How Gift Cards & Loyalty Points Reduce Return & Exchange Costs

Julien Marcialis
November 17, 2020
Every single holiday season comes with returns and exchanges. The problem is, for ecommerce businesses, returns and exchanges can be pricey. This is exactly where gift cards and loyalty points.

No matter what, every single holiday season comes with returns and exchanges for ecommerce brands. In fact, according to Forbes, the 2020 holiday season is set to have the total value of returned items be $47 to $57 billion.

That’s a lot. 

It’s also the proof we all needed to show us that as the holidays inch closer, having a streamlined process for returns is essential. What’s also important, is to try and keep those customers who are doing returns from going somewhere else. 

You may be thinking just how you do that when they’re, well… returning your product, but there are ways. 

One is by taking advantage of using gift cards and loyalty points.

How? We’re happy you asked.

To start, let’s dive into some reasons why customers normally ask for exchanges or returns on products, especially over the holidays.

  • The product(s) didn’t meet customer expectations
  • The product(s) didn’t match the description or imagery on the website
  • Received an incorrect product or size
  • The product is no longer needed when it arrives
  • The item was bought during the holiday season 

It’s essential to make sure what your product pages claim to deliver, is actually accurate. However, the most alarming out of all the reasons is that items that are simply bought during the holiday season is one of the biggest reasons. 

Last year, in 2019, “approximately $41.6B worth of products were returned.

That’s a high number, and this year even more people are looking to shop online. The problem is, for ecommerce businesses, returns and exchanges can be pricey. 

This is exactly where gift cards and loyalty points.

The Advantages of Using Gift Cards & Loyalty Points

Unfortunately, when it comes to returns in particular, it’s becoming somewhat of a normal thing nowadays. In fact, “many customers buy with an explicit plan to immediately return some or all of their items.”

What’s really tough is that returns end up costing merchants much more than most people think. This means that retailers, especially during the holiday season, need to come up with ways to offset those costs.

On top of that, it can take away time from your customer support team as you’ll have more people reaching out with questions and concerns about their return. Many of our partners at Gorgias utilize the platform to make this process more automated. 

For example, if someone really wanted to refund, you can do this directly in Gorgias without having to actually go into the backend if you’re using Shopify. This makes things much faster, and smoother for both you and the customer.

Increase Customer Lifetime Value

By taking advantage of gift cards and loyalty points when it comes to returns and exchanges over the holidays, your brand can really increase its customer lifetime value. 

To start, what actually is customer lifetime value (or CLV)?

Shopify explains it as “The lifetime value of a customer, or customer lifetime value (CLV), represents the total amount of money a customer is expected to spend in your business, or on your products, during their lifetime.”

CLV has become a metric that more and more ecommerce business owners focus on, and there’s good reasons to:

  • It’s more expensive to gain new customers and keep them
  • Increasing CLV is a key factor in growing revenue without increasing the number of customers which can be costly
  • These customers can become ambassadors for your brand
  • Some businesses are easier to get repeat purchases. Take skincare for example, if people love the product they bought, if they run out they’re going to need another skincare product to cleanse.

Offering gift cards or points as an exchange option will bring people back to the store to buy from you. Since it’s safe to assume the item was a gift, it also gives these potential customers a chance to not just browse your website, but purchase something that they actually want while viewing everything else you have to offer. 

Read more on Smile.io

This option basically makes it a guarantee that they’ll shop at your online store, and if you have a great product to offer, it’s very likely they’ll return. In fact, a customer has a 27% chance of returning to your store after one purchase, but after a third purchase that increases to 54%.

So, there’s some clear potential here. 

By using the awareness of your brand that this customer already has and using the right communication along with options, you can successfully turn them into a life-long customer and ultimately, an ambassador.

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There’s Potential To Increase Your Average Order Value

Now, these returns if you’re offering gift cards or loyalty points also can bring on a higher average order value than anticipated. This is especially true if the return is a gift from somebody else. 

How would this work? It’s simpler than you may think.

If someone’s returning an item and receives a gift card for the return then there’s a good chance they’ll spend a little more than what’s on the gift card to get what they actually want. This, in turn won’t feel like they’re spending much so it’s very likely they’ll end up being okay with purchasing something of higher value.

Let’s take “Jason” for example:

Jason recently bought $50 worth of socks and requested an exchange. 

So, you sent him a $50 gift card, from there, he ended up purchasing something worth $55 since he wanted to make sure he used all of the credit on the card at once. 

Right there, you were able to increase the average order value by 10%

By using Jason’s example, let’s say an ecommerce store receives 300 return requests per month with an average order of $50. If you’re able to increase that order value of half of the returns by 10%, just like Jason did, that’s an additional $9k for your business per year.

Plus, if they love the product they’ll continue to come back. What’s great is that your repeat, loyal customers tend to spend up to three times more than the lower 90%.

So, as they begin to have a longer customer lifetime value, you begin to see a higher average order value for those customers who may have started from a return.

How Can You Do This?

Don’t worry, it’s actually pretty easy!

1. Install  a loyalty or gift card application

Visit the app marketplace dedicated to your ecommerce platform (Shopify App Store, Magento marketplace or Bigcommerce App Marketplace) and search for a loyalty or a gift card application.

Shopify App Store

2. Onboard your support agent team

Make sure your support team knows to focus on the loyalty program as opposed to a typical refund.

To make things easier, you can use macros in Gorgias to create templates of answers for return requests.This saves time and effort for your support team.

Customer support template #1: A default answer that explains the process and conditions of returning, along with the loyalty program

Customer support template #2: The confirmation of receiving the return box along with how to use the loyalty program

Examples of macros in Gorgias helpdesk

Bonus: Gorgias & Smile.io

Gorgias also houses integrations with other ecommerce apps like Smile.io which focuses on maximizing brand loyalty through reward programs. By using our integration with Smile.io, there’s many ways you can utilize loyalty points.

For one, your support team is able to see your customer’s reward program data right next to tickets. This saves time searching for customer profiles and trying to figure out the amount of loyalty points they might have.

On top of that, you can use Smile.io variables in your macro responses, this includes points balances, referral URLs, VIP tier and more. Using these variables in your rules will automate steps for your support team, saving them time and energy that can be used in other areas. 

Example of a Gorgias macro using smile.io variables

Wondering how to get Smile.io integrated into your Gorgias account? It’s easy. Just head to your Gorgias account, click setting, then go to integrations and add Smile.

When it comes to gift cards as opposed to loyalty programs, there’s also great apps out there like Rise.ai.

This app focuses specifically on gift cards and store credit solutions for returns and refunds. Their program works with ecommerce brands to effectively offer gift cards, loyalty cards, rewards, referrals and also manage refunds. 

With both Rise.ai and Smile.io partners of Gorgias, you can be sure that by implementing these apps you can save time and money over the holiday season with refunds. 

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