How to Handle Shipping, Returns, and Refunds for Dropshipping Stores

Dropshipping is considered one of the easiest business models in eCommerce.

But the tricky parts are shipping, returns, and refunds — these are the areas where you need to put some critical thinking and strategy into play. After all, these all aspects have a direct impact on your profits.

If you were looking for a guide on handling shipping and refunds for dropshipping stores, you’ve just landed at the right place.

In this blog post, we’ll help you with a detailed overview of the end-to-end strategies, policies and procedures, and best practices for managing shipping, returns, and refunds.

Let’s get started!

Why Are Shipping, Returns, and Refunds Important Factors in Dropshipping?

The way you handle your shipping, returns, and refunds can shape the chances of your success in the dropshipping business. Here’s what makes all these aspects crucial for your dropshipping store:

Increase customer satisfaction: 

Not just in dropshipping but in any eCommerce business — shipping, return, and refund processes or policies can heavily influence customer satisfaction. For example, if a customer receives a damaged item with no option to return it, it can cause a huge frustration and the customer would most likely not buy from your brand ever again.

That’s why you need to make sure you have proper processes and policies in place.

Build trustworthiness: 

One of the biggest challenges in dropshipping businesses is to build trust with potential customers. When shopping online, customers want to avoid any risk of getting trapped in false promises. 

When you have robust shipping, return, and refund policies, they can help build trust with your customers. For example, when you have a 30-day returns policy, it works as a sense of security for customers.

Boost your conversion and sales: 

With an attractive shipping policy, you can entice customers to purchase from your brand. Some customers may also go and check your return and refund policies before completing the checkout. All of these factors contribute to boosting your sales with an increased conversion rate. 

For example, Amazon Prime has been offering free and fast shipping options to attract buyers and that’s been considered one of its primary benefits. So, it just shows that these strategies are not only used by small brands but even by eCommerce giants like Amazon.

How to Create and Set Up Shipping Strategy and Policy

We can divide this section into three parts: 

1. Managing the shipping process covering the physical aspects of shipping operations

2. Defining the shipping strategy from a marketing perspective

3. Crafting and placing the shipping promotion and policy on the website for customers

1. Managing the Shipping Process:

Since you’re going to dropship the products, shipping would be handled by your manufacturer or supplier. However, you may still need to consult or confirm with the manufacturer/supplier to get the complete details (e.g., cost, timeframe, and delivery partner) — and create your strategies and policies accordingly.

However, if you plan to store inventory at your own warehouse, you may handle shipping on your own. Some eCommerce merchants follow this practice to reduce delivery times especially when they’re sourcing products from China.

In the latter case, you can also use Shopify Shipping — a solution that helps connect your online store with popular shipping carrier accounts. It can make the shipping process smoother, faster, and less costly for you and your customers.

Learn more: How Does Shopify Shipping Work? Eligibility and Set-Up Guide 

2. Defining the shipping strategy:

As we discussed earlier, your shipping policy and promotions play a crucial role in your store’s conversion rate. Shipping costs are one of the major reasons for cart abandonments in eCommerce. 

According to Baymard Institute, 48% of shoppers abandoned their carts as they found the extra costs (shipping, taxes, fees) were too high.

Offering free shipping can resolve this concern and that’s why it’s been one of the most popular sales promotion strategies in the eCommerce world.

Learn more: How to Do Free Shipping on Shopify?

3. Crafting and placing the shipping promotions & policy:

If you have set up some sort of promotional campaign related to shipping, you should highlight it on your store. For example, the promotional offers could be like free shipping on all orders, free shipping on orders worth more than $100, and so on.

However, not every business can implement a free shipping strategy. If that’s not your strategy, you may simply cover your general shipping practices and timeframes in the policy.

Make sure your shipping policy is easily accessible to customers. Place it in the common sections where customers typically expect it to be. For example, the footer section and checkout page.

If you’ve got promotional campaigns for free shipping, it’s advisable to highlight it on your website announcement bar or through some other banner. But highlight it — because it can be a great influence on the customer’s buying decision.

How to Manage Returns and Refunds for Dropshipping Stores 

When running an eCommerce business, you’re bound to receive return and refund requests. Sometimes, for fair reasons — and sometimes, for invalid reasons too.

