Every WooCommerce store should be tracking refunds. Refund tracking is an important stat that can have a big impact on your bottom line. It’s a handy indicator that can help you gauge the health of your shop.
If you’re issuing too many refunds you might have a problem with your products, policies, pictures—or something else. (Too few refunds is probably not an issue for most stores, but if you don’t process many returns it could be because a strict return policy is suppressing sales.)
How E-commerce Refunds Compare
In the brick-and-mortar retail world, the average return rate is 9%.
Put simply, e-commerce stores generally see a lot more returns than physical stores. It shouldn’t be a surprise: Shoppers have to trust photos, descriptions, and sizing charts, hoping the product matches their expectations. Nothing compares to seeing an item in person, touching it, and trying it on.
How E-commerce Overcompensates for Refunds
In response, e-commerce has deployed a range of tools to help customers. Free shipping and free returns are major policies that try to level the playing field with brick-and-mortar stores and make it easier for customers to try something, knowing they can return it if it’s not quite right. That’s a one-two punch that boosts returns and refunds.
More returns and refunds aren’t necessarily a bad thing. When online stores offer free returns, customers are likely to spend more money.
Zappos has made a name for itself by leaning into this challenge, actively encouraging their customers to buy and return. It generally works for them:
“Our best customers have the highest returns rates, but they are also the ones that spend the most money with us and are our most profitable customers.”
– Craig Adkins, Zappos vice president of services and operations
Find Your Sweet SpotSo the challenge with tracking refunds in WooCommerce is you need to find the sweet spot where you’re removing obstacles and encouraging customers to buy, but you’re keeping the cost of managing those returns in check.
Some level of returns can be good. But minimizing unnecessary returns will save you money. One online fashion retailer reported that a 1% drop in returns would save them $16 million (and boost their net income by a third).
Running Warehouse discovered that 65% of their returns were because shoes didn’t fit. They were able to reduce returns by 23% with an app that helps customers find the right size.
How to Minimize Returns
Tracking refunds can help you notice spikes or changes in how many returns you’re handling. So what can you do minimize those returns and find your sweet spot?
We’ve got a few suggestions:
- Right fit: Just as Running Warehouse discovered, you can save a lot of money by helping your customers find the right fit. There are a number of strategies you can employ, from fit apps to more accurate measurements to descriptions of body types and how the clothing fits.
- Descriptions: Make sure your product descriptions are helpful and accurate. You need to anticipate questions and address them. This is a big one for stores selling digital products who think returns aren’t an issue.
- Photos: Quality images are key to help customers see what they’re getting. Not only does it help close the sale, but seeing details can help minimize returns. (Need help? Here are some helpful tips for taking product photos.)
- Policies: It’s counterintuitive, but a more lenient return policy (return any time vs. strict ‘return in X days’ rule) can actually reduce returns because customers feel less pressure to return something by a deadline.
- Product reviews: Reviews and ratings can offer social proof of a product and help a customer make a more confident decision. That information will help answer questions and steer them away from products they would end up returning.
- Customer support: Being present to answer questions during the purchase process can be another way to offer information that can make customers more confident and decrease returns.
- The product itself: Finally, it’s important to make sure that what you’re selling lives up to the hype. If you make big promises and offer refunds, you better deliver. Again for the digital products, too many refunds might be an indicator that you’re over-promising and under-delivering.
WooCommerce Refund Tracking
To sort all of this out, you need to be tracking refunds. It’s an early indicator that could mean you simply have more sales, or could be evidence of a deeper problem.
As you make improvements, keep tracking refunds and see if you’re able to reduce returns and refunds. It’s just one piece of your WooCommerce store, but it can help make you more profitable.
Tracking refunds is one of many things you can do with our WooCommerce reporting plugin, iThemes Sales Accelerator. Check it out and start paying attention to the data that can help you improve your store.
Follow Your WooCommerce Data Points with iThemes Sales Accelerator
To get a better handle on your WooCommerce data points, check out our WooCommerce reports plugin, iThemes Sales Accelerator. With iThemes Sales Accelerator, you can get data on your WooCommerce shop, start making informed decisions and make more money.