While inherently complicated, we strive to help merchants understand what chargebacks are and the process they follow. But even more difficult to ascertain is the consumer’s thought process and mindset when disputing a transaction. Is there a legitimate problem with the product? Is the shipping carrier experiencing issues? Or, worst of all, is the customer trying to circumvent a return policy or acquire a refund for a product they’re currently using (aka committing chargeback fraud)?
Getting the answers to these questions is tricky. Why would a consumer who is intentionally misusing their chargeback rights admit to that fraudulent behavior? Knowing these challenges, we crafted a brief survey to help us begin to reveal some answers. We surveyed approximately 300 consumers who were actively participating in a returns process and found surprising insights that lead to actionable take-to-works for merchants.
Key Survey Findings
- 43% of consumers reason for returning the product is because they don’t like or don’t need the product anymore.
- Only 16% of consumers stated reason for returning a product is directly representative of merchant liability.
- 59% of consumers were aware of the store’s return policy at the time of the transaction.
- 71% of consumers believe a store should respond to a contact attempt within 2 days.
We began collecting responses for the survey in November 2016 at the start of the holiday shopping season. The brief, user-friendly, 8-question quiz was placed on a frequently visited blog post on our website titled Top 10 Reasons for a Product Return. Our intended purpose for the specific blog post, published for the first time back in 2015, was to educate merchants on common reasons for customer returns and how they can be avoided. However, the article was attracting a large volume of consumers, not merchants. Consumers were visiting the article searching for excuses to use to return merchandise.
While not our initial intention, the post created a great opportunity to learn more about consumers who were going through the return process. What does this have to do with chargebacks? Well, many chargebacks are the result of customer’s trying to circumvent a merchant’s return policy. When a customer has had a situation, like a long unsuccessful return process or has attempted to contact a merchant about a return which they have not heard back from, it may cause them not to want to work it out with the merchant. This leads to the filing a chargeback to fix the problem. No merchant want the hassle of a chargeback and the costly fees that accompany it.
If we can identify key challenges that lead a consumer to dispute a transaction rather than return the merchandise, we’ll be better informed to prevent the same from happening in the future. All of which saves revenue and improves customer relationships.
Why Customers Want to Return Merchandise
First, we wanted to identify the reason the customer wants to return an item. The question “Which of the following describes the primary reason for your return?” was asked and the responded was given 7 common reasons and an option to choose none of the provided reasons.
One in every four respondents indicated that the reason for their return was that they simply didn’t like the product. While the second most common reason was a defective product, the bulk of respondents are looking to return a product based on personal reasons. Whether it’s the product not fitting, or simply no longer being needed. Overall, more than half, 53% of respondents were looking to return a product based on reasons out of merchant control.
Customers & Return Policies
The majority of customers, 59%, admitted to being aware of the store’s return policy at the time of purchase. Interestingly, although over half of customers were aware of the store’s return policy, few of those customers had that return policy communicated to them at the time of the transaction. Less than half of respondents, 44%, indicated that they were made aware of the return policy during the checkout process.
Respondents were also asked about any attempted or successful communication with the merchant regarding their return. The responses were fairly evenly split, with 49% indicating they did contact the store and 51% reporting they did not attempt to contact the store about return.
Since the respondents of this survey are likely at the start of the return process, it makes sense that only half have attempted to contact the store. It would not be unreasonable to assume that if the survey was given to consumers who have recently returned an item, the breakdown of responses would be different.
Slightly more surprising were the subsequent responses from those who attempted to contact the store. Of the 49% of consumers who attempted to contact the store, one-third had not yet received a response from the merchant.
The respondents who had received communication from the store were then asked if the merchant accepted the return or provided a refund for the purchase amount. More than 60% indicated that their request for a return or refund was denied by the merchant.
All respondents were asked about their reactive communication expectations for merchants. The overwhelming majority, 95%, expect to receive a response from a merchant within at least one week from the initial contact date. Leaving only 5% of respondents indicating that a response outside of the one week timeframe was acceptable.
When it comes to responding to customers, merchants can’t act soon enough. 37% of respondents expect a merchant to respond within 24 hours. Furthermore, 34% expect a response between 1 to 2 days from the initial contact date.
Dispute History & Ramifications
The final question posed to respondents aimed at discovering whether or not the consumer had ever disputed a charge on their credit or debit card. We found that nearly half, 49%, of consumers surveyed had never before issued a chargeback and 30% indicated they have disputed a charge in the past. The remaining 21% were unsure of whether or not they had ever disputed a charge.
We decided to take a closer look at the respondents who indicated they have disputed a charge on their credit or debit card in the past. These individuals are well aware of their right to issue a chargeback as they have done so previously.
Most notably, 74% of consumers who have previously disputed purchases also indicated that it should take no longer than two days to receive a response from the merchant. This high percentage might indicate higher expectations among customers who know of an alternate route to getting a return processed or refund issued (a chargeback). The consumer’s perceived lack of response from the merchant is a key indicator to their issuing bank that a chargeback is indeed warranted.
Action Items for Ecommerce Merchants
The survey produced both expected and unexpected results regarding customer returns and chargebacks. More importantly, the responses pointed to clear action items for ecommerce merchants that will improve the return process at their own store.
