How to deal with returns, refunds and exchanges at your business

The holiday shopping frenzy has come to a close and with that comes a few headaches and hassles for small business owners, specifically retailers. It is no surprise, then, that at this time of year CFIB’s small business help line gets an uptick in calls about return and exchange policies. What are your rights? What are best practices? What are tips and tricks for handling long lines, which can result in disgruntled customers?

So what you do as an independent retailer? Are you required to have a return, exchange or refund policy?

This question prompted me to conduct research to determine if there are any provinces that required this practice as mandatory. As I suspected, most provinces do not have an “official” mandatory policy. You as a business owner must establish your own guidelines.

When establishing your return and exchange policy, you should ask yourself the following important questions:

  • Do my customers understand what is a final sale?
  • Do my customers receive a gift receipt – if so, what does that mean to the individual receiving the gift?
  • Can my customer return the product for their money back?
  • If my customers wish to exchange a product, what does the product need to have intact (price tag, receipt, etc.)?
  • Should I choose to issue a refund in a form of a store credit?
  • How do I rectify any complaints, if this was an online purchase?
  • Overall, how do I manage complaints, feedback and comments?

While considering this list of questions, do so with more than the immediate bottom line in mind. There are other important factors, such as:

  • How do I keep my brand and reputation intact?
  • What do I want the customer experience to be?
  • What can I do to ensure that returns/exchanges do not interfere with long-term or budding relationships?

In a Forbes article, Customer Experience is the Future of Marketing, Daniel Newman wrote “Marketing research has discovered that it takes 12 positive experiences to repair the damage caused by a single unresolved negative one. In today’s competitive business environment, even one negative experience is enough to lose a customer forever because people now are less tolerant toward poor encounters than ever before.”

With that in mind, here are 3 important areas to cover when forming your returns, refunds and/or exchange policy:

  • Clarity: Ensure your customers can see and read your policy (cash register, posted at store, on receipt, website online) and your employees fully understand what’s expected of them.
  • Trust: Perhaps the customer has lost their receipt, will you honour the request? Will it be case by case? Do you need to train employees?
  • Expectations: Some key items must be present, if you require them such as tag, receipt, within a period of time or same credit card/debit card etc.

Once you have a return, exchange or refund policy in place, honour it. Not honouring it can result in complaints to the Consumer Protection of your province.

Important Note: if you’re a member of the CFIB, contact your business counsellor to find out details about the Consumer Protection in your province.

If you’re not a member of the CFIB, click here to obtain details as to your local Consumer Protection office.


CesarCesar Gomez-Garcia has been with the Canadian Federation of Independent Business for six years. His current role at the CFIB is helping members with their questions on compliance. These questions can range from employment standards to health and safety, as well as complicated red tape situations that small businesses face. His passion is reading and writing about entrepreneurship. Learn more about Cesar via LinkedIn and follow him on Twitter @josuegomezg.