July 29, 2024
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Should All Retailers Offer Instant Refunds?
Reshop is changing things up when it comes to the refund process by offering instant refunds, bypassing the traditional waiting period that consumers have come to expect.
Launching this new program with major partners like Alo Yoga, Steve Madden, and Orveon’s cosmetic brands, Reshop will give consumers access to their return funds immediately after completing their returns instead of receiving store credit.
“We see an opportunity to disrupt a traditional process to deliver unique value to both merchants and consumers. With Reshop, customers can receive instant refunds — offering them greater flexibility, control, and confidence to shop again right away. For merchants, Reshop can help transform what has historically been a loss into an opportunity to recapture customers and drive additional revenue.”
Katie Pridham, chief commercial officer at Reshop, via PR Newswire
Katie Pridham, Reshop’s chief commercial officer, summarizes the new refund platform’s dual benefits: instant refunds enhance consumer satisfaction and help merchants recover lost revenue through repeat sales. According to the company’s research, 90% of shoppers will favor merchants that provide instant refunds, and two-thirds of Americans think “returns are the absolute worst part of shopping.”
Reshop also partnered with Narvar in order to gain access to over 1,400 brands and make it easier to add to current return processes. Reshop is set to expand its network with backing from investors such as Afterpay co-founders Anthony Eisen and Nick Molnar and venture firms like Matrix Partners and Sound Ventures.
According to the official Reshop website, the process requires first using the Reshop app to choose Reshop as your refund option with a partner retailer. After initiating your return, you’ll receive your refund either directly into your bank account within one business day or immediately on a Reshop virtual card. You can then spend your refund anywhere Visa debit cards are accepted. The Reshop app also lets you track your refunds, view tailored shopping recommendations, and monitor your refund status in one place.
Over the next few months, the platform plans to introduce additional men’s and women’s fashion labels to its expanding roster of partner merchants. Although the company is currently collaborating with direct-to-consumer brands, its objective is to speed up and streamline the refund process across the entire retail sector. Reshop is also “focusing on partnering with innovative merchants to enhance the customer experience,” per WWD.
Pridham told the outlet, “We’re seeing a cultural shift where consumers want more control and instant access to their money. Eighty-six percent of consumers feel it’s ‘unacceptable’ for a refund to take more than a week. With Reshop, we’re meeting the demands of today’s shoppers who expect their refunds to move as instantly as they do. This in turn drives confidence, loyalty and repeat purchases.”
Other companies are also trying to improve the returns process for consumers. Sway, a startup focused on doorstep returns, recently raised $19.5 million as retailers seek faster and more convenient return options. Last holiday season, Walmart introduced a home return pickup service for Walmart+ members, allowing them to return items without needing a box or label. Similarly, DoorDash began offering doorstep returns for UPS, FedEx, and USPS packages, and Optoro added home pickups to its Express Returns program.
BrainTrust
David Spear
President, Retail, OrderlyMeds
Raj B. Shroff
Founder & Principal, PINE
Cathy Hotka
Principal, Cathy Hotka & Associates
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Discussion Questions
How might instant refunds influence long-term customer loyalty and retail profitability?
What challenges and opportunities arise from integrating instant refunds and doorstep returns into existing logistics?
With startups like Reshop and Sway transforming return processes, what impact might this have on traditional retail operations and competitive strategies?
Poll
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It’s a firm no from me. Aside from having to deal with issues of fraud, damage, and non-returns, instant refunds would probably increase the number of returns made – contributing to a problem that has been a thorn in the side of retailers for many years. I can see why consumers would love this, but I can’t see what is in it for retailers. Now, if a third-party like Reshop wants to run this type of program and take on the risks of non-returns and fraud, that could well be attractive to retailers. But it does raise the question as to what Reshop’s economics and cash-flow looks like.
