What if we told you there’s a tool for your store that can improve your returns experience while also reducing revenue loss from returns, boost loyalty and retention rates, and mitigate negative customer support experiences? Sounds too good to be true, and yet it does exist - store credit.
That may seem a bold claim, but as with my other tools and aspects of your store it all depends on how strategically you use it. Many merchants when they consider store credit, it’s more often than not seen as just another option for returns. While it certainly has major benefits when integrated into your returns process, store credit’s usefulness to your store in general goes far beyond.
5 benefits of using store credit
1 - More flexible returns experience
Oftentimes, when we talk about the returns process we focus on its impact on retention, but in fact your returns policy is also important for acquisition. 67% of customers say they check a store’s returns policy before making a purchase, and 92% say they’d buy again after a positive returns experience. Despite this, more than 80% of consumers believe that retailers need to improve their returns policies, and 84% will turn their back on a retailer after just one negative returns experience.
Adding store credit into your returns policy gives your customers a much more flexible solution to their issue. Refunds can often take longer to process, and this can be frustrating for the customer especially if they’re already planning to make another purchase to choose an alternative item in your catalog to the one they returned. Store credit can be issued quickly and instantly, making for a much easier process for your customer.
2 - Ease revenue loss from returns
While it’s important to give customers a great returns experience, perhaps one of the most frustrating parts of returns as a merchant is the resulting loss in revenue. You made a sale, and now you likely need to process the return which itself costs money on top of refunding the original sale value. However if a customer instead elects to take store credit, that original sale value stays with your business and it’s only the cost of the returns processing that will be lost which is significantly lower than the alternative.
Moreover, you’re also guaranteed to retain the value of the original order. Where a customer has only the option of a refund or exchange, then they’ll likely take the refund if the item was completely unsuitable or they don’t want to have to go through the exchange process. When they do choose an exchange, you may still end up processing a refund if the item the customer chooses is priced lower than the original item. With store credit, the customer is instead incentivized to spend at least the value of their original purchase and in fact they may even end up spending more, similarly to those redeeming gift cards.
3 - Improve retention and loyalty
If you use store credit strategically, it also has the potential to improve retention and foster loyalty with your customers. This is true not just in terms of providing a good returns experience, but also in how you engage with your most valuable customers.
You can use store credit to reward loyal and high value customers with a surprise credit, scaling this depending on criteria such as AOV, LTV, and order frequency. For example if a loyal customer who typically orders every 2 months hasn’t placed an order for 3 months, you can issue some store credit to thank them for their continued support and incentivize them to place another order.
To go back to the returns side of the customer experience, store credit as an option for a returns resolution provides that flexibility we mentioned earlier and improves their experience which in turn encourages retention.
4 - Help mitigate negative customer support experiences
Customer support is vital to your store experience and customer retention. 96% of customers globally indicate that customer service is important in their loyalty to brands, and 52% say that they’ve made another purchase from a brand with whom they’ve had a positive support experience. The reward of great customer service is clear, though as much as you may try to ensure every support ticket comes to a positive resolution, this won’t always be the case.
There are many ways in which a satisfying resolution cannot be achieved in customer service. It may be longer than average response times due to increased support ticket volumes over the holiday season, which meant the customer couldn’t get the information they needed before the item they wanted sold out. Perhaps a size they wanted to exchange an item for is out of stock, or inventory for their order has been mistakenly over allocated. Whatever the case may be, offering store credit as a sort of “thanks” for their patience can help to mitigate the negative impact this may have on the customer's experience and perception of your brand. What may seem like a small gesture can go a long way in influencing how the customer feels about their experience with your brand.
5 - Improve the gift card experience for recipients
One unique benefit of store credit is its ability to improve the experience for those customers with gift cards to spend. That may seem strange to say, after all gift cards are a sort of store credit anyway. However while many customers spend over the value of a gift card on a single order, there is still a good portion of those who split it over a number of orders. This may happen if they received a gift card of a particularly high value, or if the item they wanted at that moment was less than the value of their card and they didn’t want to purchase anything else just yet. In these cases, they may be left with an awkward balance left on the gift card, and then they either forget about it or they aren’t able to justify another purchase as they feel it isn’t “worth” it.
As a merchant, you want to encourage those customers to spend their remaining balance on another order - they’ve already ordered previously, so selling to them should be easier than a new customer. In fact, the probability of selling to an existing customer is as high as 60-70% compared to just 5-20% for a new customer, and typically spend 31% more. To incentivize those with remaining balances, you can use store credit to “top up” their gift card after a certain amount of time has passed. This may then encourage the customer to return to your store and spend that remaining cash, especially if they’re getting an extra reward.
How to integrate store credit into your returns and support strategy
Returns may not be the most exciting part of ecommerce, but they’re vital to the customer experience - 97% of consumers say that they’d shop with a retailer again after a positive returns experience. Customers don’t want to have to return something - the majority of them have ordered a product because they intend to keep it, and returning it for whatever reason can be disappointing already. The most important thing you can do to turn that into a positive experience is by offering a really convenient, flexible returns experience like we mentioned earlier.
That being said, it isn’t enough to simply add store credit as an option - you should also try to incentivize customers to accept store credit instead of a refund or exchange. That can be difficult to do, especially as in many cases customers may just want their money back. To encourage store credit as a more attractive option you could extend the returns validity period further for credit. For instance, if your usual returns window is 30 days for a refund or exchange, you could make this 45 days or longer if they accept store credit instead. This then makes it even easier for customers to return an item, and makes it more attractive to place an order in the first place knowing that they have this much longer period of time available to them.
For orders within the returns validity period, you still want to find ways to encourage customers to take store credit over a refund. One way to do this is by offering a sort of “bonus” on top of their original purchase value, for example if they take store credit you’ll top it up an extra $5 or $10 depending on the original order value. If the customer believes they’re essentially getting free money just because they choose store credit, it makes it a lot more attractive. In reality, that extra credit may cost your store a small amount of money in the short-term, but it can result in a higher order value when the customer goes to redeem their credit and reduces revenue lost to refunds and processing.
As for customer support, use store credit to enhance both great and poor interactions with your store’s support team. We touched earlier on how to improve a negative experience with store credit - as a sort of “apology” for whatever problem they’re currently facing such as increased response times, or an issue with their order that hasn’t been resolved to their satisfaction. However it’s important to also reward good customer service experiences and not just mitigate those that didn’t go so well. For example, you could offer a $5 credit to a new customer who has just got in touch about their order to incentivize a second order and also boost their impression of your store. Equally, you could also offer credit to loyal customers who get in touch to further develop that relationship with them.
Building your brand online is all about the experience you deliver for your customers, so anything that gives you an edge is worthwhile. Store credit is one way you can improve the customer experience, build strong relationships, foster loyalty, and grow sales all at once. You just need to think a little outside the box, and it can reap major rewards for your store.
Merchants on Govalo’s Premium and Enterprise plans have access to our store credit features and dashboard - click here to learn more.