Based on the consumer responses, ecommerce merchants should cultivate product descriptions and customer reviews, facilitate effortless proactive communication, and respond to customer inquiries right away.
Cultivate Product Descriptions & Reviews
We found that the number one reason for returns is the customer simply not liking the product. While you can’t do anything to address the customer changing their mind, you can provide a wealth of information available to aid in their decision making process. Detailed, truthful product descriptions and customer reviews are key in educating the customer before they make a purchase.
Time spent enhancing product reviews is time well spent. When crafting product descriptions in your store, remember that you’re not just describing the product, you’re selling it! There are many keys to writing product descriptions that sell. One such insight is avoiding using yeah, yeah phrases like “excellent product quality”. When a potential customer reads that phrase, they think yeah, yeah that’s what everyone says. Instead of vague superlatives, detail the specifics of the product that make it high quality.
You’d be hard-pressed to find better product descriptions than those provided by Zappos. Each of the bulleted points under item information describe a specific aspect of the product which indicates its benefits.
In addition to your own description of products in your store, it’s critical to include the perspective of your customers. Studies show that 95% of consumers consult customer reviews before making a purchase. Furthermore, 57% of online shoppers actively seek websites featuring product reviews. Encouraging your current customers to share product reviews on past purchases is arguably as important as turning them into repeat customers.
Facilitate Effortless Proactive Communication
If a customer wants to get in touch with you, it should be absurdly easy for them to do so. After all, it only takes the customer a few clicks in their online banking portal to dispute a purchase. So merchants need to strive to make contacting them even easier. On the most basic level, your customer service phone number should be included in every touchpoint with the customer. On your website’s contact page, in your website’s footer, in any and all confirmation or follow-up emails, and in your oh-so-important merchant descriptor.
A merchant descriptor is the line of text that appears on a customer’s bank statement or record of bank account activity that identifies the merchant with which the transaction took place. Typically, merchant descriptors are composed of your store’s doing business as (DBA) name and a city, address, website, or phone number. Every card issuer displays merchant descriptors slightly differently, making it critical to keep the descriptor concise. As an added bonus, optimized merchant descriptors can also help prevent the most common ecommerce chargeback.
Merchants with varied transaction and/or product types should consider utilizing dynamic merchant descriptors. These dynamic descriptors give merchants an opportunity to provide transaction-specific details to each customer. Dynamic descriptors are passed to the issuing banks via API, although some payment service providers only support dynamic descriptors for pending transactions.
Respond to Customers Right Away
A very clear insight from the survey was the customer expectations for merchant responses. As we saw, customers expect a response from a merchant in two days or less. Having a phone number for customers to contact you at is a necessity for ecommerce.
It’s daunting for many ecommerce merchants, especially those with a large customer base, to offer personal phone support. But it’s worth it. Andrew Youderian outlines the benefits of opting for phone support operated by actual employees of your store and not a third-party call center service:
- Gain a greater understanding of your customers and the buying process.
- Resolve issues faster than through email.
- Build a rapport with customers.
- Helps earn or reinforce customer trust.
Another way to avoid using call centers and still ensure you’re always available to respond to customers is through live chat capabilities. Customers often don’t experience the extensive wait times associated with call centers. Even if there is a slight waiting time, customers can easily attend to other tasks while on hold.
The best part about live chat is that consumers actually like using it: 90% of consumers consider live chat helpful according to an ATG Global Consumer Trend study. Furthermore, eMarketer found that consumers are 63% more likely to return to a website with live chat capabilities.
Get Your Return Policy In Front of Customers
Having a clear return policy is a basic necessity for ecommerce. Ebay found that items with clear return policies sell better than items without. Remember that accepting returns means a buyer can return an item for any reason, including changing their mind about the product. Which means the second most common reason for a return, not liking the product, is completely valid as long as it meets your return requirements.
Even though the responses were fairly evenly split, the majority of customers, 56%, indicated the merchant did not communicate it’s return policy at the time of the transaction. Unfortunately, this indicates that critical points of the store’s return policy were not effectively presented to the customer.
How are you communicating your Terms and Conditions to customers? The most common method of doing so is the browsewrap method. Here, a website’s Terms and Conditions are linked to in the footer.
Informing customers of your return policy before they make a purchase results in numerous important benefits beyond legal protection. First, you’re clearly communicating expectations to the potential customer. Thereby setting the stage for a smooth transaction and post-purchase experience. Second, you’re increasing the likelihood of a customer properly engaging in a return rather than disputing a transaction with the issuing bank.
Stellar Customer Service Reigns Supreme
The common thread among the insights from our consumer survey on returns is that outstanding customer service can solve an abundance of customer problems. On the most basic level, every consumer who visited our post on reasons for returning a product did so instead of contacting the actual merchant about the issue. Poorly designed or non-existent customer service policies are the driving reason behind 71% of consumers who end a business relationship.
Positive customer service experiences lead 50% of customers to become repeat customers. And clearly, from our survey results, attentive customer service is the expectation not a nice-to-have perk. Does your store have a clearly defined internal customer service policy? Every business’ policy is unique, but include core aspects of customer service culture, ethics, and procedures. Download our free template and quick-start guide to learn how to craft a customer service policy that delights consumers and prevents chargebacks.