A Guide to Return and Refund Policies (+ Policy Template)

Returns and refunds are one element of the ecommerce business model that can trip up ecommerce businesses. Your business needs clear return and refund policies because, as research from Baymard Institute shows, an inadequate returns policy is one of the top reasons people end up abandoning their shopping cart:

Plus, without clear policies, customers might make assumptions — and become frustrated if you can’t meet them. Despite the importance of clear return and refund policies, crafting them in easily understandable language can be a challenge.

We’ve created this guide to help online businesses like yours craft clear, effective return and refund policies. We also built a template generator (which you can view by inputting your email address above) to use as the foundation of your policies. 

Ecommerce refunds and returns: A guide to your store’s policies

There are millions of ecommerce stores already running, most of which already have refund and return policies in place. You can copy/paste your policy from a competitor, but many policies floating around the internet aren’t actually that helpful or clear. The best approach is to build out your own policies, following industry best practices adapted to fit your business.

How common are returns in ecommerce?

A recent study shows that around 25% of online shoppers admit to returning between 5% and 15% of what they buy. And a troubling 7.92% of shoppers claim to return over half of what they buy online. Another NRF report finds that 16.6% of merchandise from online retail sales was returned in 2021.

Experiencing too many returns? Read our guide to reducing returns in ecommerce.

Why should you trust us?

Gorgias is partnered with leading ecommerce platforms and tools — we’re proud to be a certified Shopify Plus partner. In addition, we’ve worked with thousands of online store owners to develop revenue-generating customer service, reduce friction in returns and refunds, and improve customer experience.

Our customers are experts in their niches. We work closely with brands of all sizes while they build and operate online stores. One of our values is being customer-first, which we live out through constant communication and feedback. In other words, our work is informed by trial and error from 10,000+ online stores.

And, we’re always here to share what we learn. Here’s what we want you to know about refunds and returns for your online store.

What is a refund policy?

A refund policy states the rules around whether and when customers can receive a refund for a purchased item. Unlike returns, where the customer is usually expected to return the item in sellable or original condition, refunds are not typically contingent on returning an item. 

A refund policy should list the reasons and scenarios in which a customer may be entitled to a refund, such as when a product is faulty or defective, when it arrives damaged or never arrives, or under other unusual circumstances included in the policy.

What is a return policy?

A return policy states the rules and conditions about when, whether, and for how long customers can return purchases and be reimbursed for those returned purchases. 

A return policy outlines which types of items are included or excluded from the general policy, as well as any exceptions to the general policy (such as certain categories of items with a shorter return window or others that cannot be returned).

Both your refund and return policies should outline how customers can expect to be reimbursed (e.g., whether you offer cash refunds or gift cards) as well.

Why do you need a refund and return policy?

A clear and fair return and refund policy establishes your credibility and protects both you and your customers from claims of unethical behavior. It can also bolster customer retention rate (because customers will appreciate the option to refund or return products they don’t like) and conversion rate (because customers are willing to buy new products if they know a refund or return is possible).

Here are three reasons your business needs these policies in place.

Your competitors likely offer a refund and return policy 

First, if you fail to offer a clear refund and return policy, you may be the only one to do so among your competitors.

Remember, customers often have a degree of distrust of ecommerce brands — especially when taking a chance on a new or unfamiliar brand. Customers therefore look for a clear and generous refund and return policy before purchasing from a store for the first time.

If you don’t have a clear policy (or if yours is more restrictive), some customers will abandon their cart and move on to a competitor with a clearer or better policy (such as free returns).

If customers are dissatisfied with your product, you need a process that’s ready to go

The saying “you can’t please everybody” comes to mind here: No matter how much care you put into your products, some customers aren’t going to be happy. And a tiny percentage is going to go beyond unhappy — more like anger or rage.

In those uncomfortable moments, you want to have a process and policy that’s ready to go. Any lack of clarity from your customer service team can further escalate a negative encounter. But with a clear and consistent policy in place, your customer support team can provide a consistent, objective customer experience.

For more on responding to customers who are less than thrilled, check out our guides on responding to customer complaints and angry customer emails, or use our free set of 27 customer service scripts to help defuse tense situations.

Refund and return policies give customers peace of mind, which can drive higher sales

When you deliver a consistent, easy-to-understand ecommerce experience, your customers relax that distrust we mentioned earlier. And when you give customers greater peace of mind, they tend to spend more.

When customers trust that they won’t get stuck with merchandise that doesn’t fit or doesn’t work for them, they’re more likely to buy. Yes, that means your return rate goes up. But if your average order value and your overall sales go up even higher, it’s still a net win.

Once you create your clear refund and return policy, we recommend making it highly visible during the shopping. Parachute, for example, lets browsers know they have free and carbon-neutral shipping on every product page. If a customer is on the fence about a purchase, this might nudge them to make the purchase.

Speaking of customer peace of mind, read our guide on how to offer order tracking for your customers.

