The eCommerce industry provides countless opportunities to grow your online business, expand your reach, and build a powerhouse brand, but you have to monitor several elements to realize this potential. While there are many metrics business owners must track to determine and expand their success, one of the most important is revenue — the fuel of a company. It’s key for evaluating your business’s performance and growth, as well as measuring the efficiency of your marketing and sales strategies, so you need to have precise numbers to make strategic decisions.

In this article, we’ll explore what revenue is, how it’s calculated, and dig into one of its most influential factors, profit margins. We’ll also discuss how to pinpoint your unique profit margins using manual and automated methods.

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What is revenue?

Revenue is the income a business generates through the sale of goods or services. It’s a crucial metric for any eCommerce professional, as it’s the lifeblood of any business, be it online or physical. Understanding revenue and how to increase it is important to achieve success.

A few key factors impact revenue:

• Product pricing: Setting the right price for your products is essential to maximize revenue. This entails understanding the cost of goods and the value your products offer to customers. You also need to look at your competition and price your products accordingly (more on that later).
• Product availability: Ensure your products are in stock and readily available to customers. That requires a reliable supply chain and inventory management system.
• Marketing and advertising: Identify and target the right customer segments, develop effective marketing campaigns, and leverage social media and other digital channels to reach potential customers.
• Customer service: Provide excellent customer service, which includes being responsive to customer inquiries and complaints and fostering a sense of loyalty among your consumers.

To calculate revenue, multiply the number of units sold by the price of each unit. For example, if a business sells 100 units of a product at $20 each, its revenue would be $2,000.

An alternative method is to sum up all of the individual sales made within a specific period of time. It’s important to track revenue regularly to monitor your business performance and make informed decisions about pricing, marketing, and other key aspects.

What are profit margins?

Profit margins, on the other hand, refer to the amount of money left over after all expenses have been taken into account. To calculate profit margins, businesses subtract their cost of goods sold (COGS) from their revenue. COGS includes the cost of materials and labor needed to produce the product, as well as any other expenses related to the product, such as shipping and handling.

Many factors can impact profit margins. Take the last couple of years, for example. The Covid-19 pandemic caused labor stoppages and shortages with manufacturing grinding to a halt due to outbreaks. This spurred a shortage of goods and materials, driving up the prices of goods. Merchants saw their profit margins shrinking as a result of higher acquisition costs.

If fixed overhead expenses like the cost of warehousing space, insurance, admin salaries, utilities, and licensing or permits (among other things) change due to inflation, needing a bigger space, or hiring new employees, will also impact your profit margins.

And, of course, there are other factors like taxes and financing or interest costs. With inflation currently on the increase, keeping an eye on your profit margins should be of the highest priority.

Generally, a good target profit margin for eCommerce businesses is around 20%. This means a business should aim to make 20 cents in profit for every dollar of revenue. However, margins can vary widely depending on the industry and the individual business. For example, businesses selling low-cost items may have lower margins, while businesses selling luxury goods might enjoy higher margins.

Note: It’s also important to focus on other metrics alongside profit, including customer lifetime value, customer acquisition cost, and return on investment.

Ensure your pricing is competitive but still profitable

eCommerce professionals face a delicate balance between offering competitive pricing without sacrificing profits. However, with a few key strategies and a bit of negotiation, it’s possible to achieve this harmony and drive more sales for your business.

Negotiate costs with suppliers

One of the most effective ways to keep costs down and maintain competitive prices is to negotiate with suppliers. By building strong relationships with your product sources, you can secure lower prices for bulk orders, early payment discounts, and other incentives. Additionally, you can seek longer payment terms, which improves your cash flow and reduces your overall costs.

Minimize fulfillment costs

Lowering your shipping and fulfillment expenses can keep costs down significantly. Bundling items together, for example, makes shipping more cost-efficient by reducing the number of packages you have to ship. Also, explore alternative shipping options such as using ground shipping instead of air, or partnering with a third-party fulfillment service.

Leverage upselling and cross-selling

By offering complementary products or upgrades, you can increase your customer’s average order value and drive more revenue for your business. Consider discounts and promotions as well to encourage customers to buy more items or make repeat purchases.

Additionally, look into implementing a dynamic pricing strategy that allows you to adjust your prices based on market conditions, supply and demand, and other factors. This will help you to be competitive as well as maximize your profits.

Most importantly, review your costs and pricing regularly to ensure you remain competitive and profitable. By keeping an eye on your expenses and adjusting your prices as necessary, you’ll easily strike that balance between reasonable pricing and a healthy profit margin.

How to calculate your target profit margin

To find your unique profit margin, first, determine your revenue. This is the total amount of money you bring in from sales. Then, sum up your costs, including both fixed and variable expenses. Fixed expenses are those that remain the same regardless of the level of sales, such as rent and salaries. Variable expenses, on the other hand, fluctuate based on sales volumes, such as the cost of goods sold and shipping costs.

