Hello and welcome to this week's episode of online store success. Today I'm going to talk with you about whether or not or not to offer refunds. There are pros and cons between offering them versus not offering them.I want to take you through what they might look like and how they might affect your business and your sales because this is something that comes up a lot inside of my Online Store Success program.
By the way, it will be coming back and be open for enrollment early 2023. So be sure to jump onto the waitlist onlinestoresuccess.com. That this is the type of thing that we talk about a lot inside of the group and inside of that program because it is a really tricky one.
So let me get started. Let me share with you the pros and cons of offering refunds. Okay, so right now in iland co., I am not offering refunds but after flushing out my ideas and thoughts about this for this podcast episode I may in fact change that but the reason that I'm currently not offering a cash refund is because my business is for sale. I don't want to have to sell the business and hand it over to someone else and then if they don't want to offer refunds, they have to then go and change it. It's always easier. It's always easier to lower our price versus increase it and it's always easier to make our policies more flexible and open than it is to restrict them. So I want to keep it, I probably will keep it until I find a buyer as it's a 30 day credit note only because I want them in a corner around what they're going to offer but anyway that's why if you go over to our ilandco.com and say hey, but Jodie you're not offering refunds. That's why.
So let's get started if you offer a refund now when I say refund like I said it's whether it's 14 days or 30 days, or whatever it might be after the customers received the item. If you have a refund period where they can get their money back on their credit card or have it afterpay or however they paid. The pros of offering refunds is the number one thing is that you experience a higher conversion rate, because customers will feel more confident coming onto your website looking at whatever it is that you offer and knowing that if particularly fashion, if it doesn't suit them if it doesn't fit them they can return it and get their money back.
And this is particularly important if you sell perhaps more expensive products. So you know, say for example, you sell $250 dresses, and someone's concerned about the fact that you know it might not fit and or it might not suit them. I'd buy a lot of things sometimes and think ‘Oh these colors are terrible and what was I thinking’ and then knowing that you can then go and return it will make that purchasing decision a lot easier for your customer they'll go ahead and add it to cart knowing that yes, okay, if all fails, I can get my money back so you will experience a higher conversion rate.
You also have that confidence instilled in returning customers knowing that if it doesn't work for them, it doesn't fit you they know from experience that they can easily return it and get a refund and it provides a great customer experience really think about I mean I don't know it's I've done this to bought things online and I'm almost scared when I I find that it's not right for me and I have to go and dig up the receipt and think ‘oh, I'm really scared I will I get my money back because this this just isn't right for me for whatever reason’. So it's one of those things that offers higher conversions. It gives confidence in new customers and existing customers and it also provides a good customer experience which is what keeps them coming back time and time again.
So there are a number of pros that make this you know, offering a refund probably a good idea. Now the cons. Obviously the cons are a couple. There's a few, it’s cash out of the business. So if you've made all of these sales and you're like yes, I can now find that next collection. This is great and then all of a sudden you get a whole bunch of refunds turn up all at the same time. It's quite soul destroying number one, but also it's all that money. You've got to then hand back which you may have already spent. I know in when I was in the office with my team of staff, when you know particularly if we'd have like a big batch of refunds arrive at the post office that day the girls would try and hide the box from me because they would just see the blood drain out of my face as they walked in with these huge box of refunds.
I noticed like right there goes all of today's sales so it's cash out of the business and that can be hard to manage for small businesses and I think this is why you see a lot of smaller boutiques and things like that they don't offer they don't offer the cash back. This, like I said, has obviously creates an added layer of financial stress for the business owner. A con of not offering it is that offering refunds is that you will have lower conversion rates and unhappy customers because sometimes they just assume they can get a refund and their cash back and then they'll be outraged when they really realize they didn't read the terms and conditions and now they've you know got, you know, a credit note and if you've got a limited number of items or say for example, your biggest size in your store is a 16 and then they you know have found that it doesn't fit like they need an 18 or 20 and if you don't offer that, they're gonna be really unhappy.
So there's that added layer of stress of customer service complaints and that's also not fun. Sometimes customer service complaints are enough to make us want to burn our business to the ground. So yes, and like I said, it ultimately will hurt the conversion rates because people will feel less confident about making that purchase. And one of the things sometimes too is that you can I mean and this is for whether or not you offer a refund or not people can be quite sneaky and they can wear the thing if it's close and then return it after they're born to that wedding. So you've got to add in some layers of protection there around you know, we make sure that our swing tags are have to be cut off to wear. We used to use pins, just because it was easier to source but now it's no there must cut them off. Because before they could just unpin it and then pin it back on and send it back to us. And then if they sent it back to us and it smelled like perfume and then we were like hey, this smells like it's been worn. Then there's like another outrageous customer nightmare.
So yeah, they're the pros and cons if you can. I would recommend offering a 30 day money back refund. Yes, they have to ship the item back to you at their expense. If you're a small business owner, I mean a lot of the big brands even pay for the return shipping. How nice for them, but I mean for small business owners it is quite hard to match that. Then you might also if they've received free shipping, you might deduct that $10 or whatever it might be off the refund as well for the initial shipping that you might not that might not be refundable. So it's worth testing. But like I said, it's always harder to restrict it if you've had it really open and a really generous refund policy and then turn around and go.You know what, no, we're not doing refunds anymore. People get angry. They comment on your Facebook ads saying this company doesn't return. So it's always you know, it's always easier to widen it up
But what I would say regardless of whether you offer a refund or not for cash or a credit note is just to track your refunds in whether or not there's any common themes. Is someone returning all of this one particular star because is there's a fit issue or is it you know, say for example, your refund rate is 10% every month consistently and then all of a sudden one month it blows out to 20% like have a look into your data and see what what what's going on. We always try and salvage the order. So if someone emails us and says I'd want a refund we will actually go hey, can we offer you know, can we would you like to try something else instead? Would you like to exchange it and we try to just keep the cash in the business first and foremost we always we ask and if they say I definitely want my money back then, then in those cases we go fine. So anyway, I hope this helps you in your decision on whether or not to offer refunds, and I'll see you next week with an unpopular opinion. Bye for now.
