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How to improve your refund ratio

What is a refund ratio and how do I improve it?

Daniel Little avatar
Written by Daniel Little
Updated over a week ago

To access Benchmarking, navigate to Analytics > Benchmarking

What is a refund ratio?

A refund ratio measures your refunds as a percentage of your sales.

How is my refund ratio calculated?

Your refund ratio is calculated as:

Refunds / sales

For example, if your refunds in the current period were 50 and your sales were 1,000, your refund ratio would be:

50 / 1,000 = 0.05

A refund ratio is presented as a percentage, so 0.05 becomes 5%.

How can I compare my refund ratio to industry averages?

Link My Books benchmarking feature allows you to compare your refund ratio with other businesses of similar size selling on the same channel.

To access Benchmarking, navigate to Analytics > Benchmarking

On the bell curve, you will see the median, lower quartile and upper quartile figures. These represent how other businesses in your cohort are performing.

Your result is shown in comparison to these industry averages and is placed into one of the following 4 quartiles:

  • Bottom 25%

  • Lower 50%

  • Upper 50%

  • Top 25%

A lower refund ratio percentage is better.

Tips to improve your refund ratio

Anything that drives a decrease in refunds or an increase in sales (or even better both) will ultimately lead to an improved refund ratio.

Reducing your refund ratio is essential for maintaining profitability and customer satisfaction. Here are 10 tips to help you minimise your refund ratio (written by Chat GPT):

1. Provide Clear and Detailed Product Information:

Ensure that your product listings include comprehensive information about the product, including specifications, dimensions, materials, and any potential limitations. This helps set accurate expectations, reducing the likelihood of mismatched customer expectations.

2. High-Quality Product Images and Descriptions:

Use high-quality images that accurately represent your products. Combine these with detailed and accurate product descriptions to give customers a clear understanding of what they are purchasing, reducing the chances of dissatisfaction upon receipt.

3. Implement a Transparent Return Policy:

Clearly communicate your return policy on your website. Make it easily accessible and transparent to customers. A straightforward and lenient return policy can encourage customers to contact you with concerns before initiating a refund.

4. Offer Excellent Customer Support:

Provide prompt and helpful customer support to address any queries or issues customers may have. A positive customer experience can lead to problem resolution without the need for refunds.

5. Use Customer Feedback to Improve:

Regularly collect and analyse customer feedback. Understand the reasons behind refund requests and use that information to identify areas for improvement, whether it's product quality, shipping processes, or customer service.

6. Accurate Sizing Information:

For apparel and similar products, provide accurate sizing information. Include size charts and clear instructions on how customers can measure themselves to choose the right size. This can significantly reduce returns due to sizing issues.

7. Thoroughly Inspect and Package Products:

Conduct quality checks on your products before shipping to ensure they meet your standards. Properly package items to prevent damage during transit, reducing the likelihood of returns due to damaged goods.

8. Set Realistic Shipping Expectations:

Clearly communicate estimated delivery times and any potential delays. Setting realistic expectations helps manage customer anticipation and reduces the likelihood of refunds due to late deliveries.

9. Implement a Robust Quality Control Process:

Establish a strong quality control process to catch any defects or issues before products are shipped. This can prevent customers from receiving faulty items, reducing the need for returns.

10. Provide Live Chat Support:

Offer live chat support on your website to assist customers in real time. This can help address concerns or answer questions before a customer decides to return a product.

By focusing on transparency, customer communication, and product quality, you can create a positive shopping experience that minimises the need for refunds and improves overall customer satisfaction.

If you have any questions about this article or feedback on how we could make it better please reach out to the support team via the blue chat icon on the bottom right of the page or via email to [email protected].

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