Here’s what to include in your refund and return policy

Now you know why your policies are crucial, and you’re ready to learn how to create them the right way. Generally, your policies will outline everything about product exchanges, refunds, and returns for your store, including:

• Whether you allow returns or refunds on products purchased through your online store. In some cases, full refunds or returns just aren’t possible. It’s better to let customers know that proactively, rather than letting it be a frustrating surprise for them. 
• The stipulations surrounding whether you will facilitate refunds or returns. For example, maybe you choose to accept returns only on broken or damaged products or only those in unopened original packaging.
• Time limits. How many days after receiving a product does the customer have to notify your company that they are interested in returning a product or requesting a refund?
• How your refunds will be disbursed. For example, you might offer store credit or refund to the credit card used to make the purchase.
• Who pays the shipping costs to return the product? Many online stores require that customers pay return shipping costs on the returned item. But others like Amazon provide paid return shipping labels that are funded by the company.
• Geographical stipulations. Do you have different refund and return policies for customers depending on their location?

If you sell digital products, your policies will require further information:

• Do you allow refunds on digital purchases like apps or media downloads?
• If a download link doesn’t work, what is the process for helping a customer access their digital goods?

By the way, refunds, exchanges, and other methods of tending to a dissatisfied customer all have different costs. Learn how using gift cards and loyalty points might be a better option for your business and customers alike.

International return policy: 6 best practices

Selling to an international market instantly grows your potential customer base. It’s also complicated, and international returns are a part of the reason.

If your ecommerce store intends to sell internationally, follow these best practices for coordinating and handling international returns (based in part on guidelines from international courier FedEx).

• Transparency is key. Your international market has the same concerns as your domestic one — maybe even more — so be clear about what is and isn’t returnable.
• Use simple language. Some return policies read like a technical manual. Don’t do that: use simple language instead.
• Localize it. Be sure to translate and localize your policy for the dominant language in any area you sell.
• Be generous with time. International shipping is slower than domestic — sometimes drastically so. An item that takes two weeks or more to arrive has already burned through half of a standard return window of 30 days. Implement a lengthier return window where possible.
• Know local laws. Some countries (the U.K. is a notable one) have laws about returns, whereas the U.S. is much less regulated. Know the local laws in any market you sell in so you don’t get fined for a violation.
• Evaluate return shipping costs. If you’re offering free return shipping, sometimes the cost of shipping is higher than the cost of the item. Sometimes a refund without a return is the less impactful choice.

Want more information? Check out our guide to ecommerce returns best practices.

5 refund and return policy examples to inspire you

Now let’s look at a few examples that you can use as templates for your online store’s return, refund, and/or exchange policy.

1. MNML return, refund, and exchange policy

MNML outlines all its policies on one landing page. As you scroll down the page, you come to the returns section, where they outline their terms for sending back a product or order. In six friendly paragraphs, they let shoppers know their aim is 100% customer satisfaction and explain how the process will be handled, including the timeframe customers can expect.

Note that international customer returns will result in a $25 restocking fee, which helps them maintain associated costs. Clearance items are not eligible for returns. Customers have 30 days from receipt to request a return.

2. Rothy’s returns and exchanges policy

Rothy’s offers free shipping and returns on all orders. They have a dedicated returns and exchanges policy page posted on their website. From this page, customers can request a return as well as locate a Rothy’s Return Bar for in-person returns. This policy does a good job of explaining which items are eligible for returns:

• Clothing items that are unused and unwashed
• Bags that still have product tags attached to them
• Items that were not listed as final sale

Since they are an online and offline seller, their policies outline the processes for in-store and automated, online processing. In a nutshell, they try to make the process as easy as possible for their shoppers.

3. Timbuk2 returns and exchanges policy

Timbuk2’s policies aren’t all that different from other online retailers. But, since they are a wholesaler as well as a retailer, they have an additional clause in their policy. The section referred to covers returns for Timbuk2-branded items purchased from other retailers.

In the case that a Timbuk2 product was purchased through an external retailer, any return or exchange must be handled externally. This is a crucial point to consider if you offer your items at wholesale prices to unaffiliated sellers.

4. Sphero returns and warranty policy

Sphero sells physical and digital goods. So they include a detailed section in their policy about digital purchases to avoid confusion. In their case, digital products are not eligible for refunds.

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Note that Sphero’s digital goods policy also covers digital product transfers. In the case that a customer is done with a digital item they’ve purchased, they may want to transfer it to a friend or colleague. In this case, that is not allowed. This is a crucial aspect of your policy to consider if you sell virtual products online.

5. Roolee return policy

Roolee outlines its policies on a dedicated returns page, which covers everything from when a return can be made to what can be returned. In addition, they spell out that shipping charges aren’t refundable and that return shipping charges are deducted from the customer’s refund total.

In this section, Roolee states that some returns qualify customers to receive an eGift card that can instantly be redeemed with their store, which might be a cheaper option for your store, especially if you sell internationally.

Improve your end-to-end customer experience with Gorgias

Building a clear and comprehensive return policy is a key priority for all ecommerce businesses, and an important way to ensure an exceptional customer experience. If you want to invest further in your returns management process, read our guide on the best returns management software on the market.

Another key priority that’s just as important to the customer experience is offering a consistent helpdesk and customer support experience.

Gorgias is the customer service platform designed for ecommerce, with powerful features businesses need like live chat, a chatbot, intent and sentiment detection, order management, message templates and macros, and much more.

With Gorgias, you can keep policies and documents — including your return and refund policies — clearly defined, organized, and visible to your customers and customer service staff in a help center.

See how Gorgias can transform your customer service approach — sign up for free today. And if you’re still looking for the return and refund policy template, scroll back to the top of this page and input your email. The template will pop right up.