Good points Neil! The article doesn’t discuss the economics of the model. It appears that there is no cost to the shopper, so that means the retailer must be charged a fee per transaction. This does not seem like a benefit to the retailer. Personally, I am not sure how may shoppers are extremely concerned about getting instant credit on returns. And with Amazon, the credit is extremely fast on items that are returned.
I may be a fan of instant refunds as a consumer, but not as a retailer or consumer goods professional. Instant refunds can be easily exploited by fraudulent “customers,” leading to significant financial losses. Additionally, they may encourage a culture of excessive returns, disrupting inventory management and increasing operational costs.
Reshop generates revenue by charging a restocking fee on returned items and offering premium membership plans that guarantee faster processing times for refunds. Sway, on the other hand, earns money through partnerships with retailers, taking a commission on each return processed through their platform and offering data analytics services to help retailers optimize their return policies.
With instant refunds, it is difficult to keep track of your inventory and to conduct adequate analytics. Bottom line, I do not believe instant refunds will become a fast growing trend as long as they do not figure this out better. However, advancements in technology could improve instant refund systems by integrating advanced fraud detection algorithms and real-time inventory tracking.
Blockchain technology could ensure transparency and traceability, making it easier to manage returns efficiently and securely. Db
They lost me at, “requires first using the Reshop app”. How many apps are on your phone and how many will you use regularly? If their plan was to embed their services into retailer apps and somehow add value on both ends, maybe.
I am with you. I guess I am not the only one who read “easier” and couldn’t understand what was easy. It sounds like another convoluted idea.
Reshop has a lot more faith in customers than I do. As a retailer, the last thing I would want to do is to make returns as easy as possible. Let’s have more scrutiny over what’s being returned, and why, not less.
Shoppers understand that when you pay in cash you can typically receive a cash refund on the spot. We also know that debit and credit cards take a few days. In-store credits are always available if you want to shop again immediately.
It takes time to process refunds, If instant refunds were easy wouldn’t they already be mainstream? Having to use a third party app to process a return seems like an unnecessary layer. Personally, I feel more comfortable dealing with the retailer directly.
You need a partner to offer…refunds? Dspite the hyperbole overload, I don’t see anything new or exciting here: getting your money back has always been the norm…at least where I shop.
To put simply and bluntly. This is not a company I would invest in.
This seems to go a bit above and beyond being customer-centric. Returns are already an incredible hassle for retailers. Adding this option seems like it will lead to a variety of financial problems with floating funds, long payment cycles, and reporting on balance sheets. The tradeoff to slightly improve customer satisfaction doesn’t seem worth it.
If I pay in cash, I want cash back. If I pay with a card, I want the card refunded. I don’t want any other steps.
Sounds seamless but fraught with operational issues, particularly as it relates to fraud, something retailers are trying to minimize, not increase. I also agree with Raj Shroff with his statement about another app on my phone? Consumers don’t use 95% of their apps today.
Consumers may love it, especially those who commit fraud; this makes it even easier. For retailers, hard pass. Returns are an important tool for customer service, but there have to be checks and balances to stop abusers and outright criminals. From my perspective, this doesn’t meet that criteria.
If I am a retailer and Reshop wants to assume my risk of return fraud, great! I’ll benefit from it until they realize why refunds are delayed and fade away.
This offering is obviously attractive to consumers but but it is a potential pitfall for retailers. What happens if a customer returns the product after the agreed-upon seven days, or never? How does the retailer confirm receipt of the return to reshop? Are there APIs for retailers and Reshop ti communicate? None of these questions are answered either here or in Reshop’s website. This one may never get traction…
Instant refunds should not be confused with easy refunds. If I can prove to the customer our refund policy is easy and hassle-free, it won’t matter if it’s instant. Customers prefer to do business with retailers that make doing business with them easy and convenient, which includes their return policies.
This is an absurd position that has no clear benefit for the retailer…or more accurately the credit card companies like Visa/Mastercard/Amex who truly manage the charge and refund process for consumers to access when they need credit. Since the article does not give any specifics, my other big concern is what is in it for the retailer? The consumer position is clear, but it appears that there is a limited set of brands and retailers who this would even apply to.
