How to reduce holiday refunds this return season.

Online brands are about to hit the busiest shopping days of the year. Sales for Black Friday and Cyber Monday are anticipated to hit $1.1 trillion this year.

This means there’s a huge opportunity for online brands to grow their revenue during the holiday season. But there's another equally important opportunity that many brands aren’t even aware of return season.

What is return season? 

Return season is the timeframe from December to January when post-holiday sales end and returns start to roll in. According to our data, which is based on the past two years of holiday shopping and over five million returns, monthly returns are 83% higher in December and January compared to an average return month. 

Monthly returns are 83% higher in Decembr and January compared to an average return month.

As a brand, if you’re not as prepared for return season as you are for the holiday season, then your profitability will suffer.

Turn refunds into exchanges this holiday season

You’ve done all this hard work to get ready for the holidays. But without the right approach to return season, you may end up undoing all your work to get the sales. Here’s what we mean.

Many brands assume that every return will be a refund. If you adopt this mindset, you’re going to end up throwing together a holiday return policy that tells customers how to request a refund - and nothing else. In other words, you’re going to optimize for the wrong behavior and end up with way more refunds than you might otherwise have.

Our strategy? Don’t assume your customers are all going to ask for refunds. Instead, focus on turning your refunds into exchanges this holiday. With this approach, brands that work with Loop only see 60% of its returns as refunds - compared to the 80% that the average Shopify brand loses to refunds.

Here's our playbook:

1. Make gift exchanges easy

52% of returns on Shopify happen because the customer has the wrong size. During the holidays, when the number of people shopping for someone else skyrockets, we can only assume this percentage will go up significantly. This means you need a strategy that aligns to this shift in shopping behavior. 

Let’s say a customer’s aunt gifted them a shirt that’s two sizes too big. If you’re not prepared to handle easy gift exchanges, you’re forcing your customer to either refund the item (which will awkwardly go back to their aunt) or just be stuck with a product that they can’t wear. 

That’s why you need to make sure you have a process in place that puts the person receiving the gift in control. What does this look like? Pretty much, you let the gift recipient: 

• Start the return process by searching the order number or zip code

• Change the address associated with an order

• Select a new item without having to process a refund first 

By doing this, you’ll experience less refunds, reduce the amount of time support reps have to deal with exchanges (especially if you use an on-demand return portal), and generally create a really easy experience for customers. Take a look at Allbirds’ gift exchange portal below for inspiration.

2. Offer free shipping on exchanges

Most brands are aware that free shipping has a high impact on conversions. But did you know that you can use free shipping as the “carrot” to get someone to issue an exchange vs. a refund? The concept is simple:  

If a customer wants to do a refund = customer pays for shipping

If a customer wants to do an exchange = brand pays for shipping

In other words, if a customer wants to request a refund, that’s totally fine - but they’re going to cover the shipping costs since the relationship is ending. But if they agree to an exchange, your brand is going to offer free shipping as a “thank you” for their loyalty. That small fee has the power to make the customer pause and think twice before asking for a refund. 

Take a look at how effective this strategy was for a popular footwear brand we work with.

As a result of two months of charging a “shipping fee,” this brand’s exchange rates climbed 25.4% and refund rates decreased by 28%.

3. Incentivize customers to shop 

Our final strategy is to offer a bonus credit to shoppers who are willing to exchange. So at the moment a shopper is about to request a refund, you present an alternative and say “hey, we’ll  give you an extra $10 to shop with if you’re willing to exchange this item.”

Essentially, a customer would have to turn down free money if they choose to continue with a refund. As you might imagine, this is a highly effective incentive. That’s why we see brands that adopt this strategy generate $1.95 per return in new revenue. Take a look at how Baseballism positions their $5 bonus credit in their returns portal.

Don’t let all the hard work you put into preparing for holiday sales go to waste. Make sure you have the strategy and tools in place to reduce holiday refunds and keep more of your revenue this return season. Need help getting ready for return season this year? Reach out to our team - we would love to help.