Here are the three most important factors to consider:

1. Types of goods you’re selling

When deciding whether customers can return the purchased items, you must consider what type of product it is — e.g., physical, digital, fragile, perishable, hygiene-sensitive products, and so on. 

If you’re selling digital products or hygiene-sensitive products, you may want to be strict with the return and refund policies. For example, in case of digital products, some bad actors may try to exploit your refund policy and ask for a refund after downloading the digital product on their personal system.

On the other hand, if you’re selling clothing or other physical products that may create size mismatch issues, you may want to be generous with your returns policy to make customers feel secure.

2. The supplier’s policy for returns and refunds

When you’re running a dropshipping business, defining the return and refund policies is not just within your own control. You must consider the supplier's policy too. In fact, this is one of the crucial factors you should consider when finalizing your dropshipping supplier. Consider a supplier who has a generous return and refund policy.

Apart from the policy, check how the returns are managed by the supplier. For example, if you’re selling print-on-demand (POD) products through Printful (a popular POD supplier), you can handle returns in two ways: 

• Automatically store all the returned items in a Printful warehouse and resell them later.

• Set your own US address to collect all the returned items. 

Now, this raises a couple of questions — What if you don’t have a US address? And what if the return is not approved by the supplier for the given scenario? 

In such case, you’ll have two options: 1. Set up your own warehouse and ask the customer to return it to your address. 2. If the return shipping cost is too high and you’re not charging it to the customer, you may simply request the customer to keep the item or donate it to someone in need.

3. Your business strategy

Your business strategy can also define the return and refund policy. If you’re a completely new brand in the market, customers may find it hard to put trust in your brand. That’s why you may plan to have generous policies even if it’s not completely supported by the manufacturer/supplier.

Pro tip: When finalizing your manufacturer or supplier for product sourcing, negotiate the terms of returns and refunds. If you’re looking to build the brand from a long-term perspective, you must communicate it with the supplier. Explain to them it’ll also help them get more business from you, so it’s a mutually beneficial business practice.

Best Practices to Handle Return & Refund Processes & Policies

To handle the returns and refunds in the most effective ways, there are some best practices that you may consider following — before and after such scenarios arise. So, we’ll divide this whole section into two parts:

A. Preventive actions to take before receiving return and refund requests:

1. Set Realistic Expectations with Customers

This applies to all three policies — shipping, return, and refund. It might be tempting to claim huge benefits and it might go out of proportion as well.

Be realistic. Consider the adverse circumstances that may not let you fulfill customer expectations in an ideal manner. Think of all the possibilities and set expectations with customers accordingly.

The concept of “under-promise and over-deliver” can be applied to setting expectations. 

For example, let’s say in the most ideal scenario, the shipping may take 3 business days. In that case, you may want to commit the shipping times as 4-5 business days to keep a buffer for any unknown circumstances that might delay the shipment for a day or two.

Similarly, when offering refunds, you must set expectations as to how many business days it may take. Again, consider uncertainty and keep a buffer of additional days.

You can draw inspiration from popular or successful eCommerce brands. Colourpop is a great example. On its shipping page, the brand sets expectations of delayed responses with an explanation stating that they’re getting tons of messages.

2. Be Clear and Precise in Policy Statements

When drafting your returns policy, specify what items can be returned and what cannot be. Your store may have multiple items and not all of them could be eligible for returns.

Similarly, mention the timelines and processes precisely to let customers know how claims need to be submitted and how long the entire process may take for resolution.

3. Write Product Disclaimers Wherever Needed

This is also similar to setting up expectations but it’s more about products than your policies and processes.

Make sure to specify any needed product disclaimers related to color, size, or appearance. It applies when you’re selling certain types of products, e.g. clothing items, footwear, accessories, etc.

For example, the colors of clothing products may look different on a digital screen than the actual product. And if the customer is not aware of it, it could lead to dissatisfaction and a return/refund request.

4. Have a Standard Operating Procedure

Define a standard operating procedure (SOP) for internal handling and communications.

Make sure your SOP is aligned with the supplier’s. If you have team members working under your dropshipping business, share the SOP with every team member and ensure it’s adhered to properly.

B. What to Do Once Customer Has Decided to Raise a Return of Refund Request:

1. Keep it Simple for Customers

Don’t make your customers go through several hoops before/after approving the return and refund request. If you’re going to give a refund, keep it quick and straightforward. Increasing the hassle of a customer who’s already dissatisfied with something can only add oil to the fire.

