Automate your refund process and keep customers happy
The Christmas and holiday season presents a massive opportunity to maximize merchants' revenue but also comes with considerable challenges. This period is particularly tough for online merchants when it comes to fulfilling orders and sending shipments on time. Thus, it is very common for cancellations to take place when the order cannot be delivered on time or gets lost.
The cancellation rate is significantly higher for online stores than for offline stores. In fact, on average, 25% to 35% of orders in online stores are canceled, compared to only 1% to 5% in brick-and-mortar stores. So while online stores can expect a considerable increase in their orders, they must already be prepared for a portion of them to be returned.
The current refund process is mostly manual and outdated.
The speed at which customers get their balance back varies widely. Once the merchant processes the refund, it's up to the bank or payment processor to post the funds to the customer's account. This process typically takes 3 to 7 business days and sometimes even up to 30 days, depending on the payment instrument used by the customer.
Furthermore, more than 50% of customers who request a refund for online purchases are unhappy with the time it takes to receive the refund. This slow and outdated refund process only adds extra stress on holiday shoppers and can lead to a negative customer experience and possibly even damage the store's reputation.
Getting the refund experience right can be an excellent opportunity for merchants to shine and win customers' love. Customer satisfaction is one of the critical factors in gaining loyal customers and maximizing customer lifetime value. Automated and fast refunds keep customers happy and ensure merchants stay ahead of the competition.
From what we've seen after working on the merchant side of payments for many years, when refunds are available as balance immediately, around 70-80% of customers use the available credits to make another purchase from the same merchant rather than returning the amount to the original payment instrument. With automated refunds, merchants can further encourage customers to reuse their refunded balance and increase customer retention.
So how can you automate the refund process?
Refund is a complicated process that takes a lot of time as multiple entities are involved. A slight delay at any stage will further delay the entire process. However, there is a tool that merchants can use to avoid this lengthy process, and that tool is called a ledger.
Our Ledgers product is a powerful tool that allows managing all money movements seamlessly. Merchants can do everything from splitting funds among multiple destinations (i.e., marketplace commissions, payment fees, courier tips) to fully automating the refund processes.
In the case of refund management, Ledgers enable merchants to provide their customers with a superior refund experience by avoiding lengthy issuing bank timelines and making their credits available immediately as a balance for a new purchase. This way, merchants can eliminate operational efforts for manually coordinating refund claims and process refunds with an end-to-end automated solution.
What does an optimal refund process look like?
When it comes to cancellations and refunds, many eCommerce companies are not well prepared. However, some companies provide excellent examples of automating the refund process, and one of them is the online retail giant Amazon. It is known for having one of the most customer-friendly refund processes in the eCommerce world. They do it by giving customers a choice to receive funds as balance credits that are available immediately. Providing an excellent refund experience when things go wrong allows Amazon to build long-term loyalty among customers, so they keep coming back and buying.
To summarize, merchants should take advantage of fully automated instant refunds that will encourage their customers to use their refunded credits to continue purchasing in order to gain loyal customers, increase customer retention, and stay ahead of the competition.
At Payrails, we have seen how our merchants have leveraged ledgers to automate large-scale financial operations to achieve greater control and visibility by seamlessly tracking, managing, and reconciling money movements. If you are still curious about Ledgers product or are unsure whether it can fit your business, please do not hesitate to contact us anytime.