I have so many questions about the economics of this model for reshop and the retailer. Is reshop taking over the risk of fraud for the retailer? Is it acting as “float” to give the money up front to the consumer and collecting it from retailer via a transaction fee? From the consumer side it is attractive (though friction with yet another app) but I don’t see it the business model behind it
Instant refunds will always be a customer favorite. There is no joy in waiting 6 weeks to get a refund for something that only took 6 minutes to buy. Yes, this would be a win for consumers, assuming they are entitled to receive the full refund.
Whether this is profitable for retailers remains to be seen as it is unclear from this article just how Reshop is making their profits. Still, there is an undeniable upside in the value proposition of any retailer who can offer instant, no hassle refunds. This alone is reason enough for retailers to consider this platform. Just with a more clear understanding on Reshop’s P & L.
Short answer = no. However, this perspective is from the retailer’s point of view, not the customer’s.
I’d advise retailers to consider alternative post-purchase solutions than instant refunds, such as refunding upon proof of postage (where the refund is issued only when the item is confirmed as returned by the parcel provider), offering instant exchanges, or providing instant store credit.
Instant refunds definitely would hurt retailers in the short term… and yes, it may entice shoppers to buy and try more.
However, if I look at my own online shopping behavior – if I experience an unsatisfactory returns process, I will go out of my way to avoid that online shop in the future.
Can retailers afford to lose customers over unsatisfactory returns handling ? I am not sure they can. So, an instant refund policy could be seen as an investment into CLV.
It would be interesting to see the impact it has on customer retention.
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It’s a firm no from me. Aside from having to deal with issues of fraud, damage, and non-returns, instant refunds would probably increase the number of returns made – contributing to a problem that has been a thorn in the side of retailers for many years. I can see why consumers would love this, but I can’t see what is in it for retailers. Now, if a third-party like Reshop wants to run this type of program and take on the risks of non-returns and fraud, that could well be attractive to retailers. But it does raise the question as to what Reshop’s economics and cash-flow looks like.
Good points Neil! The article doesn’t discuss the economics of the model. It appears that there is no cost to the shopper, so that means the retailer must be charged a fee per transaction. This does not seem like a benefit to the retailer. Personally, I am not sure how may shoppers are extremely concerned about getting instant credit on returns. And with Amazon, the credit is extremely fast on items that are returned.
I may be a fan of instant refunds as a consumer, but not as a retailer or consumer goods professional. Instant refunds can be easily exploited by fraudulent “customers,” leading to significant financial losses. Additionally, they may encourage a culture of excessive returns, disrupting inventory management and increasing operational costs.
Reshop generates revenue by charging a restocking fee on returned items and offering premium membership plans that guarantee faster processing times for refunds. Sway, on the other hand, earns money through partnerships with retailers, taking a commission on each return processed through their platform and offering data analytics services to help retailers optimize their return policies.
With instant refunds, it is difficult to keep track of your inventory and to conduct adequate analytics. Bottom line, I do not believe instant refunds will become a fast growing trend as long as they do not figure this out better. However, advancements in technology could improve instant refund systems by integrating advanced fraud detection algorithms and real-time inventory tracking.
Blockchain technology could ensure transparency and traceability, making it easier to manage returns efficiently and securely. Db
They lost me at, “requires first using the Reshop app”. How many apps are on your phone and how many will you use regularly? If their plan was to embed their services into retailer apps and somehow add value on both ends, maybe.
I am with you. I guess I am not the only one who read “easier” and couldn’t understand what was easy. It sounds like another convoluted idea.
Reshop has a lot more faith in customers than I do. As a retailer, the last thing I would want to do is to make returns as easy as possible. Let’s have more scrutiny over what’s being returned, and why, not less.