Once you know your revenue and costs, you can calculate your profit margin by dividing the net profit (revenue minus costs) by the revenue, then multiplying by 100. For example, if your revenue is $100,000 and your costs are $80,000, your net profit would be $20,000 and your profit margin would be 20% — which, as mentioned above, is a great percentage to aim for.

Translate the numbers

You need a profit margin that’s high enough to cover your expenses and provide a reasonable return on investment. The exact number will depend on the specifics of your business and the level of competition in your market. However, a profit margin of at least 10% is considered to be the minimum for most businesses.

Another impactful factor in your profit margin calculation is the industry you’re in. Some have higher profit margins than others. For example, businesses in the technology and software sector tend to have higher profit margins than those in the retail industry.

Keep in mind, though, that a high-profit margin doesn’t always equate to success; other factors, such as customer satisfaction and market share, also play important roles. Even if a business has high margins, it shouldn’t fall into a false sense of security, as the market and competition can change quickly. Monitor and adjust your business strategy continuously to maintain healthy gains.

Consider tools to handle the math

The traditional method of calculating revenue and profit margins usually involves spreadsheets, calculators, and good old-fashioned mathematics. This is a viable solution for smaller companies with straightforward calculations. However, manually crunching numbers can be time-consuming and cumbersome, if your business needs require you to look at various potential outcomes based on pricing changes or sales boom or bust cycles.

When it’s no longer feasible to calculate your revenue manually, look to tools for support. Many options are available, and businesses frequently take advantage of them because they’re:

• Fast and easily accessible: Tools take care of the heavy lifting of mathematics for you with just a few clicks. Solutions like revenue or profit margin calculators easily enable you to better manage your business goals and planning to push you toward success and sales growth.
• More cost-effective than outsourcing: You could hire an accountant or business analyst to look at your books and create projections. However, hourly rates add up and will, unfortunately, cut into those profit margins you’re trying to grow. In addition, outsourcing these activities impacts your ability to make fast decisions, as it can take time for a professional to run the numbers.
• Able to show possible outcomes: By comparing your revenue against your profit margins, you can optimize your business activities. This can mean cutting business costs, raising prices, changing suppliers, and more.

Tools let you plug in numbers quickly and easily, then the algorithm does the work so you can determine the best way forward for your unique eCommerce needs. Most accounting software will include profit margin calculations that you can use to understand your unique business’ margins and the factors that impact them. You can also select one of the many bespoke options, ranging from high-cost to no-cost online.

Omni Margin Calculator

The Omni Margin Calculator will generate your gross margins based on the numbers you input. This free tool is available online and takes only a few moments to plug in your data. Better still, it has additional features/calculators that can break down GST, VAT, Sales tax, and more.

Oberlo Profit Margin Calculator

Similar to the Omni mentioned above, Oberlo offers an always-free calculator for profit margin calculations. Simply input the data to calculate your margins and use the information to set prices.

MyFBAPrep Profit Margin Calculator

A quick Google Search for “profit margin tools” uncovers more than one hundred thousand results! It can feel overwhelming with so many tooling options available. Make it easy on yourself and look into the MyFBAPrep Profit Margin Calculator. This free tool quickly calculates your profit margins so you understand how to grow your business. It reduces the risk of human error by automating processes and even provides a ready-made, fool-proof template for calculations.

The template allows you to work faster and reuse formulas for quick calculations with little additional effort. It also maintains consistency between calculations for different possibilities, such as higher or lower price points, fluctuating business costs, or a combination of minor tweaks. Simply fill out the tool and let the Profit Margin Calculator do all the work. Unlike the tools above, you can keep your calculations to reflect back on if things change for easy comparisons.

Wrapping Up

Revenue and profit margins are important metrics (among others) for measuring the performance and growth of an eCommerce business. While 20% is a good base target for eCommerce businesses, ultimately, your industry and specific business makeup will determine the margin you should aim for.

Both front- and back-end factors affect these metrics, from your marketing and advertising to your supplier relationships. Gather relevant data and run the numbers, using either manual methods or a tool like MyFBAPrep’s Profit Margin Calculator, to see where your business performs well and where it has room to improve. By relying on accurate calculations, you’ll steer your company on course toward growth and greater profitability.

You invest time, money, and other resources to ensure your eCommerce store’s website is easy to navigate and accessible, your products stand out, and your checkout process is seamless. This sets the stage for selling your products, but one major challenge remains: getting people to your site to convert them into customers.

Increasing your web traffic is an integral part of growing your online business. This requires you to follow digital marketing best practices to surpass your competitors and capture the interest of your potential customers and attract them to your website.

Types of traffic

The web visitors who arrive on your website are referred to as “traffic.” Traffic can be direct, organic, or paid and come from multiple sources.

