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  • Home / Blog / Ecommerce Returns

How to Write a Refund policy template for your eCommerce business

01 Feb, 2023 | 7 Min Read
How to Write a Refund policy template for your eCommerce business

Table of Contents

1) What is a Refund Policy Template

Simply put, a refund policy template is a document that governs the way a business handles returns, including eligibility for refunds, repayment options, the timeframe for generating a refund, and details of the return process. A business in its lifecycle has the potential to face a quarter of returns; this is why having a refund policy that dictates the returns and refund process that state the rights of customers and your obligations clearly. 

While businesses may estimate the value of having a refund policy in place, they may not know how to craft an excellent refund policy that retains customers’ trust in their brand and gives them leverage over their competitors. This article will discuss how to write a refund policy template for your business.

2) Why Should You Maintain a Refund Policy Template

2.1) Build and Sustain Customer Trust 

Returns are almost always a psychological scar for customers. Be it the wrong size fit, damaged condition, or simply failure to meet customer expectations; the customer feels an inherent urge to stop dealing with the business or brand altogether. You can clip this urge with an excellent refund policy that assures customers of a reasonable investment by giving them a convenient returns experience and refund payments.

Customers will trust your brand when reassured that your refund policy will take care of the reasons and eliminate further complications in their next purchase.

2.2) Appeal to New Customers 

Did you know that a refund policy is a good marketing strategy? Since half of the customers check a business’s refund policy before committing to a purchase, a refund policy reduces cart abandonment. It drives up sales and appeals to new customers who casually browse your product catalog to purchase an item when you promise them a refund.

2.3) Command Customer Expectations

Managing customer expectations through a refund policy is the easiest and safest way to dispel misunderstandings and future arguments. When you state your reasons for returns and refunds, it leaves little room for customers to question or demand refunds for which they are not eligible. 

2.4) Manage Fraudulent Returns Practices 

A refund policy is a great way to combat fraudulent returns practices like wardrobing. Many businesses like KeraStraight explicitly state that they monitor and track the returned items to stop some customers from abusing the system. When you mention such preventive clauses with a clear list of guidelines, customers are aware of their obligations to respect the business and reduce fraudulent returns. 

2.5) Compliance with Law

Returns and refunds sometimes fall under the jurisdiction of State laws and customer protection bills. This is why having a refund policy keeps your business under the gamut of state laws and customer protection measures.

3) How to Write an Excellent Refund Policy Template for your Business

Now that we understand the absolute necessity for having a refund policy, the next concern is to know how to write an excellent refund policy template for your business. There are essentially ten elements that are must-haves for a refund policy template. Here are those:

3.1) Define Your Returns Time-Frame

Defining the period of returning your products is a priority agenda for your refund policy. Simply put, the returns window is a countdown of days that a customer can initiate a return request with you and seek a refund. 

While most standard refund policies almost always have a 30 days return and refund period, this is not always a recipe for success for every brand. You will have to carefully calculate the cost of reverse logistics, item re-sellability, and customer retention before fixing a returns window.

Another factor to consider would be customer experience. You would not want to dismiss customers willing to prolong their relationship with your brand with a shorter return period. So, considering customer feedback and reverse logistics constraints, carefully set your returns period.

3.2) State Eligible Items for Refund

Every business has high-value items, consumables prone to wear and tear once used, and hygiene standards that cannot be returned or refunded. Usually, these items include jewelry, cosmetics, food, perishables, undergarments, sale items, etc. 

Sometimes, owing to logistical challenges or warehousing constraints, businesses may categorize their products as non-refundable once bought. Usually, customers proactively check the refund policy for items classified as non-returnable; however, it is also a good practice to indicate this in the product descriptions of items.

Moreover, some businesses specify that only damaged or defective products can be returned and refunded. In contrast, others like Amazon allow customers to return products if they are unsatisfied. Whatever the reason, it is best to spell it out in the refund policy clearly. 

3.3) State the Conditions of Returned Items for Refund

For businesses to maintain their profit margin, the returned items have to be reshelved as inventory. Companies need to know what state the returned items should be to qualify for refunds. For example, some require products to remain undamaged or unused, and others demand original packaging with attached price tags before accepting returns. Some demand purchase receipts are returned for processing refunds.

Again, specifying these details clearly in the refund policy will update customers on how to treat the products to be eligible for returns and allow you to accept or reject refind requests accordingly. 

3.4) Method of Refunding 

Businesses have different approaches to refunds. Some provide refunds to original payment sources like credit or debit cards, while others do a direct bank transfer. Another popular method is to give in-store credit and e-gift cards for refunds. Businesses can also choose to provide all four refund options and let the customer decide.

In any case, a refund policy is incomplete without specifying the methods of refunds. Many business experts believe that giving in-store credit is a good practice for customers to return for another purchase. 

