Refunds + Returns: A Small Ecommerce Business Nightmare

Bean Boots on Dock

In 1912, Leon Leonwood Bean had an idea for a better boot.

He used rubber bottoms combined with leather uppers for his new design.

They were named The Maine Hunting Boot.

Leon purchased a list of residents in his home state of Maine. He mailed out a flier and within a few days and weeks he had orders for an initial run. Bean worked to get the boots ready and he shipped them out.

Business seemed easy…

But then a few weeks went by and Bean started getting requests for refunds. Customers started returning their boots. After it was all said and done, around 90% of the original orders had been returned for refund requests.

Bean honored the guarantee he had set forth. He refunded all the money or prepared new boots or fixed the originals and sent them back out.

Bean continued on and L.L. Bean became one of the most successful companies in American history. Their original “Duck Boot” remains one of the bestselling items along with other classics.

But the entire operation nearly collapsed before it had gotten off the ground…

Returns + Refunds – The Reality

Ecommerce is growing at faster rates every year.

Amazon is growing very fast. But small ecommerce stores are growing as fast or even faster. Technology is making it easier and easier to launch your own ecommerce store.

With online advertising, social media, SEO and more, a small business owner can run a very successful small online shop. But there are many pitfalls out there. Many that will likely occur no matter what. And some that can be avoided.

A big pitfall is the potential for returns and requests for refunds.

It’s easy to think that a product is ready. But the reality is that even the best, LL Bean included, struggle with product issues. Sometimes with the first run and other times when you least expect it.

It’s important to understand that a return crisis is likely to happen at some point and that it’s important to consider what your course of action will be when it does.

Determine Your Plan

Will you accept all returns?

Will you accept under certain conditions?

Will you refund the entire price and shipping costs?

There are a number of things to consider when it comes to returns and refunds.

Will you do just refunds and let customers keep the supposedly poor item? It might be better to save on the shipping and just refund. It depends on what type of products you’re selling.

The big key for keeping your business afloat is having a plan for cash flow. If you get a sudden rush of returns or refund requests, you have to figure out how to get the cash for the refunds and/or the cash to keep buying new inventory for future sales.

This might mean having a special line of credit set aside for “catastrophes”. It might mean keeping an emergency fund set aside for this exact type of emergency or for similar things that can occur.

Final Thought

A large return incident can bring your business to its knees. If you don’t honor the requests, your first and faithful customers may never come back. If you don’t have the money to handle it, you may lose you reputation.

But if you’re like L.L. Bean, you can get through it. You will likely struggle for awhile with cash and with your ego, but you can get through it.

Take the time to think through the possibility now so you’re at least a little prepared should something happen.

Dayne Shuda
Dayne Shuda
Dad, husband, golfer, and bow hunter. Owner of Ghost Blog Writers.

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