Returns and refunds are a frustrating, sometimes confusing and inevitable aspect of running a dropshipping business. There are a number of ways you can handle returns and refunds depending on the type of dropshipping you’re doing. This article is a guide as to how you can handle them and how to reduce the amount you have as this may be eating into your profits.

Dropshipping with AliExpress Returns and Refunds

Dealing with returns and refunds when dropshipping can be as simple or as complicated as you want to make it. The simplest way is to make a policy on your store that only accepts returns and refunds if the product has either arrived damaged, defective, never arrived at all, or the wrong item was sent.

As a beginner, I suggest you read my dropshipping from scratch tutorial.

There are many possible scenarios and many possible ways to handle each of the scenarios but this is the simplest solution. I’ll go through how to handle if a customer does meet one of the requirements and are eligible for a return or refund.

There are 4 main possibilities where the customer will be eligible for a refund:

The item was lost in transit and never arrived to the customer.
The item was shipped but arrived to the customer damaged.
The wrong item was shipped, this may be the completely wrong product or the wrong variant such as incorrect color or size.
The product is defective and either doesn’t work or doesn’t work as advertised.

I’ll go through how I handle each of these situations.

What if the Item is Faulty or Defective?

If the item is outside of the product guarantee you have stated in your refund policy, send an email apologizing but you are unable to offer a refund as it goes against your policies. If the customer demands a refund it’s really up to you if you want to offer them a refund to avoid bad reviews. Personally, if it’s only a little out of the product guarantee timeframe, I will give them a refund, if it’s out of the guaranteed time frame by over a week, I won’t offer a refund.

If it is within the product guarantee time stated, ask the customer for proof. The proof will require them to take a photo or video of the defective or faulty item and have them send it to you. If the customer doesn’t send it, there’s a good chance they were trying to scam you and trying to receive the item for free.

Be careful how you ask this as it can come off rude and many people may be offended. Try not to come across as suspicious and try to sound more concerned and apologetic. Always be polite even if you suspect the customer may be lying.

If they send a photo or video and it meets the requirements for a refund, ask the customer if they would prefer a refund or have another item shipped to them. Once they tell you if they prefer a refund or replacement, apologize and tell them they don’t need to ship the item back to you and they can keep the original item due to the inconvenience.

If people start taking advantage of this, you can tell the customers they need to send the item back to you in the current state to receive a refund. The hassle of this will stop people from trying to take advantage.

Depending on the item, customers may assume a product is faulty when it isn’t. Some items may be confusing and many people may not know how to use them properly. If this is happening repeatedly with specific products, make sure you update your website with instructions on how to work the product correctly, it’ll save you a lot of customer service.

What if the Supplier Ships the Wrong Item?

This is inevitable and will happen occasionally. It’s rare the wrong item will be shipped but sending the wrong variant is much more common. This may be the wrong color, wrong size, wrong type, wrong material. Many AliExpress products come in many different variants.

If this happens, politely ask your customer to send a picture of the incorrect item. Once they send the picture, apologize and ask if they would like a refund or to have a replacement item shipped to them. Whatever option they choose, do so right away.

Due to the inconvenience, tell them they can keep the initial item and you could offer them a discount code for future purchases.

What if the Customer Claims the Item Never Arrived?

Generally shipping times from China can vary due to a number of different factors. This can result in customers enquiring where their items are or claiming they never arrived.

If this happens and it’s still within the time frame stated in your refund policy and politely ask your customer to be a little patient. Give them the tracking code and explain that shipping times can sometimes be a little longer than expected.

If it’s outside of the time frame stated in your refund policy, apologize and say you are currently trying to sort out what went wrong and you’re trying to resolve the issue. Ask if they would like to wait a little longer for the product or if they would rather a refund or a replacement item be sent. If they want a refund or replacement, do it straight away as you have stated in your policy.

If they claim they never received the item but your shipping company claims the item has been shipped, it’s really up to you how you want to handle it. You can either fight the customer and refuse to refund or you can just give in and give them a refund. This won’t happen often as most people are not out to scam you for low-priced products.

What if the Customer Simply Doesn’t Like the Item?

This is really up to you how you want to handle customers who have simply changed their minds. If you have it stated in your return policy that simply changing your mind is not an acceptable reason to receive a refund, then you can handle this a few ways.