Cupshe — a swimsuit and fashion brand — has a simple and straightforward page to initiate a returns request.

On the brighter side, if the customer is impressed with how you handle the request it can turn a dissatisfied customer into a happy customer.

2. Offer Exchange or Other Incentives

Product return requests do not necessarily need to be resolved with refunds only.

You could offer an exchange with another product in the same price range as long as the customer is happy to buy another item. This can help you recover some portion of money that you’d otherwise lose on the return and refund.

You could also offer other rewards if you have a customer loyalty, cash point, or store credit program. For example, let’s say a customer wants to return an item worth $100. Instead of offering a refund, you could credit rewards or cash points to the customer's account which they could use in the future.

By doing this, you can keep the customer with you and you’ll get another chance to enhance customer satisfaction and overall experience.

3. Make Exceptions When Needed

Have a customer-centric approach. After all, you want to build a brand with a loyal customer base. Your customers become your advocates when you handle their concerns with care and empathy.

Every case may be taken as per the SOP, but don’t be quite rigid — you should also keep room for making exceptions depending on the case.

For example, let’s say there’s a return request from one of your loyal customers who’s given your huge business in the past. Ideally, the requested return cannot be approved as per your policy. 

But do you really want to decline the return request just because it does not fall within your approval criteria? Make an exception to keep the customer happy and see how that customer would go on to praise you in front of 10 other people. Think from a long-term perspective with a broader vision.

4. Investigate and Analyze Return and Refund Request

Receiving a return or refund request can have multiple reasons:

• Genuine cases: Customer received damaged items, no shipment received at all, wrong item received, etc.

• Fraud: Fraudsters trying to get items for free or raise fraudulent refund requests.

• Lack of clarity: Some customers might raise a return/refund request just because they misunderstood something. This could be due to a lack of precise product descriptions or store policies.

• Buyer’s remorse: Sometimes, buyers may just request a refund due to regret with their purchase. Nothing wrong with your product but they still request a refund.

Consider all such cases, and evaluate what’s causing product return or refund requests — the most frequent scenarios. Find the areas of improvement from your business standpoint and fix them.

5. Collect Feedback from Customers

Don’t just consider all your returns like a burden on your business — it’s also an opportunity to learn what needs to be improved.

Ask your customers to share their feedback on how you can minimize the issues that cause return and refund requests. Learn from your customer feedback and data to make product and process improvements.

If you listen to your customers carefully with empathy, they’ll feel heard. They’ll also see the effort you’re putting in to make their experience better. All these little things go a long way in building a solid brand.

Learn more: Post-Purchase Surveys: Guide, Examples, and Questions

Using the Shopify Policy Template for Return and Refund Policy

Shopify does its best to help merchants in every possible manner. So, it also offers templates for all store policies — except the shipping policy. The shipping policy has a lot of variable factors that may differ from business to business.

For the “Return and refund policy”, you can use the template by making necessary edits to it. Just go to Settings in Shopify admin and you’ll find the Policies tab at the bottom in the left sidebar.

First, you can set “Return rules” by clicking the Manage button.

Here, you can define the ideal conditions under which you’d like to approve product returns. You can even set the rule for the responsible party to bear the return shipping cost. For example, if you want customers to pay for the returns, you can select the radio button that says — “Customer provides return shipping”.

Then, based on whatever rules you’ve defined, you can edit and finalize your policy.

You can even seek the help of a legal professional if you want to create a more robust policy. You can find legal writers, specializing in eCommerce, through freelancing platforms like Fiverr and Upwork.

Once the template is customized and the final version is published, make sure it appears on your website at critical touch points. For example, your website’s footer section and at the bottom of the checkout page.

The goal is to make it easy for customers to access these policies as it may influence their buying decisions.

Final Thoughts on Handling Shipping, Return, and Refund in Dropshipping

Different entrepreneurs may have different methods of operating their businesses.

While there are all the general best practices that you should implement, you may also need to approach certain cases with a unique approach.

Having all that said, create solid strategies to handle shipping, returns, and refunds in a cost-effective way — without compromising on customer experience or satisfaction.

To learn more about eCommerce marketing strategies, trends, and best practices — check out more resources on the GemPages Blog. Also, join the GemPages Facebook community to network and learn from like-minded entrepreneurs and experts.

FAQs on Shipping, Return, and Refund in Dropshipping