How you manage refunds significantly impacts customer retention and satisfaction, and your ability to retain more revenue by turning returns into exchanges.
If you plan to issue refunds through Shopify, you should know that it takes 5 – 10 business days for your customer to get refunded, but the processing time is influenced by several factors.
Let’s dive deeper to understand how to handle a refund on Shopify, how long does a Shopify refund take, and what you have for an efficient refund process for your company and customers.
How to Handle a Refund on Shopify
Shopify’s native order-editing functionality allows you to manually handle refunds for online orders through Shopify admin.
There are two types of Shopify refunds:
- Full refunds– when the customer requests a refund for the entire order
- Partial refunds– when the customer requests a refund for only one item or specific items in their order
The steps for processing partial and full refunds in Shopify admin are quite similar, and you’ll notice the difference in our step-by-step guide below:
- Go to your Shopify admin and click/ tap Orders.
- Select the order you need to refund, then click Refund.
- Set the quantity for the item(s) you must refund. If your customer requested a full refund, make sure to check all the items in the order. If you’re processing a partial refund, carefully select only the correct items and quantities for which the customer has requested the refund.
- The refund total amount is calculated automatically. You can manually edit the refund total if discounts were applied to the initial order or if you want to refund shipping charges, duties, import taxes, or additional fees.
- Leave the “Restore items” section checked only if the customer has returned the item(s).
- You can add a reason for the refund, which is useful when you need to refer to the order later.
- Leave the “Send a notification to the customer” option checked if you want to send an email to your customer.
- Click “Refund” to finish.
According to Shopify Help Center, “if you’re using Shopify Payments and you issue a refund, then the amount is deducted from your next available payout.” Refunds might take up to 10 business days to be credited back to the original payment method unless the customer used a gift card instead of money to pay for their order.
If you need to process refunds for the physical locations of your Shopify store, watch this video tutorial for Shopify POS refunds.
Often you need to process a return before you can issue a refund. You might need to send customers a return label and restock items if they are eligible according to your policy. Check out our guide to learn how to manage returns on the Shopify Dashboard.
What Happens When a Refund is Initiated?
After you issue a refund, Shopify immediately submits the refund to your customer’s bank. The amount is deducted from your next payout using Shopify Payments.
There might be times when you don’t have enough funds. In this case, the process is different depending on your business’s location:
- In the US, Canada, and Australia, “the balance is debited from your bank account on the day of the payout.”
- In all other countries, “the remainder of the refund is deducted from the next payout until the refunded amount is covered.”
In case of failed negative balance payout, the payout is tried again in 30 days. A negative balance in your Shopify Payments might prevent you from issuing a refund.
You can wait until you have a positive balance generated by new sales, or you can make a manual repayment into the account. The Shopify Recovery team might contact the store owner directly and help you address the negative balance issue.
Make Sure Your Customer is Aware of the Refund Process
Returned items and refunds frequently occur in an online shopping experience. Being transparent about your refund policy helps you keep customers informed and builds trust in your online store.
Customers search for the policy before placing their order because they want to know exactly what to expect if they wish to get a refund for one or more items they purchased.
Therefore, you should place your refund policy in key touch points to ensure customers can easily find and read it before purchasing: website footer, product pages, cart and checkout, FAQ section, etc.
Here’s what you should include in your refund policy:
- Clearly define the items customers can return and refund
- Include the exceptions to your return and refund policy
- Present all refund options, from credit card refunds to store credit compensations
- Describe the advantages of your exchange options (store credit, gift card, etc.)
- Specify the number of days customers have to request a refund
- Offer details about how you handle shipping costs
- Set clear conditions to prevent fraud
- Answer frequently asked questions about refunds
Along with a transparent and straightforward refund policy, you also need a streamlined return and refund process to keep customers happy with their post-purchase experiences. You might be surprised, but a survey shows that 73% of customers said they decide to purchase again from a brand based solely on their return and refund experience.
How Long Does a Shopify Refund Take
Refund processing time depends on the refund method, the merchant, and the card issuer.
If we’re talking about credit and debit card refunds managed within Shopify, it usually takes 5 – 10 business days for your customer to get refunded. There might be slight differences between the processing time for credit cards versus debit cards, depending on your customer’s bank.
We must emphasize that Shopify refunds can only be sent to the original payment method. If your customer’s card is expired or canceled, the bank sends the refund to the new card or, if the customer doesn’t have a new card, to the bank account.
If your customer accepts store credit instead of a refund, you should know that Shopify doesn’t have built-in functionality that allows stores to issue store credits for their clients. You can only issue store credits if you’re using a third-party app like Rich Returns that enables you to process returns and refunds.
The only alternative Shopify Plus plans or higher have for store credit within Shopify is to issue a gift card for the exact amount you want to refund.
You can generate the gift card and the gift card code from Shopify Admin > Products > Gift cards > Issue gift card. Here you can enter the card value and the customer information and, optionally, set the expiration date. When you’re done, click “Save” to issue the gift card.
Compared to Shopify refunds that take 5-10 days, store credit and gift card refunds happen immediately, representing a great alternative for cash, debit, or credit card refunds. Store credits and gift cards can help you improve the post-purchase experience and turn more returns into exchanges.
While Shopify’s native order-editing functionality limits you, the good news is that you can enable more flexible, revenue and customer-friendly refund options by choosing a return management solution from Shopify App Store.
How Returns Management Apps Can Help Your Business
Shopify returns apps help you create seamless return experiences that lead to better customer retention, brand loyalty, and revenue retention.
Returns apps make it easier to manage complex returns by allowing you to automate return and refund requests based on advanced rules and offering a user-friendly interface for self-service returns.
The features of return apps help you enforce a more flexible, revenue and customer-friendly return policy and enable a hassle-free experience for your customers. Both your store and your customers benefit from a return app:
- You automate the return process and process most of the requests faster, which minimizes manual work and errors, allowing you to scale your business.
- The customer has access to a user-friendly self-service portal where they can return items and pick from convenient refund alternatives like exchanges, gift cards, or store credit, all without needing assistance from customer service.
- The return app seamlessly integrates with your tech stack, enabling efficient return tracking and proactive communication, sending status updates in a notification email, which leads to better customer experiences.
When Shopify’s built-in features limit your options, you might want to look for an app that enables a fast and convenient refund process. Automated solutions help you retain more revenue and make new and existing customers more likely to purchase from your online store again.
Better Customer Satisfaction With Rich Returns
Rich Returns is one of the apps that seamlessly integrates with your Shopify store and offers you multiple functionalities to implement advanced return and refund policies and offer better customer experiences.
The app works for all Shopify stores and offers deep Shopify integrations. The advanced rules bring your return and refund policies to life and create intuitive return experiences for your customers that keep satisfaction levels and LTV high.
Start a free trial with Rich Returns and put your return and refund processes on auto-pilot.