Dropshipping Returns – The Ultimate Guide To Handling Returns & Refunds

Handling dropshipping returns is one of the biggest pains. The whole point of dropshipping is to avoid handling products yourself. When you are dropshipping from China, it simply does not make sense to return products to the AliExpress vendor to let them handle the return.

Firstly, this will take too long and secondly, the shipping costs will not justify the return. Dropshipping returns is something that you have to factor into your business.

Even if you sell great products, there are always returns that you have to deal with. This can range from 10% all the way to 50% (I’ve seen this on crap Chinese products).

Returns can kill your business. Not just with your bottom line but with your payment processors. If you process a high percentage of refunds on your orders, Stripe and Paypal can see this.

Paypal will most likely put a hold on your funds while Stripe will probably just ban you. I don’t know what the threshold is for this but I always aim to keep refunds below 15%.

How to handle returns for dropshipping products

Before we get into the best ways to handle dropshipping refunds, you need to understand that you absolutely HAVE TO offer returns and refunds.

There are some intimate products that would be exempt but apart from that you need to offer your customers returns. It’s a big selling point and you should make it clear on your site that you offer “easy 30-day returns”.

Also include this in your store’s FAQ. Customers are looking for this and it can affect your conversion rates.

The first thing you need to do is to create a way to accept returns. If you live in the USA and the majority of your orders come from the USA then you can just accept returns to your home. If the products are not damaged then you can simply ship it again at a later stage and you lose almost nothing on that order.

If you live outside the USA then you need to get yourself a USA postbox. There are few options but I like Shipito as they are 100% free.

They will give you a USA Address, receive your order, take a photograph for you and store it for 30 days at no cost. Pretty incredibly for a free service. They only charge when you ship the item on again (they make their money with packing and shipping).

Now that you have a way of accepting returns you have the basics down. Lets look at some of the most important ways to handle returns and how to minimize any potential loss you may suffer because of returns and refunds.

Let’s look at how to minimise dropshipping returns and refunds

1.Customer Support

Having great customer support is vital to minimize and damage to your business. You need to respond to any customer requests within 24 hours.

If a customer wants to return something and you do not respond in a timely fashion they might just escalate it to Paypal or report the transaction as fraud. This can really hurt your business.

Apps like Re:amaze make handling customer support much easier and allows you to seamlessly use different staff members. It also has a number of features that can greatly reduce the volume of emails your store receives.

Responding quickly to customer emails sets them at ease and creates a sense of trust in your business.

If you are dropshipping from China (especially if you use AliExpress) then you will get a lot of customer emails. Return related emails will be either about damaged products (damaged in-transit) or sizes.

For damaged products, ask for a photograph that shows the damage before you do anything else. For sizes, you have no choice but to initiate the return immediately.

Having great customer support probably won’t reduce returns but it most certainly does reduce refunds. Do not neglect this!

Pro Tip:
With an app like Re-Amaze you can set up a sequence of questions to guide your customers to relevant answers BEFORE they email you. This can greatly reduce the amount of support emails you will get. Given that most of your support emails will be either about size/quality issues or slow parcels, this is a smart thing to do.

2.Only sell quality products

Selling quality products goes without saying. Nobody wants to buy or sell crap. The problem with dropshipping is that you do not handle the products yourself. There is no real quality control – especially from AliExpress.

One obvious solution is to order the product(s) yourself and make sure the quality is good enough. The challenge with this still is that AliExpress vendors often buy from different suppliers and they always look for the cheapest.

I’ve had them switch products on me before. If you all of a sudden start getting a lot of quality complaints then this is usually the problem.

Using a private agent (that you trust) or fulfillment partner in China (like CJ Dropshipping or Eprolo) will usually do quality control for you. They will also be consistent in sourcing the products so any changes in quality will not be hidden from you.

Making sure that every product that gets shipped out passes quality control will also help to reduce returns.

3.Avoid certain products

Some products are just prone to a lot of returns and refunds. Any breakable or fragile products like glass will often not survive the Chinese mail system. You can still dropship these products but you will have to look beyond standard Chinese shipping options.

Products with intricate sizes is the next thing I would avoid – or at least look at very carefully. Women’s clothing in general can have very high return rates. Women lie to themselves about their sizes. It definitely is a problem.

Chinese sizes are always different from USA and European sizes. Most AliExpress sellers have very poor sizing information and it is rarely accurate.

Selling products with a lot of sizes, you will need to order some of them to do size checks. Getting your product sizes to match as closely to USA sizes is vital in reducing returns.

Most people do not check size charts. They just pick the size they always wear and order.

The customer is always right and even if your size chart says differently, you still have to provide the return – which costs you money.

4.Thorough Product Descriptions

Having thorough product descriptions will reduce dropshipping returns significantly – especially on products of a more technical nature. When a customer receives a product and something missing that that expected to be there then you will get a return or a refund request.

Always offer all the technical specifications on your product descriptions. Be very clear in what is included and/or excluded.

Another big part of product descriptions is colour. Product colours can be a tough one as screens tend to display colours differently. A lot of returns can be because of colour discrepancies.

Try your best to display the product images as accurately as possible. Do not use colour filters on your images just to make it look good. You might get the sale but you might also get a return.

Pro Tip:
If you sell products that require a manual, check with your supplier what languages the manual comes in. Some only have English which can piss of European customers. If you sell products that require batteries, make it clear that they are not included. Something as small as this has seen me get a lot of angry customer support emails.

5.Be Very Thorough With Sizes

I’ve already mentioned the issues with sizes but let’s look at it in a bit more detail. Offering very thorough and easy to read sizing information is crucial to reduce dropshipping returns.