Direct traffic

Direct traffic doesn’t come from any referring website, such as when a customer types your URL into their search bar. If traffic comes from an unknown source, it can be categorized as direct traffic.

Organic traffic

Organic traffic finds your site via a search engine through unpaid means. It’s the result of your inbound marketing and SEO efforts.

Paid search traffic

Paid search traffic arrives from a paid search campaign you’ve launched on a search engine, such as Google or Bing. This is sometimes called pay-per-click (PPC).

Social traffic

This is traffic that comes from a social media platform, such as LinkedIn, Twitter, Facebook, or Instagram.

Email traffic

This is traffic generated through email campaigns.

Referral traffic

This type of traffic comes to your website from any site other than social media platforms or a search engine. Someone clicking over to your website from a hyperlink on a blog, for example, would be considered referral traffic.

In an ideal world, you’d have enough organic traffic sources feeding into your website to make paid avenues redundant. However, the reality is a good portion of your traffic — particularly in your early days — comes from paid sources, including pay-per-click.

What is PPC?

Pay-per-click is a digital advertising model in which you pay a fee each time a user clicks on one of your ads. This type of advertising is typically accomplished through search engines like Google and Bing, as well as on social media platforms like Facebook and Instagram. The goal of PPC is to drive traffic to your online store and convert those visitors into sales.

To ensure your audience converts and you achieve a high return on investment (ROI), you need to incorporate search engine optimization (SEO), rich keywords, and learn how to select the right ones.

The 411 on SEO

Search engine optimization is a method of improving the visibility of a website or page in a search engine’s unpaid results. The goal of SEO is to increase the quantity and quality of traffic to a website through organic search results. This can be achieved through a number of techniques, including optimizing website content, building backlinks, and conducting keyword research.

Both PPC and SEO are critical for eCommerce businesses because they work together to drive traffic to an online store and convert them into sales. PPC is a quick and effective way to get in front of potential customers, while SEO helps establish a business as an authority in its industry.

With PPC, eCommerce businesses can target specific keywords and demographics, which contribute to higher conversion rates. For example, if you sell running shoes, you could target keywords like “running shoes” and “athletic footwear” and display ads to users who’ve recently searched for those terms. You can also track the effectiveness of your paid ad campaigns, allowing you to optimize your ad spend, improve your ROI, and reduce your customer acquisition spend (CAC).

SEO is another crucial strategy, as it positions you as a credible source in your sector. By refining website content and building backlinks, you can improve your search engine rankings, resulting in increased visibility and more organic traffic. Meanwhile, conducting keyword research identifies the terms and phrases your target audience uses to find products like yours so you can optimize your site for those strings.

Combine PPC and SEO to drive even more traffic to your online store. For example, you could use PPC to drive immediate traffic to your website and work on SEO to improve long-term visibility. This helps you reach the right audience at the right time, which can yield higher conversion rates.

What are keywords?

Keywords are specific words or phrases that identify the main topic or theme of a piece of content. In SEO, keywords help search engines both understand the content of a website or page and determine how relevant it is to a user’s search query. They’re typically included in the title, header tags, and throughout the body of a web page. This is especially important on eCommerce sites, as the right keywords can capture your customers’ attention by highlighting product specifications.

Here’s how it works: When a user conducts a search on an engine like Google, the search engine’s algorithm scans the content of all the web pages it’s indexed to determine which ones are most relevant to the user’s input. The algorithm then looks for keywords on the page to understand the main topic or theme of the content, as well as other factors like the number of backlinks and the overall quality of the content.

For instance, if you sell women’s sneakers, incorporating keywords that highlight specific product features like color, brand, and gender will help you appear higher in the search results of a potential customer’s query.

As such, selecting the right keywords is crucial to improve your search engine rankings and drive more traffic to your site. Identify the keywords that are most relevant to your specific products so you can optimize your website content and meta tags to include them. This will help search engines understand your content and expand your store’s visibility in search results.

Types of keywords

You have different types of keywords to use in SEO, namely, long-tail, short-tail, and LSI (latent semantic indexing) keywords. Long-tail keywords are longer phrases that are specific and less competitive, while short-tail keywords are shorter and more generalized. LSI keywords, meanwhile, are semantically related to a main keyword and help search engines understand the context of their associated content.

How to do PPC keyword research

Keyword research is an ongoing process that helps businesses identify new keywords and understand how to optimize their content for them. Organizations can conduct research on their own, employ an outside hire, or adopt a tool to reduce the workload. Tools like Google Keyword Planner and SEMrush can determine the keywords that are most relevant to a business and reveal their search volume and competition.

Manual research

You can manually research keywords for your PPC campaigns that align with your product pages and business needs. If you’re unfamiliar with SEO and paid campaigns, this will require some work. Understanding the types of keywords and identifying those that relate to your product are important for optimizing your PPC campaigns and efforts.

