How to handle refunds through dropshipping?

Have you had any refund requests yet?

Most drop shippers will take a return back, but some (not all) will charge a restock fee. We used to either charge the restock fee to the customer (if you had disclosed that to them via your terms and conditions), eat the fee, or liquidate the item on eBay (at cost).

Joe, you described what I am doing for drop shipped items. I received their money, so yes, I must be the one to pay their refund. I usually refund all of their payment, including what they paid for shipping, and tell them that the shipping amount refund is to cover their cost of having sent the item back to me. (I've had people tell me their cost to return was higher than my cost to send, but I simply tell them I cannot refund more than 100% of the amount paid.)

I don't consider a second sale as breaking even, as I missed out on the profit of the first sale. My cost is still the same (less the loss in shipping), except I ship for the next sale of the item instead of sending an order to the drop shipper. (If it's a return for a damaged item, it still goes to me first and the drop shipper is never revealed to the customer.)

You can only work with suppliers who accept returns to their warehouse(s).

You can do it the way you suggested (have them return to item to you).
But in my experience, most drop-shippers will accept to handle returns. You'll have to see with your drop-shipper if they charge any restock fee, and then see for yourself which way is more profitable.

Are you having to deal with returns very often?

Write it off as a loss and don't worry about the product. Sometimes you lose a few, it's the cost of doing business... You're competing against giants like Amazon in the eCommerce space, who will refund the customer whether they get the product back in their hands or not, because they know the value is in owning the CUSTOMER not just getting the sale. Follow their lead.

I highly suggest you have them return it to your home.

Especially if you're doing the dropshipping model.

This is because you'll need to keep your supplier honest at that point. You need to do QA with them. If you don't use the dropshipping method, you don't run into this issue.

However, I once used a dropshipper that decided to send out cheaper items than what the customer had ordered. When the refund requests spiked, I had them return them to me for inspection.

I then told the dropshipper that I was going to do that from that day forward to make sure he wasn't screwing me out of any money.

YOU have to do QA on your products by whatever limited means you can.

HOWEVER.

You also need to keep your returns low by accurately selling the items and accurately selling yourself.

It's not the products you sell - it's the experience you give your customers. This is something I've been teaching people for years. There seems to be this problem that people have where they think they can just 'sell anything' for 'whatever price' and expect it to sell.

You have to have a data-based approach KNOWING what it WILL sell for - then adequately sell it at that point.

I stress this every. Single. Day. This is the secret to selling. You just need to know how to do it.

My suppliers will accept returns, but I still have the customer ship the item to me and I do the return. It creates a lot less risk for problems and monthly returns usually don't amount to any great amount.