Returns v. exchanges: How brands win with the right policy
Corinne D'Andria
·June 24, 2025
With rising operational costs and constantly changing tariff policies, running an ecommerce brand isn’t a mission for the faint of heart.
But by building a thoughtful policy and focusing on delivering a best-in-class customer experience throughout the entire purchase journey, you’ll be able to carve out a profitable and sustainable niche that will keep loyal customers coming back time and again.
A key part of building a sustainable strategy revolves around what you do when a customer wants to send an item back. With as many as 30% of ecommerce sales ending in a return, developing a sustainable post-purchase strategy is crucial for retaining revenue and increasing your customer loyalty rates. By converting refund requests to exchanges, you’ll be able to boost your brand’s profitability and keep retention rates strong.
Here are some guidelines for building an exchange-optimized returns strategy.
Don’t default to refunds
Brands that use manual returns processes generally list refunds as the only option. That means, even if the shopper simply wanted a different size or color, they’ll have to send back the item, wait for a refund, and then purchase the item all over again. And for most customers, that process isn’t worth the hassle. They’re more likely to just pocket the money, or go price-shopping from other brands when choosing an alternative.
Instead, Loop’s user-friendly returns portal makes it easy for shoppers to see their options upfront, and choose between a refund, a direct ecommerce exchange, or store credit. Loop walks customers through the returns process by asking them why they’re requesting a return, and providing relevant options based on their answers. If a shopper is sending back a top that was a size too small, your portal can recommend the same top in the next size up, facilitating a seamless exchange that takes seconds to execute.
Charge a returns fee on refunds—but not on exchanges
Modern shoppers are incredibly cost-conscious. When sending back an item, they won’t think twice about requesting a refund if your brand covers return shipping costs—but they’re much more likely to reconsider their returns strategy if they’re on the hook for a return shipping fee.
By charging a fee for an item that’s being sent back for a refund, but offering a bonus incentive on exchanges, you’ll be able to create friction in the returns process that encourages shoppers to choose an exchange rather than a refund.
For example, the jewelry brand Ana Luisa charges shoppers a return shipping fee of $6.99 on all returned products, but offers Instant Exchanges for free. On top of that, they also offer a 15% bonus credit to apply towards the product exchange. As a result, many shoppers not only elect an exchange, but end up spending more than the bonus credit value, resulting in upsell revenue for the brand.
Go beyond direct variants: Let them choose from your entire inventory
When offering exchanges, don’t limit your shoppers to a same-priced variant swap (choosing the same product in a different color or style). With Loop’s returns portal, customers can effortlessly select their replacement from any item in your store, whether the cost is higher or lower than their original purchase price. If the cost is lower, they’ll be refunded the difference; if it’s higher, the additional cost (after bonus credit, if you offer it) will be charged to their original credit card. There’s no need for them to complete a new transaction, as the difference in price will be automatically applied.
What about if they’re not ready to make a choice? No problem—simply store their refund amount as Store Credit until they’re ready to use it. By giving shoppers access to customized returns policies with the opportunity to exchange how and when they want to, they’ll be far more likely to shop with your brand again.
Why an exchange-optimized returns policy matters
By converting refund requests into exchanges, you’re not simply preserving revenue from that single transaction—you’re converting a one-time shopper into a loyal customer.
Let’s do the math.
Let’s say a customer requests a refund on an item valued at $40. The item can’t be resold as new, so you’re out that $40, as well as an additional $10 in reverse logistics fees, representing a total loss of $50.
Now, let’s say you’re able to convert the refund into an exchange by offering a $10 bonus credit. You’re still out the original $50 for the item write-off and shipping costs, but this time, the customer has chosen an item worth $75 as an exchange. Now, you’re generating $65 in profit from the sale, instead of losing money.
But beyond that, a customer who chooses a product exchange rather than a refund is far more likely to choose your brand again in the future. And the value of that ongoing customer loyalty is far greater than the individual transaction value.
Let’s say that customer places 3 orders per year over the next two years, with an AOV of $60. Rather than losing $50 on a refund and never seeing that customer again, you’re generating $360 in additional revenue from a loyal customer.
Transform your returns process by prioritizing exchanges, and you’ll be able to build a more sustainable business with heightened customer loyalty and more retained revenue.
Ready to see how Loop can help? Book a demo.
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With Loop, your brand can offer everything from refunds to direct exchanges to shopper incentives and more. Even better? These exchanges build your business.