Hire an SEO strategist

If your budget allows, hiring an SEO strategist or digital marketing manager is an excellent way to streamline your PPC campaign planning and SEO efforts. An internal hire will focus solely on optimizing your PPC efforts and will manage every aspect from research to implementation, monitoring, and measuring.

If you choose to research on your own or hire an SEO strategist, use these tips to ensure fruitful research:

1. Start with your products or services: The first step in researching keywords is to identify the products or services you want to promote. This will give you a starting point for your research and help you stay focused on relevant keywords. For example, if you sell clothing, your initial keywords might include “clothes,” “apparel,” “fashion,” and specific clothing items such as “dresses,” “jeans,” and “t-shirts.”
2. Analyze your competitors: Turn to your competitors’ websites and PPC campaigns for a source of information. Look at the keywords they target and see if any of them align with your products or services. You can also use tools like SEMrush and Ahrefs to see which keywords your competitors rank for in organic search.
3. Consider long-tail keywords: Long-tail keywords are longer, more specific phrases that often convert better than short, broader keywords. For example, “women’s cocktail dresses” is a long-tail keyword that hones in on narrower search queries. Long-tail keywords can help you reach a more targeted audience and increase conversions.
4. List negative keywords: Negative keywords are those you want to exclude from your campaigns. For example, if you sell clothing for women, avoid keywords like “men’s clothing.” This will prevent you from wasting ad spend on irrelevant keywords.

Employ a tool like the PPC Keyword Generator

A variety of keyword research tools exist to help you identify relevant keywords. Though costly, they can take on much of the heavy lifting of keyword research.

Some popular options include Google Keyword Planner, SEMrush, and Ahrefs. These tools have you enter seed keywords related to your products or services, then they generate a list of related keywords to help you further refine your research. Another option is the MyFBAPrep PPC Keyword Generator, which is easy to use, cost-effective, and operates anywhere as often as you want.

Outsource to an agency

If the thought of managing your keyword research, PPC campaigns, and SEO in-house cause you stress, consider outsourcing to an agency that specializes in SEO and digital advertising. This is likely the most expensive option on our list, but it comes with the reassurance that you have an expert team handling your SEO and PPC needs.

Another drawback, though, is it can slow your business operations. Many agencies have established service-level agreements (SLAs) with set turnaround times for requests. This can impact your ability to be nimble in switching up keywords or entire campaigns, as it may require you to go through the agency’s official channels.

Wrapping Up

Researching keywords for PPC can be a time-consuming task, but it’s important to do it correctly to produce successful content and campaigns. By following these tips and identifying the best keywords for your business, you’re more likely to reach the right audience, increase conversions, and drive more sales for your eCommerce business.

Finding your PPC words is a critical component, but the work doesn’t end there. Once you’ve identified and implemented your selections, it’s important to monitor your campaigns to see which keywords perform well and which don’t. Analyze the data from your campaigns to adjust your strings as needed and optimize your PPC campaigns for better performance. As a result, you’ll reduce your CAC, streamline your marketing efforts, and increase your ROI.

Most entrepreneurs go into eCommerce to sell products and ideally build an online sales empire — not spend their time dealing with legal documents. However, every business, no matter its size or niche, has to manage the legal side of operations, and your eCommerce website, services, and products are no exception.

eCommerce websites aren’t required to have a Terms and Conditions page, which can lead sellers to assume (incorrectly) that these limitations are unimportant.

This is far from true.

In this article, we’ll explore what terms and conditions are in the business world, why you need them, and how to write clear terms of service that protect both you and your customers.

Terms & Conditions: A quiet but powerful defense

You’ve chosen your business name and logo, picked the products you’ll sell, and built and/or customized your online store. On the back end, you’ve decided which payment types you’ll accept, how you’ll handle fulfillment and shipping, and your marketing messages.

After so much careful planning, you have to protect your hard work and your business from legal harm. This is why it’s crucial to establish your online store’s terms and conditions.

Terms and conditions (T&Cs) are legal agreements between a goods or services provider and their customers. The provider, in this case, an eCommerce merchant explains them, and the customer who wishes to purchase goods agrees to them.

A​ T&Cs page outlines the responsibilities of both parties, which can include information on shipping, returns, payments, and other relevant details related to the sale of goods or services on your website. Having clear and concise terms of service can protect you, the merchant, and the website owner, from potential legal issues by specifying the conditions of the sale and addressing potential areas of dispute. T&Cs also protect your customers by outlining their rights and what they can expect from you.

Protect your business

Probably the most important reason to have a T&Cs page is to protect yourself. The eCommerce industry is growing quickly, and defending your business against the competition is imperative. For example, y​our terms and conditions may lay out specific restrictions related to the resale of your products.