You can either apologize and simply give them a refund and count it as a loss.
Tell them you can offer them a refund but only if they send the item to you in its original condition at their expense.
Refuse and tell your customer it’s in your policy to not give refunds for simply changing your mind.
Try to compromise and either offer a partial refund or discounts on future purchases.

This really doesn’t happen often and if the product is a low enough cost, it may just be easier to apologize and offer a refund. You don’t need bad reviews and added stress.

Many people apologize and offer refunds or coupon codes to keep the customer happy and hope they’ll come back for future sales. Personally, I don’t want the customer back, if they are just going to change their mind, I’d rather not have their business.

What if the Customer Claims the product isn’t as Described on your Website?

If someone claims the product is different from how you described or advertised the product, then you will have to refund them if they are correct. This may include:

How the product works
The color of the product
The sizing of the product
The materials of the product

The first thing you should do if this happens is change it on your website to avoid it happening again.

If the product doesn’t match the description your supplier gave you, you should contact the supplier and request a refund.

If a Customer Returns the Products, Where Do They Send Them?

When dealing with suppliers in China, it’s just not feasible to have customers ship items back to China unless it’s a high ticket item. To have a $10 item shipped back to China is not worth the time, money or stress. So where do you have your customers send their returns to? You have a few options:

Home

You can have the items returned to your home address, however, this may not be an option most people are comfortable with. Just remember when everyone had everyone else’s phone number and address in the phone book, it wasn’t a big deal then. But this is a personal choice that only you can make. This option will save you money but at the same time isn’t very professional.

Check out my article on what address you should use for dropshipping.

PO Box

If the above option isn’t feasible for you and you would rather keep your privacy, a PO Box may be worth considering. If your products are on the larger side this may not work for you. Having a PO Box is helpful for a number of different things with regards to having your own business. It will however cost you a monthly fee.

Virtual Office

A virtual office provides you an address that gives you the impression of a professional office building. You can then have your mail sent there and either they can forward it to your home address or you can go pick up the mail yourself. You can also have the option of a professional phone number and actually have someone answer your phone calls for you. This is another monthly cost that may be worth considering.

What Do You Do With the Returned Orders?

You have several options if you are receiving several returned items.

If they are broken items, throw them out.
If they are still in good condition, you can use them to ship to customers yourself who have had problems with their orders so they receive them fast.
If you just want to recoup some of your losses, you can sell them on eBay or another platform to get your money back.
You can give them to charity.
You can give them to friends and family you like.
You can regift them to friends and family you don’t like.

How to Receive Your Money Back From your AliExpress Supplier?

Once you have photo or video proof from your customer that the product is faulty or defective, you may be eligible for a refund from your supplier.

This will work by opening up a dispute with your supplier, filling out the necessary form and providing the necessary evidence. To do this simply go to:

Your account at the top of the page
Scroll down to my orders
Below the orders heading, click on the disputes tab
You can then click on the open dispute link on the product you are looking to receive a refund from
You can then click on the refund button and fill out the necessary information

It’s really up to you if you want to pursue this. If the item is only worth a few dollars, it may not be worth your time and it may be easier just to absorb the cost of the item. This is completely up to you.

How to Refund Customers on Shopify

If you’re using Shopify and want to refund a customer, it’s a reasonably straightforward process.

On your admin page, click orders on the left
Then click on the order you want to refund
You can then click refund at the top of the page
Then you have the option of refunding the whole order or a partial refund
Once you have decided on the amount to be refunded, click on the refund button on the right.

Remember that it may take several days for your customer to receive their refund depending on the payment type they used, so be sure to let them know.

If you’re not using Shopify, below are links to other platforms’ refund tutorials.

How to refund customers on Wix

How to refund customers on WooCommerce

How to refund customers on BigCommerce

How to refund customers on SquareSpace

How to Handle Refunds and Returns with Domestic Suppliers?

Handling refunds and returns using dropshipping suppliers in your own country is very different than dealing with AliExpress. When you’re using AliExpress, you’re generally dealing with suppliers in China and lower-cost products. With domestic suppliers, you may be dealing with expensive high-quality products.

