Retail Tips: Handling Refunds and Returns

Whether you’re running a brick-and-mortar or an e-commerce site, there will be customers who would like to return or exchange what they bought at your store. That’s just part of life! As a small business owner, you have to make sure you have a sensible refunds and returns policy in place.

What Does a Refunds and Returns Policy Do For You?

Why should you allow refunds or returns at all? Won’t that hurt your bottom line? The answer to that question is not as obvious as it may seem. Sure, you’re going to have to give money back to your customer. But in the long run, that’s going to help establish your business as a fair and respectable establishment that really cares about customer service. It shows that you believe in your products and services and stand by them – you’re not trying to sell at all costs and leave unhappy customers in the lurch.

Experts say that small businesses should look at returns and refunds as a crucial part of the customer service experience. You can lose a customer over a bad return experience or you can set them up as a loyal buyer for life. Anything you can do to make shopping with you an overall positive situation will help you garner trust and loyalty for your brand.

A refund/return policy offers rewards beyond happy customers – it can give you valuable information about what products are working and where you can do better. If you notice that a large number of people are returning the same product, it’s time to take a look at that product and see how you can make it better.

What Are the Options for a Store Refund Policy?

To be effective, your refunds and returns policy needs to cover three main issues: a time limit, a type of return/exchange/refund, and the circumstances under which a return/exchange/refund is allowed.

A time limit is typically fairly easy to decide. You want to make sure your customers have enough time to bring the product back, but you also don’t want to worry about returns coming in 3 years down the line. The right amount of time will depend on what you’re selling. For services, that time limit will often be shorter – your customer is going to know they’re unhappy with their new haircut within a few days, if not on the spot. For products, most experts agree that a 30-day period to return should be the bare minimum. E-commerce sites may offer even longer periods to allow for plenty of shipping time. Some prominent brands such as LL Bean and North Face even offer “lifetime guarantees” on all products, though most retailers do not offer such latitude and those types of guarantees can be complicated on the legal side.

In addition to a time limit, you’ll need to decide how to handle returns, exchanges, and refunds. You may give people their money back, plain and simple, or you may offer store credit. You can also combine these options in a way that works for you. For example, many stores offer to refund your money with a receipt but only give store credit if you don’t have a receipt. Or you may offer store credit only for returns after a certain amount of time. Some stores also offer store credit for the full value of the product or a discounted amount if you want a refund in cash. If you run an e-commerce site, certain shipping etools exist to help expedite the return process – that will help you avoid refunding a customer’s money without actually getting the product back.

Finally, you’ll need to decide on the reasons a customer can return or exchange a product or ask for a refund. That’s going to depend on what kind of business you’re in. If you run a salon and a customer is unhappy with their haircut, you may decide to give them a discount on the spot, not charge them at all, or offer them a free fix. If they call you a month later claiming to be unhappy, that’s probably too far out to reasonably request a refund or a fix. If you run a restaurant, you may offer to exchange your customer’s meal if they try it and don’t like it or if it’s an incorrect order – but not if they eat most of the plate and then decide they don’t like it. You’ll need to think about what will work best for your business and your customers.

Note that whatever your general policy, you should always make it right if a product is defective or damaged in transit. That may mean offering a refund, shipping a new product (usually expedited), or both. You may also want to consider offering a discount on a future purchase as thanks for their patience and to encourage them to come back.

And before you set a firm policy, have your attorney go over it to ensure that you’re in line with industry standards and any applicable regulations.

Letting Your Customers Know

The most carefully-crafted return and refund policy in the world won’t do your business any good unless your customers know about it. They need to understand how to go about getting a refund or return and they’ll appreciate knowing that they have that protection in case they’re not satisfied with their purchase.

If you’re running a brick-and-mortar retail shop, then it’s important to share your return policy at the point of sale location. This means that you should have a clearly visible copy of the return policy prominently displayed at each cash register. It’s also important to include your return policy on the hard copies of receipts you give to your customers.

If your store is an e-commerce site, then you can share the return policy on your website. In addition, enclose a hard copy of the return policy with the packing materials so your customer is notified of the return policies when they receive your product in the mail. The simple act of making sure your customers know about your return policy when they buy your product can save both of you headaches down the road.

And of course, the policy needs to be understandable and cover all the bases. It should:

• Use clear, concise language (no legal jargon)
• Explain whether customers will get cash or store credit back (or whether they’ll have a choice)
• Describe the reasons a customer may request a return/exchange/refund (defects, incorrect orders, dissatisfaction, etc.)
• Make sure to include any limitations, like requiring that the tags are still attached or that an item has never been used
• Set out time restrictions (such as 30 or 90 days from the sale date)

For clear and concise language, look at how Target explains its return policy. Of course, you’ll want to draft your own return policy as applies to your store, but you can use major retailers’ templates to get a sense of what to include. For more major retailers’ return policies, visit The Good Stuff’s 23 Must-Know Holiday Return Policies.

Don’t Forget Your Employees

You have your return policy set and your customers know about it, but you’re still missing part of the equation – your employees! They’re the ones that will have to handle these customer service issues, so make sure they’re clear on your policy.

Take the time to sit down with your employees and let them know that the policy goes beyond the simple letter of the policy. Extenuating circumstances may put your customers outside the normal policy. So, make sure your employees know that there can be leeway if that’s necessary to give your customers fair treatment. At the very least, make sure they know they can send cases to you if they don’t feel like the standard policy is good for a particular customer.

Do It For The Customers

You’re running a small business, and every sale counts. But as we mentioned before, that doesn’t mean you should be trying to trap customers into keeping products they’re not happy with or settling for services that didn’t meet their expectations. Real success is a long-term affair. That means building a community of customers, which can only happen if they know that you really care about their satisfaction. So take those refunds and returns as an opportunity!