Mar 23, 2024
READ TIME: 5 MINUTES
Renaissance man 👋,
The dropshipping world's best-kept secret: handling returns. Yes, it's not the most attractive part of our business, but it's the most crucial aspect of sustainability, especially in the EU markets.
So why is it that the so-called gurus glide over this? Perhaps it’s not as glamorous as flaunting as showcasing their Shopify Dashboards. Yet, here I am, breaking the silence because I want your dropshipping business to hinge on more than just your ability to scale to $10k days.
TODAY, AT A GLANCE:
Challenge → Handling Returns in the EU Market
Solution → The Strategic Refund System
Phase Highlight → Tactics for Minimal Refunds
Key Statistic → Reducing Refunds OV to Just 35%
THE FORGOTTEN ASPECT: RETURNS
In our dropshipping business, especially in the EU, where customers are much more sensitive to chargebacks and disputes, navigating returns as an expert is crucial. Not taking this seriously can affect your business. I’ve heard 8 to 10% chargeback rates from dropshippers using Klarna in their stores!
Understand that in building a sustainable business that can finance your ideal life, you should always treat the backbone of your business as your number 1 priority.
And yes, I can imagine the feeling of receiving that $300 return request. It sucks, and it will hurt your operations if you have no clue how to handle those correctly.
So, how do we minimize these headaches? Let’s dive into our refund system phases, which have cut our losses by ensuring we only refund 35% on average of the customer order value.
PHASES OF HANDLING RETURNS
In December, we faced 2 big return requests. As you can see, both orders were partially refunded because both of them settled for a 35% refund. How did we manage that? Let’s break down the phases.
##PHASE 1 | REQUEST
Customer: Initiates a return, often clueless about the next steps
Support: We probe for the return reason of an apology and see if there’s any way to assist further, maintaining politeness and professionalism.
##PHASE 2 | SEEKING RESOLUTION
Customer: Expresses dissatisfaction and seeks a return.
Support: We request product images for clarity on the issue, again apologizing and assuring resolution efforts, keeping our tone professional and empathetic.
##PHASE 3 | OFFER
Customer: Sends image, still wanting a return.
Support: We thank them for the images, highlighting their importance in preventing future issues, and propose a 15/20% refund, allowing them to keep the product; roughly 25% accept this.
##PHASE 4 | NEGOTIATION
Customer: Declines the initial offer, demanding a full refund.
Support: We increased the offer to 35/45%, mentioning the alternative of returning to China as per our policy for a full refund; roughly 80% accept this.
##PHASE 5 | FINAL OFFER
Customer: Declines the initial offer, demanding a full refund.
Support: We hold firm on our policy, reiterating our final offer and stressing the 24-hour window to accept; roughly 50% accept this.
##PHASE 6 | AVOIDING CHARGEBACKS
Customer: Rejects all offers and is unwilling to return the product.
Support: To avoid escalating to a chargeback, we relent to a full refund, prioritizing our payment processing health over the loss.
Of course, each situation is unique, but this is roughly what the return systems look like. This is how we’ve managed to scale to multiple 7-figure sales, primarily with fashion, where the return rates are high. This keeps our payment processing healthy and minimizes return losses.
HIGH-RISK PAYMENT METHODS
As I’ve mentioned, the EU markets are quite challenging with risk payment methods like PayPal and Klarna. The risk of facing chargebacks and disputes is higher, requiring extra notice. For these, we don’t hesitate to offer the upper end of our refund option to ensure that the customer accepts the offer quicker than filing a chargeback or dispute.
BOTTOM LINE
Navigating returns in dropshipping is crucial. It requires tactics, strategy, and an understanding of your customer base. Success in this game is not just about making sales but sustaining them.