Shoppers understand that when you pay in cash you can typically receive a cash refund on the spot. We also know that debit and credit cards take a few days. In-store credits are always available if you want to shop again immediately.
It takes time to process refunds, If instant refunds were easy wouldn’t they already be mainstream? Having to use a third party app to process a return seems like an unnecessary layer. Personally, I feel more comfortable dealing with the retailer directly.
You need a partner to offer…refunds? Dspite the hyperbole overload, I don’t see anything new or exciting here: getting your money back has always been the norm…at least where I shop.
To put simply and bluntly. This is not a company I would invest in.
This seems to go a bit above and beyond being customer-centric. Returns are already an incredible hassle for retailers. Adding this option seems like it will lead to a variety of financial problems with floating funds, long payment cycles, and reporting on balance sheets. The tradeoff to slightly improve customer satisfaction doesn’t seem worth it.
If I pay in cash, I want cash back. If I pay with a card, I want the card refunded. I don’t want any other steps.
Sounds seamless but fraught with operational issues, particularly as it relates to fraud, something retailers are trying to minimize, not increase. I also agree with Raj Shroff with his statement about another app on my phone? Consumers don’t use 95% of their apps today.
Consumers may love it, especially those who commit fraud; this makes it even easier. For retailers, hard pass. Returns are an important tool for customer service, but there have to be checks and balances to stop abusers and outright criminals. From my perspective, this doesn’t meet that criteria.
If I am a retailer and Reshop wants to assume my risk of return fraud, great! I’ll benefit from it until they realize why refunds are delayed and fade away.
This offering is obviously attractive to consumers but but it is a potential pitfall for retailers. What happens if a customer returns the product after the agreed-upon seven days, or never? How does the retailer confirm receipt of the return to reshop? Are there APIs for retailers and Reshop ti communicate? None of these questions are answered either here or in Reshop’s website. This one may never get traction…
Instant refunds should not be confused with easy refunds. If I can prove to the customer our refund policy is easy and hassle-free, it won’t matter if it’s instant. Customers prefer to do business with retailers that make doing business with them easy and convenient, which includes their return policies.
This is an absurd position that has no clear benefit for the retailer…or more accurately the credit card companies like Visa/Mastercard/Amex who truly manage the charge and refund process for consumers to access when they need credit. Since the article does not give any specifics, my other big concern is what is in it for the retailer? The consumer position is clear, but it appears that there is a limited set of brands and retailers who this would even apply to.
I have so many questions about the economics of this model for reshop and the retailer. Is reshop taking over the risk of fraud for the retailer? Is it acting as “float” to give the money up front to the consumer and collecting it from retailer via a transaction fee? From the consumer side it is attractive (though friction with yet another app) but I don’t see it the business model behind it
Instant refunds will always be a customer favorite. There is no joy in waiting 6 weeks to get a refund for something that only took 6 minutes to buy. Yes, this would be a win for consumers, assuming they are entitled to receive the full refund.
Whether this is profitable for retailers remains to be seen as it is unclear from this article just how Reshop is making their profits. Still, there is an undeniable upside in the value proposition of any retailer who can offer instant, no hassle refunds. This alone is reason enough for retailers to consider this platform. Just with a more clear understanding on Reshop’s P & L.
Short answer = no. However, this perspective is from the retailer’s point of view, not the customer’s.
I’d advise retailers to consider alternative post-purchase solutions than instant refunds, such as refunding upon proof of postage (where the refund is issued only when the item is confirmed as returned by the parcel provider), offering instant exchanges, or providing instant store credit.
Instant refunds definitely would hurt retailers in the short term… and yes, it may entice shoppers to buy and try more.
However, if I look at my own online shopping behavior – if I experience an unsatisfactory returns process, I will go out of my way to avoid that online shop in the future.
Can retailers afford to lose customers over unsatisfactory returns handling ? I am not sure they can. So, an instant refund policy could be seen as an investment into CLV.
It would be interesting to see the impact it has on customer retention.