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10 tips for creating a returns policy for your retail store

18 August 2021 Small Business Advice
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Executing a great returns policy for your retail business can sound daunting at first, but it’s absolutely vital for any customer-centric business –  especially if you also operate an ecommerce website. According to recent ecommerce consumer research by Metapack’s Global, 69% of customers read the online returns policy before completing a purchase (up from 32% in 2018!). So, creating a straight-forward, easy to read, and concise retail returns policy has never been so important.  

What is a return policy & why does your business need one? 

A returns policy is a set of terms describing how customers can return or exchange goods they’ve purchased. The policy explains what items can be returned, the return timeframes, and what merchandise qualifies for refunds.

There’s a set of legal requirements for all shops trading in the UK, stipulating that a full refund must be offered if an item is “faulty, not as described or doesn’t do what it’s supposed to.” 

For any orders made over the phone, mail or online, you’re obliged to offer a refund to customers if they’ve told you within 14 days of receiving their goods that they would like to cancel their order. Businesses then have another 14 days to return the goods.

There are certain exceptions – for example, you aren’t obliged to offer a full refund to customers who knowingly accepted a faulty item when they bought it.

However, there are more things you can add to your returns policy to make it as customer-friendly as possible. Because it’s not just about protecting  your customers, it’s  also about increasing trust in your brand. 

Think of it as another important part of your sales funnel – whatever you add to it has the power to convert potential clients into new customers. And, when it comes to ecommerce in particular,  just as with every other page on your website, you need this one to be scannable, easy to understand and to the point.

The benefits of a transparent returns policy

Writing a transparent returns and refund policy can have a positive impact on your customer in more ways than one. Here are some of the top benefits:

  • It can promote customer loyalty – If a customer knows that they can trust your business should things go wrong, they’re far more likely to come back and shop with you again. In fact, 47% of consumers said that they would be inclined to shop more if a product had an easy return process. 
  • It puts emphasis on your product’s quality – The more flexible your policy is, the better your product looks. After all, why would you offer a long return timeframe, full refunds or even price match, unless you were completely confident in the quality of the products you offered?  
  • It can create brand trust – A transparent returns policy is a great way to increase brand trust for all the  reasons above. If a customer sees you demonstrate reasonable confidence in the quality of your product, and you have a straight-forward return policy, they’ll be more likely to trust your brand for future purchases. According to YouGov data from as far back as 2013, 58% of shoppers stopped buying from a particular retailer because of a poor return experience.
  • It could help generate positive reviews – People hate dealing with long, complicated returns. So if you offer them a transparent policy that outlines clear timeframes and return outcomes, they will thank you for it. Meaning even a return can result in a good experience with your brand, translating into a positive online review of your business!

These are just some of the key benefits you should consider. As even with the best of intentions, you can still expect to be dealing with return and refund requests.

What to include in your refund policy 

Now you know exactly how vital a returns policy is, you need to craft one that fits your business just right. By following this refund policy template, you’ll be able to write straight-forward terms that are both compliant and easy to understand.

 A reasonable timeframe 

Firstly, you need to include the number of days a customer has to return an item after receiving it. Allowing your customers enough time to return your goods shows that you value them and their time. Thirty days is a standard timeframe but some businesses do choose to offer even more flexible terms, going up to 60 or even 90 days. 

The conditions of a return

Make sure you clearly describe in your retail return policy what the acceptable product conditions are. For clothes, requesting that items have no visible signs of use or wear is common practice. Popular words you can use to communicate this in your policy include “unused,” “unworn” and “as-new.” This should cover you so you don’t receive tonnes of product back in bad condition, making it impossible to repair or resell. 

Other common conditions you may include are stipulating that all returned items must have their tags still on or be returned in their original packaging. 

How you’ll offer returns

Another condition that no refund policy template would be complete without is explaining exactly how you’ll offer returns. If you’ve got both a brick-and-mortar store and an e-shop, you need to clearly state if you’ll be accepting returns both online and in-store. As many as 22% of customers want to have a “return to the store” option, so it’s worth considering including this in your policy.

Whether you offer a return or a refund

A return and a refund are two very different things – while a return is when a customer sends an item back to you, a refund means giving the customer all or some of their money back for an unwanted item (usually following a return). This is why you need to clearly state how your customers will be compensated for the return in your policy. Will they be fully refunded, offered an exchange item or store credit? 

