When it comes to returns and cancellations, merchants and retailers often find themselves in a tight spot. On one hand, you face additional costs incurred from shipping, restocking, and loss of value. On the other hand, you risk losing both their valuable customers and your hard-earned revenue. This is when Shopify store credit comes into play, offering a smart alternative to cash refunds that not only keeps your revenue in your business but also encourages customers to shop with you again.
To help store owners make the most of this feature, our partner, Koin, has created the ultimate go-to playbook, Shopify Store Credit 101: Innovate with Confidence, for you who want to apply this powerful tool to your business.
In this article, you will have a preview of what is in store for you in this playbook, including the definition of store credit, how store credit is better for your store than other payment methods, and how you can apply store credit in different scenarios.
Introducing Shopify store credit
Store credit is a special monetary value that a specific retailer or merchant gives to customers to spend in their store. Although store credit has been around for a while, Shopify merchants only got access to this game-changing feature last year when Shopify finally rolled it out on their platform.
Why you should use store credit instead of other payment methods
Thanks to its powerful nature, store credit has a significant impact on two of the most important factors for store owners, sales revenue and marketing psychology:
| Store credit | Gift cards | Discounts | Cash refunds | Loyalty points |
|---|
Revenue impact | Keep revenue in the business from cash refunds or additional costs | Temporarily boost cash inflow as a liability from selling gift cards | Increase sales volume but hurt the profit margin | Reducing revenue | No clear impact, although there is evidence that it can lower profit margin |
Marketing psychology | Create a sense of account value and ownership | High risk of fraud and scams | Benefits are apparent, but perceived value toward the brands decreases | Regain financial flexibility, but the refunding process is burdensome | Impatient to accumulate enough points to get rewards |
Purpose | Store currencies for future purchases, retaining earnings in your store | Prepaid store cards for gifts | Reduce price for short-term sales boost | Give back customers’ money for returns and cancellations | Encourage repeat purchases with a ranking system |
Store credit application: Different scenarios and benefits for your store
Store credit opens up many opportunities for your store to generate repeat purchases and engage with customers. In this section, we will look at the most common use case and a creative way to apply store credit to your business:
The common case: An alternative to cash refunds
When customers wish to return or cancel a purchase, you know that there must be something wrong down the road. While some demanding customers would want cash refunds, store credit appears as a smart alternative that not only comforts your customers but also keeps your revenue intact:
Retaining profit: Instead of making the refunds, you offer them a considerate approach that reflects your genuine care, regret, and dedication to fixing the issue. From a customer’s perspective, this is even more valuable than a monetary transaction, while your sales profit stays where it is.
Saving additional costs: Mitigating return costs has always been a big challenge for merchants and retailers. According to NetSuite, total returns for the retail industry are up to $743 billion in merchandise, and that’s just in 2023 alone. Therefore, a solution like store credit also acts as a strategic tool to reduce revenue loss from returns.
Creating superb customer service: When it comes to returns and cancellations, customers want to know that they are appreciated by the business. By offering store credit, you show your customers that you want them to be happy with your products and services. Especially when 67% of customers would avoid buying from a business after a negative return experience.
Eliminating refund processing hassles: Most online transactions involve credit cards. If buyers demand a refund, merchants will have to pay a flat rate or a percentage fee to make this process, which will affect the bottom line. On the buyers' end, they will have to wait for around 14 business days, depending on their card issuers, for the money to go back into their accounts.
The creative way: An incentive to reward customers
Because store credit has equal value to real cash, stores and retailers can use these currencies as a reward to encourage engagement and attract attention from customers:
Referral rewards: When customers refer someone to buy from your store, you can reward their word-of-mouth efforts with store credits. For example, Tesla users can earn up to $1000 credit towards the sale price of a car when they make a qualifying referral.
Email subscribers: If you are building your customer email list, reward subscribers with store credits to encourage sign-ups. According to a Salesfire, email campaigns featuring a fixed monetary incentive experience a significantly higher sign-up rate compared to a percentage discount. Therefore, an email with a subject line like: “20$ store credit when you sign up” will help you attract new subscribers and give them a push to try what you have to offer.
Review incentives: You can also use store credits as an incentive to gather feedback or reviews for your Shopify store. It’s an effective way to keep customers engaged after their purchase and ensure they’re happy with what they’ve received. Additionally, this approach allows you to spot and resolve any issues early on, preventing small concerns from turning into bigger problems.
A Shopify-friendly guide: Getting started with store credit
As a newly-released feature, the Shopify store credit feature can be overwhelming to navigate for those who are not familiar. That’s why Koin has put together all the fundamentals in Shopify Store Credit 101: Innovate with Confidence.
The playbook will cover everything in this article, plus exclusive insights from their webinar with Shopify on how merchants and retailers can use store credit effectively to process refunds, exchanges, and rewards. The playbook will also discover the future trend of store credit and how you can take advantage of store credit for your promotional campaigns.
Unlock store credit potential
Koin - Your store credit powerhouse for e-commerce success
Koin envisions store credit as more than just a revenue-retention tool; it’s the engine that powers a self-sustaining ecosystem where every customer touchpoint counts.
This ecosystem runs on a simple yet powerful principle: every transaction creates value that fuels both customer acquisition and retention. Imagine a customer who keeps coming back to use their store credits. As they grow more satisfied with your brand, they start referring friends and family, earning even more credits and deepening their loyalty. This cycle continues, creating a strong network of loyal customers who actively promote your business.
Final thoughts
Shopify’s store credit feature is quickly becoming a robust tool for forward-thinking merchants. Although it was originally designed for revenue retention, many merchants now use store credit to enhance the customer experience with creative strategies that set them apart from competitors.
Ready to take your store to the next level with store credit? Get your playbook now!
Harry Nguyen
Marketing Specialist at Qikify
Hi, I’m Harry, your friendly neighborhood marketer at Qikify. I am all about providing E-commerce merchants like you with the best insights and industry tips to help you grow your online stores and drive more sales.
Out of office, I like working out at a gym and learning about all things E-commerce and Marketing.
Feel free to reach out to me on LinkedIn. I’m always up for a coffee chat with other marketing folks and store owners to exchange ideas and explore potential collaborations.
