How Do Dropshippers Handle Returns? [BEST WAY]

If dropshipping means that you do not handle the products you sell, how does a customer return the item to you?

This is one of the most difficult problems that a dropshipper could possibly face. It is a nightmare, to say the least.

But hold on—I have the light at the end of the tunnel. Today, what I want to tackle is this problem: How do dropshippers handle returns?

We will discuss the following:

• What is a return?
• What are the root causes of returns?
• How do dropshippers handle returns?
• How can you prevent returns?

I will no longer talk about what dropshipping is. I am pretty sure if you are reading an article about returns you should be pretty clued up 🙂

So, shall we begin?

What is a return?

A return is a situation where a customer wants to send back the item to you. In exchange, the customer gets his or her money back.

There are many reasons why a customer would want a return. The worse is that the customer already used your item and now wants to get his money back (is does happen unfortunately).

This usually happens in the fashion industry—a customer orders a gown and then wears it for the occasion. After the occasion, the customer returns the item to the seller. This is yet another reason to avoid the clothing niche, especially anything related to party clothes 🙂 We will discuss the different root causes of returns in a bit.  

The usual set up in a return is that the customer ships the item back to you. Once the seller receives the item, and it is in great condition, he issues a refund.

The challenge in the dropshipping industry is that a return cannot be sent to the seller—that is you. You are the dropshipper, but you do not want to get the item back. What you want is for your supplier to bear the brunt of the losses for this problem.

So, you tell the customer to ship the item back to your supplier. But is it that easy? What if the supplier does not accept returns? What if the supplier’s return timeframe has already lapsed?  

We will talk about all of these in later sections. For now, I need you to understand that a return is a painful blow to a business. In a typical set-up, it is the customer’s financial responsibility to pay for the shipment back to you or the supplier.

But what if the customer does not want to pay for it—what should you do?  

The best way to avoid returns is to prevent them from happening in the first place. We will learn more about this in the following sections.

What are the root causes of returns? 

What makes customers return an item? Let us take a look at the different causes and then see what we can do for each situation.

• Incorrect item ordered – this happens all the time. A customer clicks on an item, and then once you have sent the product, the customer says that he or she made a mistake.

For example, a customer may have ordered clothing that is too small for their size, or perhaps a customer ordered red instead of blue. This reason for a return is the customer’s fault.

• Incorrect product sent – this s the supplier’s error. If the customer ordered red, and the supplier sent blue, the customer will definitely not be happy.

This is critical in situations where the product cannot be used, especially if the product sent is not as described. For example, a customer may have ordered pajamas, but the supplier sent a blouse. In this case, expect a customer to be unhappy.

• Defective product – this normally happens in electronic goods or toys. Many suppliers do not even bother to check if the product they sent works. For example, a toy product may bet advertised as something that has a sound. But when it arrives at the customer’s house, the sound system does not work.

A defective product is one that does not work as intended. It includes not just electronics but also broken items. Sometimes, it is not the supplier’s fault but the courier—they did not handle the product with care, and this is why the product got broken.

• Customer no longer likes the product – in the e-commerce world, this is called a “change of mind.” There are many customers out there who make impulse purchases, and then they change their minds later on!

It is either they found something better than your offer, or they realized that they have no use for the product anymore.

For example, a person may attend a wedding and buy a gown from you. So, she orders, and you ask your supplier to ship it.

While in transit, it is possible that the wedding is called off, or maybe she does not want to attend anymore. In this situation, you need to wait until the item gets to the customer’s house, and then ask the customer to ship it to you.

• Scammer customers – this is sad, but it happens. I mentioned earlier that there are customers who would use the item and then return it. While this is atrocious, you as the dropshipper are left with no other recourse.

There are customers who do this not only online, but also in the physical world. They buy things from fashion stores, use the items, and then go back for a refund—with the product seemingly untouched!

• Fraudulent transactions – some customers are not aware that their card was used to make a purchase. In this case, they will either return the item or file a chargeback. The latter is more painful, as the credit card company can get the money back, but the customer is not going to send the item back to the supplier.

Also, the sad thing about this is that the customer may have been a victim of identity theft. The customer, in this case, is not aware that a fraudster from another country has his credit card information.

So, the fraudster orders from you, and then your supplier ships the item. Once the customer finds out, he files a chargeback. The end result is that you lose your sale, and yet you cannot ask your money back from your supplier because he shipped it in good faith.

There you go, these are the most common root causes of returns. Do not, for one moment, think that these cannot happen to you. They will happen to you. It is only a matter of time.

Now that you are aware of these root causes, you should be ready to learn how to handle returns if you are a dropshipper. Subsequently, I will also share with you some tips on how you can discourage your customers from returning items bought from your store.

How do dropshippers handle returns?

So, if you ever come across a request for a return, what should you do? There are several options on how to handle customer returns, and it is up to you to choose who you want to handle returns.

Return and refund

This is the most straightforward approach. In this process, you ask the customer to ship the item back to you or your supplier. It is up to you. If your supplier does not accept refund, but you do, you bear the cost of this loss.

This is what many dropshippers do, but it is the least cost-effective. If your supplier offers a refund, everything is good, but your customer has to suffer the loss of shipping the item back to you.

