6 ways to convert 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 of online purchases are many times higher than of purchases in physical shops. You can try to lower your return rate with some handy adjustments, but you simply will not succeed in eliminating returns.

However, you can manage your returns more easily and efficiently and recover any lost sales by opting for an exchange instead of a refund.

To help you do this, we've outlined why returns are so valuable. We also provide you with six ways to use them to your advantage today.

Why exchanges are worth more than refunds

When a customer receives a purchase and wants to return the product, they often request their money back: this is also called a refund. If a customer chooses to exchange a returned product for another one from your shop, it is called an exchange.

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

• Shipping costs of the return
• Costs of quality checks
• Possible repair costs
• Costs for restocking 
• Advertising and other acquisition costs

When a customer requests an exchange, you quickly save on many of these costs. Therefore, exchanges help to maintain a positive cash flow.  

In addition, there are two other important advantages of exchanges compared to refunds.

Impact on the customer experience

Customers who return a product usually do so because they are dissatisfied with it. If customers opt for an exchange instead of a refund, you get a second chance as an online store to turn your disappointed customer into a satisfied one.

Impact on customer loyalty

If you succeed in creating more satisfied customers this way, there’s a big chance they will buy from your web shop again in the future.

Exchanges can therefore have an enormous impact on the loyalty of your customers. In addition, you also increase the value of these customers, or the customer lifetime value (CLTV).

In short, exchanging a returned purchase for a different product provides your shop with much more value than the request for a refund. 

How can e-commerce businesses turn refunds into exchanges?

Having just the knowledge that exchanges are more favorable, is just the beginning. More important is taking action to turn this fact into your advantage and encouraging customers to exchange more. How can you do that? We have listed a number of clever ideas below: 

1. Ask for return reasons and act on these insights

Perhaps the most important issue of all in the battle to convert refunds into exchanges: why do people report returns in the first place?

By analyzing your return data and return reasons, you can find out which products are returned more often and why. The resulting insights into return data will not only help with lowering your return rate:

A thorough return data analysis also gives you insight into the wishes of your customers. This helps you decide which products to offer as potential exchanges. 

2. Propose the right alternatives

If you do not give your customers exchange options during the returns process, chances are they will simply opt for a refund. When suggesting alternative products during the returns process, consider the following:

• Offer different sizes or colour choices of the same product
• If the product to be exchanged is more expensive, implement a direct payment option during the returns process
• Make sure the swaps you offer are linked to your live inventory

Especially this last consideration is an important one. Of course, you do not want someone to request an exchange, only to be disappointed after all because the product is not in stock.

3. Scrap the shipping costs for exchanges

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

1. Charging the shipping costs of returned products to the customer – if possible – to discourage returns
2. Waiving the shipping costs of returned products to make the returns process as pleasant as possible and to keep customers satisfied

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

In this way, you encourage customers to choose to exchange a product rather than request a refund.

4. Make the return period for exchanges longer

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

For example, you can make the return period shorter for refunds and longer for exchanges. In the Netherlands, a statutory return period of 14 days applies, during which the purchase price and the delivery costs must be refunded. 

You can extend this return period for exchanges to 30 days or more. That way, you create an incentive to choose an exchange.

5. Encourage swaps with the right incentives

Another good way to encourage exchanges is through special offers, discounts, or offering coupons. 

For example, you can offer your customers a refund of the purchase price, or let them continue shopping with the purchase price plus 10% discount on another item. This makes exchanges a lot more financially attractive.

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

6. Foster loyalty with a super-smooth returns process

More than 90% of surveyed consumers said they would make another purchase if the returns process went smoothly. Add that to the fact that most return requests are only about ordering the wrong size and you can conclude there’s really only one solution:

Make the returns process as smooth as possible and at the same time make it as easy as possible to offer an alternative size during this process. The easier the returns process, the smaller the chance that the customer will want his/her money back out of frustration.

So by optimizing your returns process, you not only increase the number of exchanges, you also create loyal customers who will buy from you again. 

Wondering how the right return solution can turn refunds into exchanges?

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

Returns are no longer a pain in the ass with the Returnista software. Increase customer satisfaction and reduce your costs with the help of a beautiful returns portal and the ability to offer smart exchanges. Would you like to get more value out of your returns process, just like Decathlon, Loavies and ASOS? Then request a demo on our website.