Where do you fall on the spectrum of exchange policies?

By Ben Dann on August 01, 2018

Many online stores face the complexity and pain of offering a product exchange online. I know this pain all too well both as a shopper and an advisor to hundreds of online stores. Making an exchange online is rarely a click away and typically involves going out of pocket a second time to place a new order for what you need, or contacting customer service and feeding a rep information so they can place the new order on your behalf.

If you had it your way as a shopper, you’d like as few clicks and days between the moment you realize you need an exchange and the satisfaction of your package arriving at your door. As a merchant, you’d have more time in your day and a better relationship with your customer base.

Forward-thinking brands are looking for ways to make gains on both sides of the coin. Knowing that 88% of online shoppers review a retailer’s return policy throughout their online shopping journey, this is more important now than ever. There's also mounting evidence showing that shoppers’ expectations are shifting to demand instant, free, and clearly defined post-purchase experiences.

To deliver a best-in-class exchange experience, it’s useful to understand the spectrum of exchange policies and what steps customers typically face when swapping out a product online. I’ve used a scale of cold to hot to illustrate the most common approaches.

Approach 1: No Exchanges

Ranking: COLD

cold 

The least complex approach to offering exchanges is to not offer them at all! The “Unfortunately, we don’t offer exchanges, please place an order for a new item” approach.

Not offering exchanges avoids potential complications for the shopper and store, but forces an unfriendly experience on customers who are stuck with double charges to their credit card while they wait for a refund.

Here’s a pro/con breakdown of not having an exchange policy for your online store:

Pros:

  • Avoids funky workarounds to account for an exchange on the books
  • Avoids inventory debacles like sizes or styles going out of stock while the exchange is pending
  • Saves time not having to process and track exchange orders

Cons:

  • Shoppers forced to go out-of-pocket second time
  • No way to capture data on what’s exchanged vs. returned for refund
  • Losing a valuable touchpoint opportunity with the customer to build LTV
  • Higher volume of refunds and cash out the door

Approach 2: In-House Exchanges

Ranking: WARM

luke-warm

Merchants who cherish their relationship with their customers typically require communication with the CS team to process an exchange. The store must collect information on what the customer needs, manually place a new order from the backend and then push the order refund once the original has been delivered in re-sellable condition back to the store.

Are in-house exchanges a good solution for your store? Let’s break it down...

Pros:

  • Personalized touchpoints foster positive relationships between the brand and customer
  • Able to collect data on what’s being exchanged

Cons:

  • Highly time-consuming process
  • Requires dedicated resources when implemented at scale
  • Creates lag in customer satisfaction
  • Processing time creates complexity in handling inventory
  • Accounting for exchanges is financially messy

Approach 3: Third-Party Automation

Ranking: WARMER

warmer

Third-party returns and exchanges solutions have emerged and evolved in the past 5 years to help online brands streamline the manual complexities inherent to exchanging an item online. Some platforms are advanced enough to enable self-service online exchanges using a branded online portal.

These platforms have improved the customer experience as well as the operational efficiency of processing an exchange by leveraging store credit/gift cards to facilitate product swaps or using APIs to automate order placement on a customers behalf.

Pro:

  • Streamlined user interface for your shoppers
  • Time savings for the Operations and Customer Service teams
  • Positive touchpoint opportunity with the customer to build LTV
  • Capture data on what’s exchanged vs. returned for refund

Con:

  • It's slower for your shoppers to request an exchange than to buy again and return later. Doesn’t Amazon send out exchanges right away!?
  • Unclear timeline for your shoppers on delivery dates
  • Delayed exchanges mean delayed gratification
  • Lazy returners tying up your inventory
  • Doesn’t trust the customer

Approach 4: Instant Exchanges

Ranking: HOT

hot

Amazon has an instant exchange order policy for select products. This means you can select a different variant of your original item and it will ship out before you send your original back. Amazon is very aware that this puts themselves and the merchant at risk. What if the original never comes back or comes back worn or damaged? To solve this, they automatically charge the customers credit card if the original item is not received within 30 days of the request.

Pros:

  • Self-service exchanges
  • Instant shipping on exchange orders!
  • Inventory chaos avoided
  • Instant customer gratification
  • Stored credit info prevents loss risk

Cons:

  • Doesn’t trust the customer 

Conclusion

Is the conclusion here that Amazon has an unfair advantage to offer instantly fulfilled exchanges because they store credit card info?

Think again.

Offering an Amazon-grade exchange experience is possible for any retailer, of any size. Here is my biased opinion (I work at Returnly, duh) on how to do that in a few easy steps.

First, let's look at the challenges. Stores would compete against Amazon’s exchange policy on their own if they could, except they face tough financial decisions to get to that level, namely:

1. Cost and time of building the infrastructure to create self-service exchanges
2. Liability of sending un-paid products out to customers with no collateral
3. Storing credit card info is typically a non-starter for brands

As a integrated returns/exchanges solution, Returnly helps the store and customer reap the benefits of offering an instantly shipped exchange by protecting the store against risk should the original product come back worn, torn or not at all.

Exchanges are processed and fulfilled in real-time. Returnly works behind the scenes to pay for the new order and automate the exchange flow for the brand. 

Instead of waiting weeks for an exchange, customers can control their order placement and return later. No more worrying about sizes or styles going out of stock while your package ships back.

The result is a customer who is 4 times more loyal to the brand. 

You do the math.

By Ben Dann

Ben is an Account Executive at Returnly. Prior to joining the Returnly team, Ben trained and competed as a full-time National Team Rower.