It is very important for a business to have clearly defined terms and conditions that cover all aspects of customer payments. Establishing policies that define the terms and conditions and making them readily available to anyone looking to make a payment, reduces the risk of chargebacks, ensures employees are well equipped to address any issues effectively, and guarantees a fair treatment of customers. For example, if a customer disputes a charge, the bank will side with the customer if the relevant terms weren’t clearly stated at the time of payment. Additionally, an unclear return/refund policy creates a lot of additional work for the team dealing with the customer’s issue, to ensure it is handled fairly and consistently.
What is a Return and Refund Policy?
A return and refund policy outlines the conditions under which customers can return or exchange items they have purchased. If you are looking to create a return policy, here are some of the basics it should include. A return policy lays out how long a customer has to return items, in what condition the items must be, if they need a receipt, and whether they will receive cash or store credit. Without a return policy, there can be disagreements over when and what can be returned or exchanged at the store.
What is described in the Terms and Conditions?
The Refund Policy describes the conditions pertaining to the return of items bought (or service received) and the terms related to obtaining the refund and it often forms part of the Terms and Conditions of sale or service (also called ‘Standard or General Terms’ or ‘Terms of Service’). The Terms and Conditions should ideally be included on the merchant’s/contractor’s website to make it abundantly clear to the customers what their rights are.
The Terms and Conditions vary broadly and are closely tied in with the type of business you have. They will be different for a brick-and-mortar retailer versus a freelance editor, or an independent contractor selling door-to-door merchandise.
The General Terms and Conditions may specify, but are not limited to, the following items:
- Agreement to Terms
- Account Registration
- User Representations
- Intellectual Property Rights
- Revisions, Disclosures, Notices, Indemnity
- Restrictions and Prohibited Activities
- Misuse, Abuse, and Misrepresentation
- Compliance with applicable Laws and Regulations
- Data Processing Agreement
- Privacy and Data Policy
- Cookies Policy
- Termination of Service
- Violation of the Terms of Service
- Disputes and Complaints Procedures
- Return and Refund Policy
Why Your Business Needs a Return Policy
A return policy can save business owners, their employees, and their customers (both traditional clientele and online shoppers) plenty of headaches by defining when and how items can be returned or exchanged. A return policy benefits a business in the following ways:
- Customer satisfaction – When customers know what to expect, and those expectations are met, overall customer satisfaction increases. Even if the policy doesn’t give them exactly what they want, customers will appreciate knowing the terms in advance.
- Organization – A store without a return policy won’t be able to consistently deliver the same experience to all of its customers. A return policy helps with organization, so the entire team stays on the same page and treats every customer equally.
- Empowered employees – A return policy empowers employees by ensuring they are informed of and following the proper procedures with every customer. Without a return and exchange policy, a store’s employees could be left guessing how to handle customer requests, and it’s unlikely they will all be handled consistently.
- Customer loyalty – Satisfied customers who know what to expect from a store’s return policy will become loyal customers. Customer trust is one of the hardest qualities for a business to establish, and a return policy is a vital step in developing that relationship.
What to Include in a Return Policy
What should a small business include in its return policy? The precise formula will vary by store, contractual service on offer, and whether the merchant has eCommerce stores or a brick-and-mortar location. When creating a return policy, be sure to answer the following questions:
- How many days does a customer have to initiate a return?
- What methods must a customer use to initiate a return? For example, is there a specific return address, or must exchanges be made within a physical store?
- In what condition must the returned items be? Must packages be unopened, or can items be returned provided they are in original packaging? Must clothing be unworn? What if tags are no longer attached? What if the item was used but deemed not fit for the intended purpose, or there was a satisfaction guarantee period that allowed the customer to return the item if they were unhappy with it?
- Is a receipt required to return an item? What about an exchange?
- Are some items restricted from being returned? For example, a clothing retailer might restrict undergarments from being returned, or some items may be marked as ‘final sale’. A building contractor may disallow refunds once the job has been inspected and signed off on, the dishwasher installer takes a video of the appliance working and not leaking; thus restricting the conditions of refund to the moment the customer signs it off.
- Is there an option for the customer to request a correction of the completed work if the job wasn’t done correctly? Is this free of charge? Is there a satisfaction period?
- How are refunds provided? Is cash offered in exchange for a returned item, or must the customer use store credit? Is this a refund policy for a service? What conditions must be satisfied for the customer to request a refund for a job with unsatisfying results?
- Is the customer responsible for return shipping costs, or will the business pay for return shipping charges?
- When shipping returns, will the business provide the customer with prepaid shipping labels, or is the customer responsible for arranging for shipment?
- Are any restocking fees or other charges subtracted from refunded amounts?
Return Policy Examples from Big Brands
An effective return policy will inform customers what to expect if they need to exchange merchandise or if the store offers refunds. The following big brands’ return and refund policies set adequate expectations, which increases customer loyalty. Take a look at these return policy examples from big brands:
Amazon has an extensive return policy, including specific standards for processing returns during the holiday season. You can see the entire policy here.
In its return policy, Nordstrom details how to return merchandise at a store, via curbside drop-off or through the mail.
Michaels provides a clear return policy for customers who do and don’t have a receipt.
4. Home Depot
Home Depot advertises its fast and friendly return policy
Apple has a standard return policy and its own policy for returning items during the holiday season. The full returns and refunds policy can be found here.
6. Advanced Auto Recyclers
Advanced Auto Recyclers, which deals in automotive parts and vehicle sales, details both its return policy and its limited warranties.
Dog.com details its 30-day return policy on its website… satisfaction guaranteed on its pet products.
The small business Save-on-Crafts.com details its return conditions and return procedure in the return policy for its online crafts store.