They can also vary by country and even from state to state. Some countries and governing bodies like the European Union maintain laws that require websites to have certain disclosures and agreements in place. These include returns and privacy policies, which are taken very seriously. Failure to comply with these laws can result in fines or penalties, so you must ensure your T&Cs page is both up-to-date and in compliance with the relevant laws wherever you do business.

Establish your rules

You’re required to abide by the laws of the countries and states where you sell. However, you set your own rules when you clearly define the terms and conditions of your store. Depending on the types of products you sell, you may choose to have stricter rules than those set out by the governing bodies in the jurisdictions where you operate. These may include:

• C​opyright conditions
• A​ge limits (legal age of majority in various jurisdictions)
• Governing law of contract (varying by state, province, country, etc.)

What to include in your T&Cs:

When creating terms and conditions for an eCommerce website, it’s important to include the following elements:

D​efinitions of all parties and relevant information related to the sale of products or services

Clearly define the parties involved in a sale. For example, your customer becomes a “Buyer” and you may choose to list yourself as a “Seller” or perhaps “The Company.” Other definitions you can include are:

• C​ontract (purchase order)
• Contract price (the price your customer agrees to pay when completing their order)
• Products (the items you sell)
• Terms and conditions (what they encompass regarding your store)

A clear explanation of the products or services sold

While you don’t need to describe every product you sell, you should feature a concise overview of your products and services in your T&Cs. For example, ERIKS North America, an industrial supplier of hydraulic hose, gasket, and conveying system solutions, simply describes “Products” as “the equipment, parts, materials, supplies, and other goods Seller has agreed to supply to Buyer under the Contract.”

If you offer a warranty or a promise of satisfaction, such as a 30-day money-back guarantee, it’s important to define their terms here as well.

Information on how to place orders

Explain the ways your customers can purchase your products or services. As a seller, you may choose to include a note on all of the platforms where you sell products as singular T&Cs for your company that encompasses everything. For example, if you sell on your website as well as in a physical store, you can describe the nuances of sales. In this case, you may opt to accept Apple Pay, Google Pay, credit cards, and Paypal for online orders and allow your customers to pay with credit, debit, or cash in-store.

Other special payment arrangements, like Buy Online, Pick Up In-Store (BOPIS), should be outlined and described here as well. You may also choose to offer Buy Now, Pay Later, or “layaway” style payment plans. Each payment type may have its unique conditions: For example, if your customers decide to pay for products in installments, you can elect not to ship the product until you receive the full payment.

Shipping and handling details

Nowadays, customers have high expectations for shipping timelines and costs, and they commonly look at delivery fees and schedules before they buy. Your terms and conditions page is an excellent place to lay out all relevant information related to this topic.

One important element to note here is the limits of liability once an item has shipped. Do you provide insurance coverage on products, or will customers need to pay for that protection? Detail this information and make it readily available to your customers to minimize confusion and shipping issues.

You can also name the shipping carriers you use if you desire, which may vary by country. Be sure to outline the estimated shipping times for domestic and international shipping as well (and whether or not you ship outside of the country).

Returns and refunds criteria

Y​our returns and refund policy is one of the most important components of your eCommerce strategy, so your T&Cs must adequately describe how you handle this process. Communicate the requirements for a purchase to be eligible for a refund, such as a specific time frame, unopened condition, or other factors.

You must also thoroughly describe the process of your refunds, including whether or not you’ll issue a refund or give a store credit, the timeline for processing returns and refunds, and the avenues of recourse customers have if their refund fails to come through.

A disclaimer regarding the accuracy of product descriptions and pricing

Likely, you’ve purchased an item online only for it to arrive and fail to live up to your expectations based on how it looked on the website. Most of us understand how colors and textures can appear differently on different screens. For this reason, a disclaimer regarding potential inaccuracies in products can offer you protection as a seller.

Further, a limitation of liability statement covers you in the event there are mistakes in your website content. This is especially important if you feature third-party content like consumer reviews. You can include a note regarding aspects like derogatory content or offensive postings from others and how this is outside of your control.

Your privacy and security policies

Customers care deeply about their safety and privacy online. Moreover, many countries now require all eCommerce sites to abide by specific restrictions related to privacy and security; companies must publish such policies and make them easily accessible to shoppers. With this in mind, it’s no longer just a best practice but a legal requirement for you to include a privacy and security policy in your online store’s terms and conditions.

A description of your website’s terms of use

Insert a section that details the terms of use for your website, including the prohibited use of images or written content without consent. Want to prevent browsers from repurposing your logo for their own use? Establish rules in your terms of use and highlight whether or not users are permitted to access and use content from your website (i.e., written text, graphics, data, images, logos, and video clips). This section is your chance to set clear restrictions for copying and/or reproducing content from your websites.

