Incentivizing Store Credit Over Refunds: Does it Work?

Does Incentivizing Store Credit Over Refunds Actually Work?

We all like something free and extra.

That’s why the Amazon effect, the phenomenon that has led countless ecommerce retailers to adopt customer-centric practices and return policies like offering free shipping and returns, has been so effective in increasing purchase conversions. 

So, if incentivizing shoppers during the marketing process is so effective, does the same principle also apply during the returns process?

Can retailers soften the blow of returns by encouraging shoppers to choose store credit over a refund? After countless requests from our curious Shopify retailers, we decided to put this theory to the test through data-driven analysis.

Why Store Credit?

Store credit offers retailers several advantages, some of which include lower financial burden, reduction of credit card chargeback costs. But, most important is increased customer retention, which is the driving force of growth for many ecommerce brands.

The Popular Store Credit Strategy

Many retailers have started experimenting with strategies to encourage customers to choose store credit over refunds.

One popular strategy is offering shoppers X% more money back in store credit than the purchase price of the product. For instance, if you were to buy a product for 100 dollars and decide you didn’t like it and returned it, you would get more than 100 dollars back in store credit.

Automate Your Shopify Returns, Exchanges, and Store Credit Process

Setting the Stage For Returns Data

We set up a comparative analysis using live returns data from one of our ShopifyPlus retailers to see how effective this store credit strategy really is.

The Hypothesis

Our team hypothesized that offering 10% more money back in store credit will drive an increase in the percentage of shoppers who use store credit.

The Procedure

In this analysis our team compared two intervals, each spanning six months.

For our control group, we analyzed a time period in which there was no added incentive for shoppers to use store credit.

For our test group, we analyzed a time period in which shoppers were incentivized (10% extra money back) to use store credit.

To get the results, we broke down each interval by return type percentage, which yielded an apples-to-apples comparison of store credit percentages in both groups.

The Results

The comparative analysis did not satisfy our hypothesis to a conclusive degree.

According to our data, this particular method of incentivizing shoppers to use store credit was not effective.

The increase in store credit was observed as 0.36% which is negligible.

Although there was an increase in the percentage of shoppers using store credit, it was not statistically significant enough to warrant a definitive thumbs up to the strategy. Therefore, we cannot condone incentivizing store credit over returns. 

We encourage Shopify retailers to try this at home and see if they have similar results.

Why Didn’t It Boost Store Credit?

The results can be explained by one of the areas that influence our behavior when it comes to economic decision-making, loss aversion.

Loss aversion describes the phenomenon that shoppers hate losing money more than they like the joy of receiving money.

In this case, even an added incentive did not effectively increase the conversion goal. The increased money back was not a strong enough motivator to offset the pain of losing money for shoppers.

Have an idea?

Do you have an idea or question about your returns strategy or process? Let us know and we’ll prove it with our data.