Having to give a refund sucks.
Whether or not they’re a legitimate refund—they’re a headache for a business owner who is facing a loss in revenue, cash flow, and the extra time it takes to issue a refund.
But issuing refunds is an unavoidable part of running an e-commerce business.
At least 30% of products ordered online are returned, compared to 9% of products bought offline.
One way for a business owner to manage cash flow is to give customers store credit instead of cash refunds.
This works well for customers who changed their minds about the product they bought. That’s additional cash that is retained in your business, and your customer will visit your store in the future as they seek to use their store credit.
Here’s what you need to know about giving your customers store credit.
What is Store Credit?
Store credit is when a store offers a specific amount of credit that a customer can use to buy items from your store. This is usually issued when a customer returns an item that isn’t eligible for a refund. Make sure that your refund policy page clearly states when a customer cannot receive a refund.
Can You Give Store Credits on Shopify?
Unfortunately, Shopify doesn’t have any functionality in the store admin that allows merchants to provide store credits to the customer. For store owners who are subscribed to the Shopify Plus plan or higher, you can issue gift cards equivalent to the refund total amount.
Other store owners may resort to using discount codes equivalent to the amount refunded to the customer. There are different implications for using gift cards and discount codes to award store credit.
If you want to avoid all the hassle, your final option is to use Shopify store credit apps. Most will charge you a monthly subscription cost along with a small fee for every transaction after a certain point. Alternatively, the app may provide a maximum credit balance based on your subscription level.
What Is the Difference Between Store Credit, Discount Codes and Gift Cards?
In the case where you want to provide a one-time discount to a customer to prevent returns or refunds, a discount code can work well.
The problem with discount codes is that they don’t allow a customer to hold any balance. If they had a total of $50 credit, they can’t buy something for $25 and come back again to use the remaining balance.
Gift cards are also another way to provide a refund. With this option, customers can track their balance and use it whenever they want to.
The downside is that they have to keep track of the gift card number, and it won’t be linked to their account.
However, this can be the most cost-effective way to provide some store credit to your customers on Shopify with.
There may also be accounting implications that can influence your decision on whether to use gift cards, discount codes, or store credit apps.
How to Give Your Customers Store Credit
- Create discount codes
- Issue gift cards
- Use Shopify apps
1. Create Discount Codes
A discount code can be used to provide your customers with a percentage or fixed value discount off products, variants, or collections in your store.
On your Shopify admin, head over to the Discounts section. Click on Create discount.
Enter the name of the discount code. Give it a title so that you remember the purpose of the code, such as RETURNCREDIT.
Select the type of discount. For store credit, this is usually the total amount of money that will be discounted from the order.
Go to the Applies to option to select where this discount code can be applied, such as all products or specific products.
Choose specific customers to generate the code for. If you have the customer’s email address recorded in your Shopify store, you will have the option to select them.
Click on Generate code and the discount code will be created. Provide the discount code to your customer to use.
How to Create Discount Codes
- Go to Discounts > Create discount in the Shopify admin dashboard.
- Type in the discount code name.
- Select whether the discount will be a percentage-based or a fixed value.
- Enter the value of the discount.
- Under “Applies to”, select Specific customers and choose the customer the code will be for.
- Click Generate code.
2. Issue Gift Cards
Head over to your Shopify admin account and click Products on the left. Click on Gift cards which will appear in the dropdown.
Tap on the Issue gift card button.
Type in the value that you’d like the gift card to have.
Using the search box located under Find or create a customer, you can type in the customer email address or name of the person you want to send the gift card to. You can also create a customer to send the gift card to.
Click on the Set expiration date if you want to set an expiry date for the card. Enter Save to issue the gift card to the customer.
How to Create Gift Cards
- Go to Products > Gift cards > Issue gift card in the Shopify admin menu.
- Type in the value of the gift card.
- In Find or create a customer, type in the customer’s email address.
- (Optional) Go to the Set expiration date section and set an expiry date.
- Click Save and the gift card will be sent to the customer.
3. Use Shopify Apps
These apps aim to simplify issuing store credit and reduce a potential loss of revenue. They also have features to create a loyalty program that incentivize buyers to shop whenever they perform an action, such as signing up, making their first purchase, meeting a lifetime minimum spend, and more.
Freshcredit, for example, offers the option for customers to carry store credit balance in their account and use their balance whenever they want.
Many of these apps, such as Rise.ai, can be integrated with the Shopify POS app. The Shopify POS is the iPad version of the Shopify app where you track your sales from various channels such as online, in-store, and mobile orders.
How to Issue a Refund
Keep in mind that you may want to issue a refund for record-keeping purposes before giving the customer a gift card. This ensures that your inventory stock is adjusted correctly so that you can restock the item.
Go to the Orders tab in your Shopify admin.
Select the order number in the order screen or search by any customer details such as their name, address, or phone number to locate their order.
Choose which items in the order you want to have refunded and also the quantity of those items. The refund total will be calculated. Enter the number 0 because you will give the customer a gift card instead.