News, Education and Events Decoding Digital Payments & Fraud

News, Education and Events Decoding Digital Payments & Fraud


How to Keep Holiday Returns from Becoming Post-Holiday Chargebacks

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[Editor’s Note: December is Chargebacks Month on Chargebacks are an ever-present headache for digital merchants. Rules set by the card networks to govern them are complicated and favor consumers and issuers, often leaving merchants feeling frustrated. Check back here throughout the month for updated content aimed at helping merchants understand, manage and respond to chargebacks.]

Retail fraud cases naturally peak during and after the holiday season. The problem is especially pronounced with returns; criminals and customers alike take advantage of seasonal return policies, which are often relaxed to deal with the inevitable post-holiday refunds and exchanges.

A recent National Retail Federation estimate shows holiday season return fraud alone tops $3.8 billion. As much of a problem as that may be, it’s still better than enforcing policies that are too restrictive. This will encourage customers to take matters into their own hands and demand a chargeback to recover their funds.

While chargebacks that come from criminal activity are hard to anticipate, hard to identify and almost impossible to dispute, criminal fraud makes up only a small percentage of total chargebacks. Most come from customers simply bypassing the merchant for a refund.

It’s good business to keep customers happy, both before and after a purchase. Some easily implemented preventative measures can go a long way towards reducing chargebacks. Fortunately, there are steps the average merchant can take to minimize return fraud, but still protect the business from chargebacks well into the new year.

1. Clear Communication, Transparent Policies

Chargebacks arise when customers either can’t find or don’t understand a merchant’s policies, and make assumptions that the merchant can’t deliver on. You need to make sure all the information customers need is easily and accurately located on the website—preferably in multiple locations.

Also, because we’re operating in an increasingly omnichannel arena, it’s not enough for the information to be accessible on a desktop machine. All pertinent data should be conspicuous on tablets and mobile devices as well.

2. Create a Workable Shipping Policy

Research suggests that as much as 91 percent of shoppers are willing to spend more to qualify for free shipping. At the same time, up to 70 percent of customers expect delivery within five days of placing their order—free shipping or no.

It’s always best to try and minimize customers’ wait times and costs, but it’s especially critical during the holidays. However, no single shipping option will be best for every customer; you should strive to provide options that can accommodate a variety of situations.

Here are some other things to consider when crafting a shipping policy:

Realistic timelines: Work to create order-processing timelines that will satisfy customers, but also be realistic to achieve. Don’t make exceptions or promises that can’t be kept.

Rigid deadlines: Identify shipping cutoff dates with each carrier you use, then make sure customers know the last possible day they can order merchandise and have it shipped for an on-time delivery. And remember: stick to your deadlines.

Communicate: Send confirmation emails immediately to let customers know when an item will ship and when it should arrive. If you don’t already, consider using delivery tracking to reduce customers’ fears of delayed arrivals and protect the business against falsified claims of “undelivered merchandise.”

3. Fair and Flexible Return Policies

Consumer surveys show that 67 percent of online shoppers will read a merchant’s return policy before they decide to complete a purchase. However, if shoppers can’t locate or understand your policies, then those policies may as well not even exist. Some areas to focus on:

Time limits: A 90-day window for online returns is standard these days, but as we pointed out earlier, the holidays may call for more flexible parameters. However, if you’re going to have special seasonal rules for returns, shipping or anything else, be sure they’re stated often and obviously on your site.

Applicable accounts: It’s usually not a good idea to issue a return to any card other than the one used for the original purchase. Make sure customers know this up front.

Expectations: Decide and define the parameters for repackaging and resending merchandise—unopened, tags attached, original packaging, invoice included—whatever’s necessary to process the return. If customers know this beforehand, they’re likely to be more careful when first opening their order.

Monetary policies: Be transparent about all fees associated with returns. Make it clear who will pay return shipping costs, whether you charge a restocking fee, and if the refund will be cash or store credit.

There’s Much More to Learn

Consumers have been trained to be more cautious when buying online. Clear—and clearly posted—policies on shipping, returns, refunds and other things are evidence that you value the customer service experience. The more customers know before ordering, the less likely they are to make a return or chargeback.

To learn more about ways your chargeback rate can be affected by the holidays, be sure to download The eRetailer’s Guide to Holiday Chargebacks. This new book gives you the exclusive insights and information you need to protect your bottom line—all for free!

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