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Incentivizing Store-Credit Over Refunds: Does it Work?

Peter Sobotta
Updated 07/08/19 5:12 PM

Does Incentivizing Shoppers to Use Store Credit Actually Work?

We all like something free and extra, and that's why the Amazon effect, the phenomenon that has led countless e-commerce retailers to adopt customer-centric 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 a data driven experiment and analysis.

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Why Store Credit?

Store credit offers retailers several advantages, some of which include lower financial burden, reduction of credit card charge back costs, and most importantly— improved customer retention, which is the driving force of growth for many e-commerce brands.

The Popular Store Credit Strategy

Many retailers have started experimenting with strategies to encourage customers to use store credit over refunds. One popular strategy is offering shoppers X% more money back in store credit than what they originally bought the product for. 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 setup 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.

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

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

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.

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 influences 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.