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Why Do E-commerce Websites Need Refund And Cancellation Policy?

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All ecommerce based websites that intend to sell online are required to have a stated refund and cancellation policy so that any customer can, if the need arises, return the good purchased. This gives a customer recourse if they change their mind about the purchase made and enables the consumer to claim a refund for the payment made towards such purchase. A policy outlining the guidelines in case a cancellation and/or refund is done on a purchase is essential as it lays down the course of action a customer and the company can take. If a company does not have a stated policy, it would infringe a customer’s right to redressal.  

Cancellation is the process of making a return of a previously made purchase from an ecommerce website. The purpose of cancellation could vary from customer dissatisfaction with the product to  defective or faulty goods/merchandise purchased. Different ecommerce sites have different cancellation policies that suits the operations of the company. Flipkart and Amazon cancellation policy states that an item cannot be cancelled after delivery of the good. After ordering for the good, and upto the time of delivery, the customer can cancel the order online.

To refund literally means to pay a customer back who is not satisfied with the goods or services purchased online. A customer may also be entitled for a refund if they have been over charged or over invoiced. After a customer has cancelled/returned good/s, if any payment was made online in lieu for the purchase of such goods, then the payment made earlier has to be refunded back to the customer. The refund policy will state the terms of refund (what will be refunded, such as: store credit, cash refund, exchange of goods, etc.) The timeline for which a refund can be made and claimed is usually stated in the refund policy (Return within 7 days, 30 days, 90 days, etc.). Most countries have regulations within industries for companies to include a refund policy, especially for online stores.

Why Have A Policy?

Every ecommerce business online must make the use of the following three legal agreements:

  1. Return/cancellation and Refund Policy

This agreement is used to inform a customer about an ecommerce website’s refund and cancellation policy. The need and use of such a policy has been covered in the first part of this article.

  1. Terms and Conditions

This is an optional agreement that establishes guidelines and rules for customer registration, use and access of an ecommerce website. A terms of service agreement is legally binding on the parties agreeing to it. More on this is covered in the article ‘Why does a website need a disclaimer?’.

  1. Privacy Policy

A privacy policy informs a customer about a company’s privacy policies, the type of information collected, the purpose and use of collecting such information or data. This agreement is a compulsion required by the law under the Information and Technology Amendment Act, 2008 and the Information Technology Rules, 2011.

Note: A refund and cancellation policy clause can be included in the terms and conditions agreement instead of drafting a separate agreement altogether. Sometimes items with a refund and cancellation policy sell better than products that do not have any such stated policy on an ecommerce website.

Contents Of A Return And Cancellation Policy

  • All sales are not final

All sales are not final implies that a customer can cancel and exchange or claim a refund on the purchase. Most successful websites employ this clause in their policy to enable customers the added choice of return and refund. All sales are final would imply the opposite, that a customer would not be able to cancel or return a good once a purchase has been made. Ecommerce websites generally apply this condition to goods that are on sale and have offers or discounts.

  • Refund cost

The cost for refund is borne by either the customer or the company. This should be stated clearly in the return and cancellation policy on the ecommerce website. There shouldn’t be any hidden cost for cancellation and refund. The payment procedure for the same should be mentioned in the policy as well.

  • Time Frame to return the product

The policy should explicitly state the time period allocated for cancellation. This means the time frame a customer has to cancel an order. The policy should also state the time period allotted for refund. This means the number of days it will take for a customer to get his money back after making a return. The time frame for malfunctioning and damaged products generally differ from the normal cancellation/exchange of a good. Sometimes a customer may get credit or an exchange offer instead of a refund. The duration allotted for such an exchange or credit and date of expiry of exchange should be stated as a main sub point in the policy.

  • Digital products

Digital products may or may not have refunds on purchases of such products. Sometimes a download link may not work and the company may give a refund in such rare cases.

  • Form of refund

The ecommerce website should also state the forms of refund available to a customer. A product can be exchanged for cash in terms of a refund, store credit or exchanged for another product altogether.The criteria for eligibility of refund should also be included in this point. (example: return a good in its original condition, within a time period, etc.) Most successful online companies offer their customers the option to select the form of refund, return or exchange as per the convenience of the customer.

  • Must be obvious, easy to read and easy to find on the web page

Any policy intended for a customer should be visually accessible to the customer. The location of the policy should be obvious in the sense the policy should be easy to find on the home or landing page. The language used to describe the policy should be easy to read and understand. There shouldn’t exist any scope for misinterpretation.

  • The Policy should also be sent with the good or service

A physical copy is usually sent at the time of delivery of goods along with the delivery of the bill of purchase and the warranty card. Though again this is not a compulsion, it gives the customer the added advantage of going through the policy again before claiming a return and refund.

  • Reserve the right to terminate

Examples Of Refund And Cancellation Policy

Some of the the refund and cancellation policies of ecommerce websites listed are:

  • Amazon

The Amazon webpage lists its returns into three broad sections: Returns, refunds and exchanges. Amazon also provides a refund status dashboard for the customers to check the status of their refund. The Amazon Return policy states that certain products can be returned by raising a ticket,while other products cannot be returned and some can be exchanged for gifts or otherwise. Amazon has an A to Z guarantee on all its goods and a comprehensive list of return policies for different goods or vendors.

  • Flipkart

Flipkart allows its customers to return faulty products, damaged products, mistake in order or mismatch in size. Upon creating a return request and returning all the goods, tags, freebies and bills intact, the good can be replaced with Flipkart within a 10 or 30 day guarantee. Flipkart allows a full refund on a return and bears the cost of delivery, though delivery cost is to be borne by the customer.

  • Jabong

Jabong allows customers to make partial or full returns on products purchased by raising a request within 30 days of delivery. The refund or exchange for the same takes 7 days to process and the amount of money refunded is based on the condition of the returned good. In order to cancel a product altogether, it should be cancelled on the website before the item is shipped. CD’s, books, innerwear, fragrances, cosmetics, etc., cannot be returned nor can a refund be claimed on such goods.

  • Myntra

Any product kept in its original form of packing, tags, bills and condition will be entitled to be exchanged or returned if the customer deems so. (whatever the reason may be) All items must be exchanged or returned within 30 days of receipt of the good. Any refund will be made directly to Myntra’s cashback account that enables a customer to make additional purchases and make payments directly to Myntra.

  • Snapdeal

Gift vouchers cannot be exchanged or returned for cash and automobiles cannot be returned or cancelled at all. Replacement or refund will happen if the product successfully passes all the quality checks after being returned. In order for a return request to be processed and a good to be returned, a buyer needs to furnish a document from Snapdeal’s authorized service center within 7 days from the date of purchase. (This is quite different from the policies adopted by the other four companies already discussed above)

How To Get A Refund And Cancellation Policy For Your Website?

Several websites offer prepared and ready to use templates based on existing policies and standard clauses of most other companies. A refund and cancellation policy should be unique, customizable and beneficial for a website/company. A template may initially guide you, but specialized help from legal professionals are required to draft an appropriate and concrete refund and cancellation policy for your company. Our folks here at have been drafting such policies and agreements for individuals and companies alike successfully. Any ecommerce website looking for the best services (whether it be drafting of agreements, documents and/or company policies) in the industry, contact us and we will take care of the rest.

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