As we mentioned above, you do have obligations to offer full refunds under the Consumer Rights Act 2015. However, you should clearly stipulate all instances in which a return (exchange) option is offered instead. This could be in cases where you offer personalised and custom-made items – then you aren’t legally required to offer a full refund unless the items are faulty. 

If you’re worried about profitability, you should consider adding the options for an exchange or store credit in addition to refunds. These will have less of an impact on your cashflow compared to a full refund. Plus, offering customers free or reduced price of shipping is a good incentive for them to opt for store credit instead of a refund. 

Protection against refund fraud 

To avoid refund fraud, make sure you request a proof of purchase – this could be a sales receipt or bank statement. For clients who have paid by card, you should offer refunds in the same currency they paid, with the refund being processed back to the original payment card. 

Another option is using a Returns Portal – this enables early intervention before the item is shipped for return and helps against such frauds as wardrobing (purchase, wear once and return for refund). A Returns Portal allows you to see a record of returns on a single customer / account in order to spot any patterns in their behaviour. 

What items can and can’t be refunded

It’s important to note if there are any exceptions from your refund policy. You might be unable to accept the return of some products for hygiene reasons (such as undergarments). Or items that didn’t meet the ‘condition for return’ criteria we talked about above. You’re also not required by law to issue a full refund for an item that was damaged by a customer trying to repair it themselves. 

Your customers need to be provided with all this information in advance, so you need to clearly outline all of these exemptions within your refund policy.

How your returns policy works for ecommerce

One of the most important things to note if you have an ecommerce business is to stipulate who will cover the shipping cost of the return. To keep your customers happy, it’s generally considered best practice to offer free shipping (74% of consumers are put off by having to pay for returns delivery). 

Make the process even easier by including a return shipping label when you send out the product to your customers. However, if you do expect them to cover the cost, you need to make this very clear in your returns policy – no one likes hidden fees.

If a customer has made their purchase online, but seeking a refund at the brick-and-mortar store is still an option, you need to make this very clear in the policy as well. Simply outline if you’ll only accept returns in-store or via post, too. 

If a reason needs to be given 

Knowing what the reason for the return is can help you avoid returns in the long run. Maybe the photos on your website didn’t represent the items fairly or the product description missed out some key elements? If you’ve got a clothing ecommerce business and you see an increase in returns due to incorrect sizing, then maybe it’s a good idea to add a sizing guide to your website. Whatever it is, use the information to your advantage and turn the return into a win.

Where the reason for return is a damaged item, make sure your policy offers either a replacement product or a full refund.

What to do with your refund policy 

Now you’ve written your returns and refund policy, it’s time to put it front and centre. Here’s your quick checklist on what to do with your policy:

Place it in plain sight for customers

The worst thing you can do is hide your refund policy somewhere no one can see it. Making it as prominent as possible will give customers the extra reassurance that they’re protected should things go wrong. 

This is especially important when it comes to brand new customers who might not have heard of your business before. In-store, post your policy on the till and have it printed on customer receipts. Online – have a link to the refund policy page front and centre.

Make it easy to find on your website

According to a recent survey, 67% of shoppers check the returns page before making a purchase. So, don’t delay them any further. Add a prominent link to your shop’s website, include it in customer correspondence (such as the order confirmation email), and in sales receipts. Other great places to include a link are your website’s footer, shopping cart and checkout pages. Put it at the top of your FAQ page (if you have one) and consider adding it to every product page as well. 

Keep revisiting it based on customer feedback and new products

Your business plans will change with time, so when that happens don’t forget to revisit your refund policy and check if it still applies. You might find that you need to optimise it to make it more efficient and meet your new product needs better. Regularly checking that your policy is up to date is a great way to not only cut costs, but to turn a bad customer experience into a positive one. 

Use the refunds data to improve customer experience 

If you’ve followed our refund policy template above and added “reason for return” as one of its conditions, then you’ve set yourself up to collect some very useful data. Analyse your returns data and try to identify any trends. Perhaps you’ll notice that the same item keeps being returned again and again? You might want to investigate this further and check how you’ve marketed the product. Or maybe there’s something wrong with it that can be fixed? 


Having a transparent, compliant returns policy is essential for any retail business. It makes it easier for new customers to trust your brand when they see that products can be returned easily. Plus, a well-written, customer-friendly policy can be turned into a powerful sales tool. 

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