Offer free stuff

Another option is to offer a customer an upgrade. In some situations, you can ask the customer if they want you to send a new item. This usually applies to the product that the customer ordered is damaged.

Why would you do this? Will you not lose money?

Yes, you will. However, your customer could be so happy that he will buy again in the future. It is not like your supplier or courier often mishandles shipping.

This process is effective if you are the kind of dropshipper that values customer relationships. Sure, you will lose money, but the bright side is that you are building customer trust. Of course, you cannot do this all the time. If the same customer does this the second time around, what are the odds, right?

Offer store credit

If you want, you can also offer your customer store credit. What does this mean? In this process, you give your customer the same value as the money that he spent.

Let us say that he spent $20 for an item, including shipping. You ship the item and then it is broken. So, he wants a refund. Instead of you issuing a refund, you give him a $20 in-store credit.

What does this mean?

It means that he has $20, but he can only spend it on your store. He can either buy the same item and not pay for it, or he can make a different purchase up to $20. If his purchase is more than $20, he has to pay the excess.

Does this result in a financial loss? Yes, it does, but you do not lose so much.

If the item you are selling only costs $10, which includes shipping, you will only spend $10. The customer is going to think that he is getting a $20 item, but he is not.

As you can see, the first $20 he paid is gone. He will keep that item. Now, you are sending him a new item for free.

Offer exclusive coupon

Another great idea you can use is to issue an exclusive coupon code. It works like the previous one, but this is easier to manage.

To make it work, just go to your stores back-end where you can create a discount code. Make a fixed-price discount, and then send the code to your customer. This way, he or she will still order from your store. Your losses will be significantly reduced, and your customer is going to be happy.  

Remember, you need to have some serious customer service skills to be able to convince a customer not to get a refund. The problem with offering a coupon or credit is that the consumer may have doubts about your capability to deliver as promised.

Always apologize and offer a sweet deal. It is better to suffer a few losses here and there than to make a customer unhappy. If he is unhappy, we will definitely leave bad feedback.

How can you prevent returns? 

The best way to avoid a problem is to prevent it from happening, right? In this section, I will share with you some ways to prevent returns.

Make sure the order is legit

This is a step where you are trying to prevent fraud from happening before it does. Most dropshippers simply process an order without investigating if the transaction is legit. The best way to avoid being defrauded is to send an email to the customer and ask him to confirm the details of the order, as well as looking up said order in your store’s back-end.

As well as this, you want to send emails to your customers when a new order comes in. Ask them to verify and confirm that they would like to buy these items.

Include the following details:

• Item name
• Item quantity
• Item cost
• Item price

If the customer responds and says yes, then be re-assured that he or she is confirming the purchase. You are protecting yourself against possible charge-back. If the customer did not respond, issue a refund. In this case, you have no financial loss.  

Set expectations

You need to have a shipping, returns, and refunds policy. It has to be clear. For example, you should include in your shipping policy the time it is going to take for the item to arrive.

You should also include in your policy that you could only accept returns within a specific period. The most common is for seven days.

Before you make these policies, you have to understand the shipping and return policy of your supplier. Read the AliExpress return policy for more details. If the supplier’s return policy is 30 days, then it makes sense that your return policy is shorter.

Make it clear that if these policies are not met, you are not issuing a refund. Many customers are not going to file a chargeback claim because a chargeback costs money. If they miss the window for the return, it is their liability.  

These policies should also tell the customer what will happen when a return or refund is requested, so they can’t complain about this later 🙂

Know your supplier

This is one of the most common mistakes that dropshippers make—they do not put their suppliers to the test. In dropshipping, all you have to do is to post a supplier’s product online.

This ease of putting up a dropshipping store makes dropshippers too excited. They get so pumped that they do not order the item from the supplier.

What happens is once they make a sale; the image on the supplier’s listing is far from what is real. Many examples of expectation vs reality can be seen online. For example, a dress may be sold as something that is made of high-quality fabric. Once a customer receives the item, he finds out that the clothing is made of polyester. Know what you are selling and set relevant expectations on your store!

So, what happened?

What happened was you did not check the credibility of the supplier. You relied on reviews, which can be faked. Also, you may have relied on the vetting process of a dropship suppliers directories like Oberlo, which could also be wrong.

To prevent this, you have to order the product from your supplier, and see the product yourself. If the item is not as described, then you know how your customer feels about the experience.

Do not offer refunds

The last resort to prevent returns is not to issue refunds. Yes, there are dropshippers who do this. However, you need to take a look at the legal implications of this action. Depending on which country you live, there are different consumer protection laws that exist, and you must abide by them.

Summary

A return is a headache—it not only reduces your profits, but it damages your credibility and creates problems with your accounting process.

A product return is a painful experience not only for dropshippers but to all entrepreneurs. As a dropshipper, this problem exacerbates because you are not in control of the item that was shipped.

A return is a return—there is no way you can deny your customer what he or she wants. The last thing that you want to happen is to receive a customer complaint from your country’s bureau of customer protection.

Despite this, there are ways to reduce your return rate. Make sure you have a shipping policy for dropshipping. If possible, you have to apply all the principles about preventing returns as you possibly can. Read this article carefully and take appropriate action! Trust me, it will be worth it!