This article is written by Shruti Chaurasia, pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.com.
Working as an e-commerce store owner has lots of challenges mainly because the customers do not get to physically examine the products before purchasing. Therefore, the owner needs a well-drafted refund policy for its e-commerce store. The refund policy is vital to simplify the process of return and exchange for the customers. A clear refund policy can gain the trust of the customers and instantly attract more customers. A customer will not be interested in buying for an e-commerce store if there is no provision of a return, exchange, or refund policy. A refund policy can be very limited as compared to the return and exchange policy, but every online store must have one because the customer will want to know the position of the store with respect to damaged products, products that don’t fit, etc. There are few points to cover and keep in mind while drafting a refund policy for an e-commerce store. We’ll cover them all in this Article. First, let’s understand what a return policy is.
What is a return policy?
A document describing in detail the process of a business and requirements for accepting returns is called a return policy. It covers customer’s expectations and the process as to how they can initiate the return. It protects the business from unsuitable returns and credit card chargebacks that could cause financial loss and provides instructions to help both the store owner and the customers to follow a harmonious process. A return and refund policy is the agreement where the customers are informed about the online store’s returns and refunds policies. It usually contains the following information:
- The maximum number of days within which the products have to be returned.
- How will the customer receive the refund i.e. by credit or replacement?
- If the refunds are offered for digital products or in-app purchases only.
- Who will be accountable for the payment of shipping to return the product?
Why do you need a refund policy?
However tempting it might be to eliminate returns altogether, it is not suggested as the customers aren’t likely to trust an online retailer that doesn’t offer an easy way to return purchases that don’t fit, arrive damaged, or just aren’t quite their expectation.
Shoppers earnestly check a store’s return policy before purchasing the product and tend not to choose the retail shop whose return policies aren’t flexible enough. Following are some of the most important reasons why one should have a Return Policy:
- They let you make “all sales final” if you want
- They encourage consumer confidence, which is especially important for new stores or companies operating in competitive markets
- They give you something legally enforceable to fall back on – more on that below
Are refund policies legally binding?
Yes, refund policies are, essentially, legally enforceable contractual terms between the online store owner and the customer. However, like any contract, these terms are only enforceable if they are:
- Clearly stated
- Agreed to by the customer
- Fair and reasonable
- Lawful (e.g. you’re not agreeing to a contract for illegal activity).
Having a look at the method of drafting
The refund policy shall include the following sections:
- The maximum number of days before which the customers can notify the store for wanting to return an item after they received it.
- The kind of refund that will be given to the customer after the item is returned: For Example another similar product, a store credit, etc.
- Who shall be accountable to pay for the return shipping?
- With conditions of returns such as the product must be unused, in original packaging, in resalable condition, etc.
- Restrictions on returnable items like no returns of undergarments, etc.
- If there are any restocking or other fees you deduct from refunds.
The terms of the policy should be simple and clear to understand and should not impose restrictions on the customer’s statutory rights under the applicable laws. The policy can be divided into the following sections: refunds, exchanges, shipping, initiating the refund or exchange, and cancellation. These are the terms that every legally enforceable policy must-have. Even if the refund policy is included as part of the store’s terms and conditions, and the store does not have a separate refund policy, the following are the information that should be addressed in the respective clauses:
Some of the common conditions for refunds for the items are time limitations, liability, exceptions for faulty items, etc. Some retailers only offer customers a certain time limit to return their items. This clause informs customers of the maximum time they have before they can initiate the return of their purchased items. It is recommended to set a clear timeline to avoid confusion. This clause also mentions whether the count for time limit starts from the date the customer purchased the item or from the date the item was shipped or from the date it was delivered to the customer. Along with the time limitations, it also includes some other conditions in which the retailer shall accept the return of products to initiate the refund. The conditions are mentioned in the sample clause below. This clause can be worded as:
“It is important to us that you’re happy with your purchase. If you are really not satisfied you can return the product within ___ days. We will give you a full refund by the same method as your original payment for products that are returned with proof of purchase in new, unused, and re-salable condition and with the packaging.”
The refund method clause specifies how the refund will be processed i.e. how the customers shall get back their money. The retailer can either refund onto the original credit card or debit card, or can offer store credit or gift card. Whatever is the method of refund shall be clearly mentioned in the policy. Some online stores also offer refund payments by a combination of cards and gift cards. One of the card repayments is processed first and the other later. Some stores as goodwill gestures offer only gift cards or store credit refunds if the customer fails to provide a receipt or some other proof of purchase or the return is initiated slightly out of time. This clause can be worded as:
“We only offer refunds onto the original payment method used to make the order. And/Or, For purchase offer refunds onto the original payment method used to make the order.And/ Or, Returns without an authorized number may be issued a return to sender or receive a store credit only.”
It’s important to make it easy for customers to claim their refund. For example:
- Ask customers to contact the retailer,
- Use a returns portal,
- Make returns form available online and/or in the package.
Initiating a refund or exchange
The provision for initiation of a refund or exchange shall be set out in a clear and concise manner that is easy for the customers to understand. One can also dedicate a separate section for the same in the return policy section. This provision can be worded as follows:
“Following the following steps to initiate your return:
- Go to our return portal
- Enter your order number (e.g.___)
- Select which item(s) you wish to return and why.
- Confirm your original delivery information.
- Select your preferred method to return the order.
- You may be prompted to download a return label- simply attach the label to your parcel and take it to your nearest drop-off point.”
This clause clarifies who shall borne the return cost if a customer returns or exchanges an item. Typically, if the customer receives a damaged or wrong item, they expect the retailer to pay for the shipping cost as it is the fault of the retailer’s part. Whereas, in case if the customer wishes to return the items merely to change their size, colour, or for any other personal reason, the retailer can impose the liability on the customer to bear the shipping cost for the returned item. This clause can be worded as follows:
“For reverse shipping charges ₹____in ____ and ₹_____ for other states in India. The shipping cost has to be borne by the customer”
Every business selling goods or services online publishes a refund policy on their portal, it can be either within their terms and conditions or separately. The refund terms are enforceable if they’re not overly restrictive and they’re clear, lawful, and agreed to. Every refund policy must include clauses on refundable items, the refund process, exchangeable items, the exchange process, shipping costs, the process of cancelation of orders, and time limits on refunds and exchanges.
If the retailer wishes to state the refund policy separately he can provide a link to the refund policy in the website footer or at another key place such as during checkout and in an order confirmation email to make it convenient for the customers to refer. It is advisable to use verbiage in the return policy which the customers can relate to. Filling the return policy with complicated language and/or legal jargon will only confuse the customers and lead to an increase in service requests. So long as it’s clear, concise, and not open for interpretation, you’re good to go.
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