The biggest reason it’s so different is due to the fact that the product price is very different. This means you can’t be as generous to your customers in terms of refunding them if there’s a problem. With a $10 item, it’s worth the loss to keep your customer happy, with a $200 item, the loss is too big and you need to sort out each issue.

Working with suppliers in your own country makes it easier in terms of communication, shipping and you’ll both be dealing with the same rules and regulations. It is far easier to build a relationship with a domestic supplier than it will be with a Chinese supplier on AliExpress.

Supplier Contracts

If you are dropshipping using suppliers in your own country, each will have a different refund and returns policy. When you first sign up with the supplier, you will have a contract that you will need to sign. This contract should have the supplier’s return policy.

If the supplier won’t accept returns, I’d be very hesitant about working with them. Personally, I wouldn’t sign a contract if my supplier wouldn’t accept returns but this is your call. The reason for this is I don’t want to have to put on my website “no returns with this product” as it comes across as a little shady.

There are however exceptions to this as some products can’t be returned. If you’re selling underwear or swimsuits, they’re obviously not going to accept returns, and if they did I’d be concerned.

Because each supplier’s return and refund policy will differ, your policies must match the policies for the products you are selling from that supplier. It may be worth having a smaller returns policy in terms of days, this way you can give your customers a little leeway if they want a return a few days after the return date ends.

What if the Customer Changes their Mind?

Your supplier will generally not accept refunds for customers changing their minds. If this is the case, you shouldn’t either. The last thing you need is to offer a refund to your customer if your supplier doesn’t offer one, otherwise, you’ll be left out of pocket.

Be as transparent as possible about this before the customer makes a purchase. Have it clearly stated on your refunds policy, have it stated on a FAQ page and it may be worth having it on your product page.

As frustrating as it can be to have a customer change their mind, be polite about it. Being rude may hurt your business in a number of ways.

What if the Product is Faulty, Broken or Defective?

If the product arrives to the customer defective, the first thing you should do is ask the customer for a photo or video of the problem. Remember to ask this in a concerned and apologetic manner. If the customer sends proof and the issue is eligible for a refund or return, you have a few options depending on the condition of the product:

If the product simply doesn’t work, you can ask your customer to send the product back and have your supplier send a replacement.
If the product has a broken part but the rest of it works fine, you can contact your supplier and have them send a replacement part.
If the product is defective in terms of markings or scratches, you can have your customer send the product back and have your supplier send a replacement. Your other option is to offer your customer a partial refund off the price if they are willing to keep the product as is and then you can contact your supplier, explain the situation and you may be able to receive credit for your next purchase.
If the customer complains that the product is different in some way to how it was described on your website, you can either offer a partial refund and if this doesn’t work you can offer a full refund and have them ship the item back to your supplier. Your supplier should offer a refund in this situation as the product will still be in its original condition.

How to Create a Refund and Return Policy for Your Dropshipping Store?

Creating a refund and returns policy is an important and unavoidable part of a dropshipping business. You really need to make sure that you cover every possible situation as to protect yourself from customers trying to take advantage of you.

Refund and returns policies will be different depending on the type of products you’re selling, how you want your business run and even where you live in the world. You should however make a list of potential issues you’ll want to cover to include in your policy:

What to do if the product arrives defective, faulty or broken?
What to do if the product gets damaged during shipping?
What if the product gets lost during shipping?
What if the product hasn’t arrived by the specified delivery dates?
What if the product isn’t as advertised?
What if the customer changes their mind?
What if the customer wants to return the product after the specified return policy date?
Who pays for shipping if a product is to be returned?
What if the supplier ships the wrong product or product variant?
How many days the customer has to return the product?
How the customer will receive the refund?

These are some of the potential things you’ll need to cover in your refund and returns policy. If you want a FREE refunds and returns policy template, Shopify can provide you with a template when you create your website. You can then change whichever parts you need for how you want to run your business.

How to Reduce Refunds and Returns?

Fix Problems as They Arise

The best thing you can do to reduce refunds is to not allow the same problem to keep happening and stop it as soon as possible.

If a customer wants a refund due to an item not being the color it looks in the image, change your description or get a new image.
If you’re getting complaints about the quality of one of your products, find a supplier with a better quality version.
If customers want refunds due to long shipping times, change suppliers or change the expected shipping times on your website.
If people are finding any loophole in your refund policy, change it immediately.