Copyright

Copyright information is sometimes rolled into the “Permitted Use” section of the terms of use. Always include a notice about copyright and trademark to protect your brand and content. The best part is, it’s really easy: Simply state, “Copyright © [current year],” followed by your website’s URL.

Your company’s contact information

Methods of contact are among the most important information to include in your terms and conditions (and on your website in general). Explain how customers can get in touch with you if there are issues with their purchases, remembering to include your customer service hours and days of operation.

Give as much information as possible to maintain open communication channels. You can and should include your company’s:

• M​ailing address
• Email
• Phone number
• F​ax number (if applicable)
• Hours of operation (in local time)
• D​ays of operation
• Standard response times (e.g., within X business days of receiving an email or message)

A statement about the governing law of the agreement and the jurisdiction in which disputes will be resolved

Describe where your website operates relative to governing law (i.e., state, province, or country). For example, if your company operates from Florida, you may write something like, “These Terms and Conditions are governed by the laws of the United States of America and the laws of the State of Florida.”

A section on dispute resolution

In the event a conflict arises with a customer, it’s important to have a clear outline of the process for resolving legal disputes and to define the available channels of arbitration or mediation should this occur. (This may vary based on jurisdiction.)

Having clear and easy-to-understand terms and conditions helps establish trust with your customers and ensures they understand their rights and responsibilities when using your website. However, consider seeking legal advice to ensure your terms and conditions comply with all relevant laws and regulations.

How to write robust T&Cs

We’ve detailed why you need a Terms and Conditions page and what to include, so you’re probably wondering where to begin to craft your own. Your options are simple: You can do it yourself, outsource the writing to a lawyer or underwriter, or leverage a tool to do the heavy lifting for you.

Write it yourself

Unless you enjoy writing and have strong attention to detail, drafting your terms and conditions on your own can be an exercise in patience. Writing is a time-consuming activity, and T&Cs add a higher degree of technicality than found on a standard product page or website. For this reason, it’s easy to leave gaps that could make you susceptible to issues down the road.

Hire a lawyer or underwriter

Because it’s a legal document, you might feel more comfortable outsourcing the creation of T&Cs to a lawyer or legal underwriter who can manage the writing and editing of your document. Of course, this comes at a (usually hefty) fee.

Lawyers often charge in the hundreds of dollars per hour and many have a minimum hourly requirement, meaning that, even if it takes less than 10 hours to write, you’re required to pay for all 10 as part of their terms and conditions. The same can go for a legal underwriter, though costs may be lower.

In addition, when you hire a lawyer or underwriter, you’ll need to agree to a timeline for the deliverables. This can be a quick turnaround, or it could be lengthy depending on their workload and standard service-level agreements.

Leverage tools

If you’d rather avoid the hassle of writing your T&Cs page on your own and lack the budget to hire a lawyer or underwriter, you can rely on a platform or tool to create unique terms and conditions page content for you. MyFBAPrep’s Terms and Conditions Generator enables you to craft a custom T&Cs page for your website quickly and easily.

You simply enter your relevant company information, and the tool produces an easy-to-read and comprehensive T&Cs document that’ll protect your business from potential issues. Simply make a copy of the linked document, fill in your company information, and let the tool do the rest!

Wrapping up — Create airtight terms and conditions for secure business ops

A Terms and Conditions page is an important component of your eCommerce website. It’s an effective way to protect you and your business from potential disputes by clearly detailing the responsibilities of both you, the seller, and your customers, the buyer. They also establish the rules of engagement between you and your customers. We recommend including a link to your T&Cs on every product page and in your marketing and post-sale emails to ensure your customers have easy access to them at any time.

Although these terms aren’t required by law in every jurisdiction, more and more countries are demanding elements of the traditional terms and conditions document — in particular, privacy and security policies. As such, it’s critical for you to have a legally binding document in place if you plan to scale your business. Failure to have a Terms and Conditions page or comply with laws can result in fines or penalties in some cases. Once you have your T&Cs page, update it regularly and ensure it complies with the relevant laws that govern the markets where you sell.

Imagine you’re standing in line at a store preparing to purchase an item and you have some doubts in the back of your mind. Perhaps you’re worried it won’t match the color scheme of your home, or maybe it’s an article of clothing that, once you try it on later, doesn’t flatter the way it did in the fitting room. As you prepare to check out, you ask the cashier about the return policy — specifically, about getting your money back. The clerk explains the policy, circling it on your receipt so you know what to do if you want a refund.

In eCommerce, customers have no opportunity for this type of conversation at checkout. As such, it’s important to ensure your returns and refund policies are clear and easy to find on your website. This critical piece of information can help you reduce returns, avoid refunds, and improve the customer experience.

While it may seem like a hassle to deal with returns and refunds, they’re an important part of doing business online. Even if you strive to provide top-notch products and excellent customer service, there will nevertheless be times when a customer wants to return a product or request a refund. When this occurs, your well-honed refund policy will be your lifesaver to navigate the process smoothly, and we’ll explain how to draft one that fills both you and your customers with confidence.