3.5) Shipping Costs

Providing refunds while bearing the cost of reverse logistics isn’t an easy task. Customers are willing to pay for return shipping if they return a product that didn’t meet their expectations rather than for damaged or defective goods. Though customers usually expect free return shipping, businesses don't need to abide by that rule, especially when their bottom line is in danger. So, it is indispensable for companies to spell out if they charge a shipping cost and why.

3.6) Time Needed for Processing Refunds

Along with the refund method, customers also keep in mind the time a business spends providing them refunds. The quicker the refund gets to the customer’s wallets, the better they feel about the business’ ethics. Usually, a business takes seven working days to process a refund, or they may initiate it once they receive the item in stock. In any case, it is advisable not to set deadlines if businesses can’t meet them.

3.7) State if Items can be Exchanged or Replaced if Damaged

An excellent way to quell returns is to offer exchanges or product replacements. For damaged products, it is best to provide a quick exchange, and a refund as receiving damaged products drastically affects customer trust in the business. Therefore, stating the conditions of exchanges can be an easy way to attain customer satisfaction.

3.8) Ways to Get a Return Label

For most businesses demanding customers do self-service returns, it is the optimal practice to clearly state how and where customers can get their return labels. 

4) How to Optimise Your Refund Policy 

4.1) Easy to Understand Refund Policy

A technical, complex, and three-page refund policy will only prevent your customer from reading it and, in turn, miss vital information. Just as you make your refund process more manageable, make the refund policy easy to understand for customers.

Easy language without complicated words, highlighting keywords and essential phrases, and using genuine customer feedback are great ways to write a simple and easy-to-understand refund policy.  

4.2) Easy to Locate Refund Policy

Another good practice is to place your refund policy where customers can easily find it. Setting it in the website footer, banners, carousels, and product descriptions are good places to highlight your refund policy.

4.3) State the Reasons for Your Conditions

A good refund policy always displays a clear conscience from the business. It is said that honesty is the best policy. You can keep the explanations short but offering reasons for specific clauses like charging a shipping fee and declining returns for items is the best way to offset customer dissatisfaction and accept your refund policy.

4.4) Free Returns 

Offering free returns can be a controversial decision for many businesses, given the rising cost of reverse logistics. However, it is always in good faith to provide free returns, especially if you have shipped the wrong product or the product is damaged in transit. 

4.5) Use Videos and Graphics 

Videos and graphics are not only appealing to the eyes but also good ways to explain your refund policy with clarity. Given the short attention span of most people, a better way to optimize your refund policy is to use videos and graphics to discuss your refund policy which is sure to catch your customer's attention. 

4.6) Creative and Memorable Names 

Do you know Ikea’s refund policy has the theme of “It’s Ok to change your mind,” or Vouri calls their returns policy “Investment In Happiness”? Your refund policy is an extension of your brand image, so giving memorable names to them will surely garner your customer's attention and highlight your brand’s theme. 

5) Some Lessons From Businesses with Finest Refund Policy

5.1) Rapid Returns 

The returns process is a taxing process for customers, especially when they have to self-service the returns. Added to the hassle of printing returns labels and dropping off the parcel at returns locations, they accept that the money spent is returned on time, if not faster. Most enterprise-level businesses process returns immediately and accurately to curb the negative opinions of customers.

5.2) 365-Returns Window

Businesses like Zappos and Ikea offer a 365 return window with fast reimbursement to return or exchange their products. Zappos provides rapid returns to customers in addition to this extended returns window. This is a strategy of the value proposition for businesses to ramp up their sales while retaining customer trust and satisfaction.

5.3) Money-Back Guarantee

Aside from some instances of manipulation, this policy generates a lot of trust from customers and is a good practice to include in your refund policy if you sell high-value goods. Issuing a money-back guarantee will set you apart from the competition and allow you to sell your products at a higher price. Customers would still prefer to have the product given your commitment to issue a full refund if the situation arises.

6) Should You Use an Existing Refund Policy Template

While using a pre-existing refund policy that meets your requirements is tempting, it is not advisable to do so. To retain your business’ unique approach to handling the returns process and refund options, it is best to think carefully and write your refund policy. You can certainly take inspiration from the best ones out there, but do use others’ policies as your own. 

7) Should You Automate your Refund Policy 

Automating the process is the best way to have proper returns and refund management. Using a SaaS-based return management system like ClickPost, you can easily keep track of your returns and generate return labels for customer ease while offering a branded tracking page for cross-selling.

8) Conclusion 

A refund policy is not simply a document that explains how to manage the critical refund process. It is a bandwidth of trust that brings customers to appreciate your service and products. Highlighting how you provide refunds and offer multiple refund payment options, including terms and conditions specifying refund eligibility, not only informs your customers into making the right purchase decision but also tackles malpractices plaguing the business world today. 

9) FAQs

9.1) What to Include In a Good Refund Policy Template?

A good return policy has four prerequisites: return eligibility, refund methods, time to process the refund, and how to make a return. 

9.2) What to Avoid in a Refund Policy Template?

It's best not to set any deadlines for yourself if you cannot meet them and avoid a complicatedly written refund policy that might confuse customers.

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