In most situations, there’s a way of fixing it so you don’t have to repeatedly have the same issues.

Smart Product Choice

The type of products you choose to dropship will make a huge difference in the number of refunds in your dropshipping business. Some products are not ideal products to dropship due to the fact that you just can’t replicate the in-store buying experience for an online store.

Products such as clothing, bedding and furniture are much better suited as a standard retail store due to the fact that the customer can feel, sit on or try on before making the purchase. This doesn’t necessarily make it a bad product to dropship but you will get many more customers requesting refunds.

The other is items that are easily broken. These can be glass products that can be broken easily during shipping or products with multiple moving parts that can easily be broken by customers.

Ideally, you want your products to be as simple as possible.

High Quality

If you’re dropshipping from AliExpress, you can expect a lot of customers to request refunds. AliExpress is notorious for low-quality products. To avoid this as much as possible, try to only use experienced reputable suppliers with a high feedback score. Your other option is to order a sample product before selling it to customers.

Misrepresenting the Product

You want your product descriptions to be as accurate as possible to the actual product you are selling. This can be tough as a dropshipper as you may never have physically touched the product. If possible look up reviews for the product and see what people are saying. If people are saying it fitted slightly differently, or the color was different from what it looked like online, try to add this kind of information to your description to avoid disappointed customers.

Transparent Shipping Times

Don’t try and hide the long shipping times if you’re dropshipping from China. If your supplier states the shipping times will take between 15 to 25 days, it may be worth you having shipping times between 15 to 30 days just to be on the safe side.

Shopify Apps

There are several Shopify apps that can help reduce the number of refunds your store receives:

Aftership – This app will provide a detailed tracking system for your customers to follow and will notify them throughout the whole process. This will keep customers happier and reduce customer service.

Fabreturns – This will help automate and simplify the whole return and refund process. They have a bunch of helpful features such as store credits and label creations.

ReturnGo – Another helpful app that can convert refunds into store credit which will save you money and help build customer loyalty.

NoFraud – Transactions will be sent to noFraud for fraud screening to help eliminate chargebacks which can be a major issue.

Refunds, Returns and the Law!

Each country and sometimes each state has different laws when it comes to refunds and returns. So don’t assume you can just say screw the customer, it’s my online store and I’m not giving anyone a refund for any reason. There are laws in place to stop people from taking advantage of others. These laws differ in a variety of ways so be sure to check them out before writing your refund policy.

United States

Federal law states that retailers are required to accept returns if the item is defective. They also state a 3-day cooling-off period is allowed for purchases over $25.

When it comes to state law, each state has slightly different policies in place regarding refunds. Many require retailers to have their refund policy prominently displayed at the place of purchase.

Canada

Canada is very relaxed about refunds and returns policies. There is no law stating that a retailer is required to accept refunds and returns to customers. This means each retailer’s policies can vary drastically, as a customer it’s worth checking their policies before making a purchase.

Each state may have specific laws which allow customers to return specific products under certain situations.

Click here for more information on Canada’s refund policies.

UK

Retailers must offer a refund for products that are faulty, not as described or don’t function the way it is supposed to. They don’t have to offer a refund if the customer knew the product was damaged when they purchased it, they damaged it themselves or they no longer want the item.

Click here for the UK’s government website in regards to offering refunds.

Australia

In Australia, the law states retailers must offer returns and refunds if the product has any major problems. Retailers don’t have to provide refunds to customers who simply change their mind and don’t want the product anymore.

Click here for Australia’s refunds and returns policies.

Summary

Even with all the above information, dealing with refunds and returns doesn’t need to be a complicated process. I have tried to cover every possible situation that could arise, however, most of these situations will never happen.

It’s more of the unenjoyable and annoying aspect of running your own online store. Over time, you’ll begin to see which issues keep arising and you’ll learn how to handle each situation correctly and how you can change aspects of your business to help reduce the number of customer complaints.

Once you know how to handle each situation, you can look at outsourcing the customer service side of things and have a virtual assistant take care of all your refunds and returns. This will save you a lot of time to focus on other parts of your business.

I hope this article has helped answer your questions. If you have any more questions in regards to refunds and returns, send me a message and I’ll try to add them to this article.