Why you need a strong refund policy

A refund policy outlines the rules for receiving refunds for purchased goods and/or services. It details the eligibility requirements for returns, what types of refunds are given, the time frame, and the return process, giving you and your team a rule book to follow when processing returns and refunds. This is especially important as you grow your business when you’ll likely begin to receive more returns as your sales increase, making a one-off or ad-hoc returns too cumbersome to manage.

The document lets customers know what to expect before they buy, which reduces the likelihood of dissatisfaction and avoids additional returns on your end. Clearly defining your policy and laying out the terms for customers in a concise manner act as insurance for your sales. For example, if you only offer refunds on regular-priced merchandise, customers know they can’t get their money back on sales items.

You should also aim to be fair and reasonable with your policy. It’s understandable you don’t want to give refunds for products that have been used or heavily worn, but you should also consider the unique circumstances of each request. If a customer has a legitimate complaint about something they’ve purchased, it’s in your company’s best interest to resolve the issue as quickly and amicably as possible.

How to write and launch an appealing return policy

Every return policy is unique to the individual business, and different products might require different eligibility terms. However, there are certain core elements that every document should include. Approach your writing thoughtfully and consider how to accommodate your and your customers’ best interests.

Determine a reasonable time frame

Firstly, choose a time frame during which your customers are eligible to request a refund. This can be whatever range you prefer, whether it’s 10 days or 365.

Decide when you’ll start the clock as well. Does the refund period open when the purchase has been completed (the date on the receipt), when the order was fulfilled (sent from your warehouse), or when the order has been delivered (as noted in the tracking information)?

You might opt to build your policy around a “try before you buy” approach, letting your customers use the product for a predetermined amount of time, such as one month, so they have the opportunity to change their minds with less hassle. These types of guarantees are attractive to shoppers, but they also benefit you.

Source: Outer.com

O​uter, for example, is a furniture company with a generous and unique return and refund policy: They’ll refund 100% of the cost of an order if the request comes within 14 days, but customers can receive an 80% refund up to one year after buying Outer products. This allows customers to test an item for an extended period of time. However, Outer doesn’t offer free returns outside of the 14-day window.

Longer time frames — those greater than the standard 10 to 14 days — allow your customers to become familiar with and fall in love with your products. When customers are not bound to a tight refund window, such as a 10-day limit, they may put off submitting a return, which could result in them missing it altogether.

Establish acceptable item conditions

Depending on your product type, you can have an array of requirements concerning the condition of items eligible for refunds. Regional laws where you do business can also dictate (or at least influence) these terms as well. For instance, in some countries, baby items like carriers, strollers, breast pumps, and larger toys can only be returned if the box is unopened.

Source: Allbirds.com

If you adopt a “try before you buy” approach, you’ll need to be comfortable accepting items in varying degrees of a used condition, but that doesn’t exclude you from having strict requirements for the condition. For example, if you allow customers to test a product for 14 days, you can still require the item to be in a gently used, undamaged condition.

As a concrete example, A​llbirds, a popular lifestyle company that sells footwear and other products, have different requirements for returns and refunds based on the products offered. They’ll happily take back any product within 30 days, but underwear and socks must be in unopened packaging; however, shoes can be worn.

List the steps for refunds to be processed

Once you’ve determined a time frame for refunds and the condition required for an item to be eligible for a return, detail the steps for the refund process.

Depending on your company and processes, you may have an online request form that customers can fill out, or buyers may need to contact you directly. The request may include:

• Proof of purchase (order number)
• P​roof of condition (photos)
• Complaint or reason for refund request

Whether or not to offer free product returns is up to you, but there’s considerable evidence that free returns boost sales. While free returns will cut into your profits, a 2012 report demonstrated how free returns can increase sales by a whopping 357% — proving it’s a worthwhile investment.

The next step in offering returns is to verify the return package has shipped. Some large retailers like Amazon (particularly through FBA) simply wait for tracking to start before processing a refund, with funds deposited to the original form of payment within a few days. But many other retailers require the returned products to be delivered in acceptable condition before the refund is issued.

In some cases, returned products may only be fit to be used for parts, or you might be able to resell them at a discount with an “open box” label. Keep this in mind when you decide on the item conditions you’re willing to accept.

It goes without saying that defective products — that is, those with manufacturing issues or that arrived at their final destination damaged — should be refunded or replaced as quickly and seamlessly as possible.

Finally, you may choose to offer refunds on products without requiring your customer to send the item back (although this practice is less common).

