6 Ways to Turn Refunds into Exchanges

Returns are an unavoidable part of e-commerce. Depending on the industry, average return rates can be as high as 40%.

These return rates for online purchases are significantly higher than for in-store purchases. Of course, you can use a number of handy adjustments to lower your return rate, but you simply won't be able to eliminate returns entirely.

However, you can manage your returns more easily and efficiently and potentially recover lost revenue by encouraging an exchange instead of a refund

To help you with this, we have outlined why exchanges are so valuable. We also provide you with 6 methods you can implement today.

‍

When a customer receives a purchase and wants to return the product, they often request a refund. If customers choose to exchange a returned product for another item from your webshop, we call this an exchange.

When a customer initiates a refund, you not only lose the revenue, but also incur the following costs:

• Return shipping costs
• Costs related to quality checks
• Any repair costs
• Restocking costs 
• Advertising and other acquisition costs

When a customer requests an exchange, you quickly save on many of these costs. As a result, exchanges contribute to maintaining a positive cash flow.  

In addition, there are two more important positive effects of exchanges compared to refunds.

Customers who return a product are often dissatisfied with it. If they choose an exchange instead of a refund, your webshop gets a second chance to turn them into a satisfied customer.

If you succeed in turning dissatisfied customers into satisfied ones, you increase the likelihood that they will make another purchase from your webshop in the future.

Exchanges can therefore have a huge impact on your customer loyalty. At the same time, you immediately increase the value of these customers, also known as the customer lifetime value (CLTV).

In short, exchanging a returned purchase for another product provides much more value to your webshop than processing a refund. 

Knowing that exchanges are more beneficial than refunds is only the first step. How do you leverage this insight and actually encourage customers to choose exchanges more often? We have listed a few smart ideas for you: 

‍

1. Ask for return reasons and act on these insights

Perhaps the most important question in the effort to convert refunds into exchanges: why do people register returns in the first place?

By analyzing your return data and return reasons you can identify which products are returned more frequently and why. The insights from return data obtained this way not only help with reducing your return rate:

A thorough analysis of return data also provides insight into your customers' preferences. This helps you more easily decide which products are best to offer as potential exchanges. 

2. Suggest the right alternatives

If you don't provide your customers with exchange options during the return process, there's a good chance they will simply opt for a refund. When suggesting alternative products during the return process, keep the following in mind:

• Offer different sizes or color options for the same product
• When the product being exchanged is more expensive, process payments directly during the return flow
• Ensure that the exchanges you offer are synced with your live inventory

That last point is especially important. You certainly don't want a customer to request an exchange only to disappoint them later because the product is out of stock.

3. Waive shipping costs for exchanges

When it comes to shipping costs for returned products, e-commerce companies often choose one of the following strategies: 

1. Shipping costs for returned products are passed on to the customer—where possible—to discourage returns
2. Shipping costs for returned products are waived to make the return process as pleasant as possible and keep customers satisfied

You can combine these two approaches by, for example, offering free shipping only for exchanges while charging a small fee for refunds.

This way, you encourage customers to choose a product exchange instead of requesting a refund.

4. Extend the return window for exchanges

In most cases, a return is requested within the first two weeks of receiving the purchase. You can make exchanges more attractive than requesting a refund by being creative with your return windows. 

For instance, you can shorten the return window for refunds while extending it for exchanges. In the Netherlands, there is a statutory 14-day return period during which the purchase price and delivery costs must be refunded. 

You can extend this return window for exchanges to 30 days or longer. This creates an incentive to choose an exchange.

5. Encourage exchanges with the right incentives

Another great way to encourage exchanges is by offering special deals, discounts, or coupons. 

For example, you can offer customers a full refund or let them continue shopping with their refund amount plus a 10% discount on another item. This makes exchanges much more financially attractive.

You can also use a return solution like Returnista to automatically issue coupons when someone chooses a refund during the return request process. This coupon remains valid until the refund has been processed.

6. Boost loyalty with a super smooth return process

More than 90% of surveyed consumers say they are likely to purchase again if the return process goes smoothly. Add to that the fact that most return requests are simply due to ordering the wrong size, and there is really only one solution:

Make the return process as smooth as possible while simultaneously making it as easy as possible to offer an alternative size during the process. The easier the return process is, the less likely customers are to demand a refund out of frustration.

By optimizing your return process, you not only increase the number of exchanges, but you also create loyal customers who will shop with you again. 

Do you need help optimizing your return process? We are happy to help.

With Returnista's software, returns are no longer a pain point. Increase customer satisfaction and lower your costs with a beautiful return portal and the ability to offer smart exchanges. Do you want to get more value out of your return process like Decathlon, Loavies, and Asos? Request a demo on our website today.