3 Reasons to Consider Your Refund Rate

Have you ever looked at your refunds and questioned… How many of those refunds are actually legitimate?

 

I’m guessing you may have never really thought about the possibility of your customers trying to find loopholes in your refund system, in order to get  products or services for free, without you realising…

 

The truth is this happens more often than you think, and not just to bricks and mortar stores…. In fact, online stores are even more vulnerable, as the entire refund process is completely faceless.

What You May Not Know

There is a whole community of professional refunders (and we mean the proper Sith Lords of refunding) that are championing hundreds (maybe even thousands) of online forums and groups, to educate other criminals in the industry of new, innovative ways to rip you off using your refund system. 

 

It’s not even just the seasoned refunding professionals to look out for, but the lazy buyer who purchased $800 worth of parts from your online store for their motorbike rebuild, who after waiting, decides they weren’t happy with the 6 week wait time and requests a refund.

 

Let’s say you deny the refund to the customer, given that your policy states a change of mind is not reasonable grounds for a refund. So the customer claims that the package “never arrived” and therefore now you are required to give the customer a refund, otherwise they will threaten to dispute the transaction. 


The reality is, there are usually signs that refund bandits are targeting your store. The main sign to look at for is a spike in your refund rate (or return rate). 

 

What is My Refund Rate?

You can calculate your refund rate by taking the number of orders refunded and dividing that by the number of orders in the time period of interest. Your refund rate is calculated as a percentage.

Why Should I Care About My Refund Rate?

It may be a sign that fraudsters are targeting your store

If your refund rate is spiking, it could be a sign that bandits are trying to test your refund process, and find any loopholes that they can. As mentioned above, these online scammers are sometimes the best in the biz, and will look for any way that they can score a free item (or 3) out of you by working your refund process.

If you do happen to notice that your refund rate is unusually high in a certain month in comparison to previous months (keeping in mind that there should be flexibility based on seasonality – i.e Christmas peak period) then it is something that should be investigated. 

Your refund process may need to be updated 

If you’re finding that your refund rate is consistently sitting a lot higher than usual, then this is probably a sign that you need to rethink your refund process.

One of the biggest mistakes that merchants make with their refund process, is they make it too far removed from any personal contact. Therefore scammers can easily slip through the cracks of the “automated process”.

Take back control of your orders

Implement a tool like Disputify to detect known refund fraudsters before dispatch occurs, this way you and your team have more control over which orders are fulfilled.


Identify any issues with product quality 

Another reason you may be receiving a large number of refunds is that one of your product lines may just be faulty, and then it becomes a manufacturing issue. This is not the end of the world, and it happens to everyone. On the other hand it could be a matter of The product not meeting a customers’ quality expectations, or your brand did not deliver on what was communicated through marketing

Keeping an eye on your refund rate can help you identify if there are any product issues that are damaging your brand reputation, so that you can quickly work to resolve any issues, without losing customers along the way. 

What You Need to Know

  • Refund fraud is a growing problem – costing U.S. retailers alone more than $18 billion a year, according to Appriss and the National Retail Federation.
  • Refund fraudsters are now actively promoting their services on message boards and elsewhere on the web.
  • Merchants can take steps to prevent refund fraud – by improving product descriptions and leveraging innovative technology like Disputify to protect themselves.

     

In today’s transactional world, to be considered “above the standard” in the eCommerce sector, you need to focus on the post-purchase phase. Now is the time to be creating connections with your customers, build a direct line of communication and trust.

Speak to one of our team members today about how you can preemptively protect your refund system from attacks.
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