The app “Ultimate Size Chart” makes adding and maintaining size charts a breeze. This or a similar app is super important if you have to make adjustments to size charts. It also makes it easy to display your sizes in various places in your product descriptions.

Never use the size charts directly from AliExpress sellers unless its accurate and s\clearly shows USA sizes. Create your own size charts and make it very clear how measurements are takes and how it should be checked.

I would encourage you to check sizes yourself and at least order a few products to do size checks. Adjust your size charts accordingly.

If you sell products from China with a lot of size variants then you should expect a lot of returns. Make sure you allow for this when you start selling decent volume.

Always make your size charts VERY easy to find on your product pages. Do not hide it. Also, encourage customers to look at the size chart and always have big bold reminders to check sizes before they order.

6.Order confirmations

Shopify will automatically send out order confirmations as soon as an order is placed. You can edit these automated emails.

I always add something in big bold text for customers to double check the sizes and/or colours they ordered. Sometimes people just click the wrong options and by double checking the order confirmations you can catch order mistakes before they ship out.

7.Order and tracking Lookups

Offering customers order and tracking lookups is also super important. People are impatient and always want stuff quickly. By offering order and shipping lookups on your store will reduce the number of customer support emails.

If you dropship from AliExpress then 50% of your customer support emails will be dealing with slow shipping issues.

Using apps like Aftership allows your customers to check the status of their order automatically. Make sure you include a link to your order tracker on your store and also tell your customers about this in their order confirmations.

Your customer will also receive an automated email once the tracking number is posted to Shopify. Make sure you have a link to your order tracker so that your customers can go there directly instead of emailing you.

If a customer gets impatient and do not have information about their order they will probably just file a dispute with your payment processor. Having the order tracker in place will greatly reduce that risk.

8.Have a Solid Returns and Refunds Policy

Every Shopify store needs to have a refunds and returns policy. You need to tell your customers in simple terms what your policy is for returns and what your policy is for refunds.

This will vary greatly depending on your products. The best way to craft your policy is to look at your competitors to see what they offer.

Keep in mind that this policy will affect your sales. People are cautious with small stores and they will look for this before they order.

You need to balance making it sound attractive to buy from you with having a solid policy that protects you from losses. You need to spend some time crafting your policy to get the wording right.

Pro Tip:
I always make it very clear that the customer is responsible for the return shipping costs. A lot of customers are used to getting return shipping labels from big brands and retailers. You can not offer that as a dropshipper and you will lose too much if you do cover return shipping.

9.No Return, No Refund

Always request a return from your customer before you initiate a new order or a refund. This is standard practice and something you should always do. A lot of dropshippers simply write it off and offer the return or refund immediately to avoid any hassles.

It makes sense to a certain extent but it definitely does not make you look like a professional business.

A lot of people simply will not return the item because they are lazy or it is a hassle – especially on lower priced products. This is an easy way to reduce dropshipping returns because the customer has to jump through an extra hoop.

Pro Tip:
Asking for a return on a defective or broken item is a tough one and you should make up your own mind how to best handle it. You can’t expect your customer to pay the return shipping if the fault is not with them. If the product is obviously broken and they have sent you a photo, then just offer the refund or offer them store credit.

10.Offer Them Store Credit

This is a great trick and it works incredibly well to reduce any dropshipping returns or refunds. If a customer is adamant on a return and refund, don’t just give it to them straight away.

On a $24.95 product I will offer a customer a $30 store credit. This allows you to limit your loss since your customer will spend that $30 in your store. You don’t get a tick against you for issuing a refund and your customer will most probably be very happy.

Offer them store credit first. You can do this by simply creating coupon code in Shopify. The trick is to make the value of the store credit more than the value of the product.

This reduces your loss greatly because the customer will buy from you again. Yes, you will have product costs to eat but you do not have to refund the full value of the product.

11. Always request a refund from the AliExpress vendor

If you are fulfilling your dropshipping orders from AliExpress and you do get refund requests you should always funnel that on to your AliExpress vendor. This will help you recoup some of the loss.

You can do this for products that don’t get delivered, get delivered too slowly or any product that is broken or defective.

12.Pricing Strategy

With all this in mind, it’s well worth looking at your dropshipping pricing strategy. The price you sell your products at must take returns and refunds into consideration.

When you are dropshipping you need to sell your product for at least 3x the product cost. If you sell products with a lot of size variants I would recommend you look at 4x to 6x the product cost. If you factor in a 15% return rate then this will be required.

You need to build a lot of fat into these products to counteract the high volume of returns – and the man power to handle the customer support (do not neglect this important point).

13. Pay attention and adapt – Fast!

Learning and adjusting is the key to minimize dropshipping returns and refunds. If you have a product that gets a lot of refund requests, find out why. Your customers will usually tell you.

It might be poor quality, not fulfilling on your sales promises or it might not be the same as your product images (this happens on AliExpress). Try and fix this and if you can’t you should consider pulling the product to protect your Paypal and Shopify/Stripe accounts from getting banned.

If you get a lot of returns for sizing problems, find out what it is and adjust your size charts. Also warn customers if products “run big” or “run small” as that can alert them to check the size charts.

Automating the returns process

Limiting the amount of returns you get should be the ultimate goal. Limiting the amount of time you spend dealing with returns should be close behind.

Once you’ve ironed out the obvious issues that causes a lot of returns and you have your return rate down below 10% I would highly recommend you automate it.

How?

By using an app like Aftership’s returns centre. This allows you customers to seamlessly initiate returns, post the return parcel’s receipt and manage the whole process without any input from your support staff.

It works really well but the risk is always that if you make returns too easy your customers will catch on. This is a great solution if you fulfill orders from the USA.

Be sure to always require your customers to pay return shipping to avoid abuse.