Source: blkandbold.com

BLK & Bold is a coffee and tea beverage company with a focus on supporting youth initiatives. They offer in-store and online purchasing options, including subscription programs, and customer satisfaction is a main focus for them. They’re committed to excellence in that regard, and it’s reflected in their refund policy: The company doesn’t require products to be returned. However, refund requests will only be processed within 30 days of purchase.

Clearly display your policy

Y​our returns and refund policy should be readily visible and easy for your customers to find. Some retailers have gotten creative to make it easy for shoppers to see. T​enTree, for instance, includes their return policy directly on their product pages, located in a handy accordion that can expand. Although their policy is somewhat generic, costing customers a flat $10 within 30 days of purchase, its visibility, and simple language ensure zero confusion.

Employ a service to handle your returns

Services exist that can support your return and refund policy by handling every step of the process for you.

Source: TenTree.com

For example, TenTree (mentioned above) uses a platform called Returnly, while Allbirds uses Loop. Meanwhile, Amazon sellers who use Fulfillment by Amazon (FBA) can rely on FBA to take care of all aspects of customer service, including returns and refunds.

Source: Allbirds.com

These are but a few services that manage the reverse logistics of returns and refunds to ensure seamless customer experiences.

Choose between a refund or store credit

Another important decision you’ll have to make is whether to offer refunds or store credit for returned items.

One advantage of refunds is that customers can choose how they want to handle the returned item. This is appealing to buyers who are unhappy with the product or who changed their mind about the purchase.

On the other hand, offering store credit allows consumers to purchase a different item from your store, which is an effective way to retain their business. It can also be less burdensome administratively for your business, as you don’t have to process a refund.

You can make refund methods time-sensitive, such as offering a full refund within X days, or they can vary by product — for example, offering only store credit when a product was purchased on sale. However you decide to proceed, communicate whether items are eligible for refunds and/or store credit (and if any items will be labeled as “Final Sale”).

Keep the language simple and to the point

The language in your refund policy must be clear, concise, and easy to understand. This helps ensure customers understand their rights and options when it comes to returning a product or requesting a refund. If the policy language is too complex or difficult to comprehend, it can cause confusion and frustration for customers, which could lead to negative experiences and potentially damage your reputation as a merchant.

By implementing clear verbiage, you effectively communicate your policy and resolve customer issues in a timely and efficient manner — often before they purchase, which reduces the number of refund requests you receive. Additionally, an open and simplistic refund policy can build trust and confidence in your company by demonstrating transparency and fairness in your dealings with customers.

Disclose any associated fees

Returns can be a necessary but expensive evil in an eCommerce business. With shipping costs rising around the world, it’s understandable some merchants choose not to offer free returns on products. If you decide to follow suit, it’s imperative you outline any fees associated with a return.

Two companies we’ve previously mentioned clearly define the costs accompanying any returns:

1. TenTree has a flat $10 rate on all returns to cover the cost of postage.
2. Outer offers free returns within 14 days. Past that date and up to 365 days post-purchase, they require customers to cover the cost of return shipping.

In general, the cost of returns is subtracted from the total refund offered.

Leverage tools to generate a policy for you

Crafting a full returns and refund policy can be overwhelming, and if you dislike writing, it can be downright unpleasant.

M​yFBAPrep offers a DIY solution to generate your refund policy that takes the heavy lifting out of policy creation. The Refund Policy Generator takes only minutes and provides an easy-to-read policy that clearly details your company’s approach to returns and refunds.

Download it below!

Answer the form above, fill out your company information, and make any necessary edits. From there, you can copy and paste the generated policy onto your eCommerce store and begin promoting.

*Note that this is not professional legal council. Every store’s policy will be unique, so please review the generated policy before adding it to your store.

Promote your policy

A strong refund policy also provides a great marketing opportunity for your business. Show off your generous refund policy to build trust with prospective customers. As long as you adhere to it, your policy can breed customer loyalty by showing them you’ll do what it takes to make things right for each issue.

Source: IlMakiage.com

Take I​l Makiage, an eCommerce brand that sells cosmetics and skincare products, for example, much of their marketing leans on their Try Before You Buy approach while also highlighting their unique “shade finder” tool and other products. They allow customers to use the product for up to 14 days, and at any time during that period, dissatisfied customers may request a refund — no questions asked.

N​ot sure where to begin? Keep the following key tips in mind:

• I​nclude your refund policy on product pages.
• Highlight your returns and refunds policy on your home page.
• Work your refund policy into your marketing messages.
• Link to your returns and refunds policy in every post-purchase communication, from the success page to your retargeting emails.

Wrapping up — Create an awesome return and refund policy to set expectations

Having a clear and concise refund policy not only protects your business but also builds trust and credibility within your customer base. It’s also a fantastic marketing tool for your business when displayed strategically.

It shows potential customers you’re a professional and reliable company that stands behind its products. A generous refund policy also encourages customers to shop with confidence, knowing they have recourse if they’re dissatisfied with their purchase.