What should a dropshipping refund policy say?

Start with the number that decides the policy

Return shipping from a US or EU customer back to a Chinese supplier costs $15-$30 on a small parcel. Your landed cost on the standard product is $13.00.

The return costs more than the goods. Once you accept that, most of the policy writes itself: for cheap items you refund and let the customer keep the product, because the alternative is spending $20 to recover $13 and generating a two-week argument on the way.

That is not generosity. It is the cheaper option, and it is why “return to our warehouse in Guangdong” policies produce chargebacks instead of returns.

The eight clauses

1. Thirty days from delivery. Not from order. A 30-day window that starts at purchase can expire while the parcel is still in transit, which no processor will defend.

2. Who pays return shipping. The customer, unless the item is faulty, damaged or not what was ordered. Say it explicitly. This is the clause auditors and payment providers look for and the one most stores omit.

3. A return address that is not in China. Use your own address or a local returns hub. Nobody posts a $30 parcel to Guangdong, and asking them to reads as an attempt to avoid refunding.

4. Refund without return below roughly $40. State the threshold. It turns your most expensive support conversations into a single email.

5. Damaged or wrong item: free replacement or refund, photo required. The photo requirement is reasonable, fast, and gives you evidence to claim against the supplier.

6. The EU and UK 14-day withdrawal right. In those markets a consumer can cancel a distance sale within 14 days of delivery for any reason. It is a legal right; your policy can restate it but cannot remove it.

7. Refund timing. Within 14 days of receiving the return, and say how the money comes back. Silence after a return is what converts a refund into a dispute.

8. A working email and a physical address. Consumer law requires trader identification in the EU and UK, and payment providers check for it before your first payout. A missing refund policy is the most common reason for a payout hold.

The contradiction that costs the most

Your refund policy, your shipping policy and your product page must state the same delivery window.

Copying a template that promises 3-5 day delivery while your supplier ships in 12 is the single most common self-inflicted wound in this business. That contradiction is what turns an ordinary refund request into a chargeback, and a chargeback costs $54.73 on the standard order, not the $15 fee people quote — the full breakdown is in what a chargeback costs.

What a good policy does to your numbers

Stores that state the delivery window plainly and refund quickly run 1-3% refunds and stay under a 1% dispute rate. Stores that bury the window run 3-8% and cross the ratio where processors hold payouts.

On $5,000 a month that gap is about $250, and closing it costs nothing but honest copy above the add-to-cart button.

Budget the residual refund cost properly: at a 3% refund rate on a $13.00 landed cost, that is roughly $0.40 per order, which moves break-even ROAS from 1.42 to 1.44. Put it into the break-even calculator as an expected per-order cost.

Where this sits in the launch

Policies go live before your first campaign, not after your first complaint. If you sell into Europe, the GDPR requirements belong in the same afternoon. They are step seven of the 10-step launch roadmap, alongside the shipping policy, terms, privacy page and a contact page — and the broader legal obligations are in is dropshipping legal.

General information, not legal advice. Consumer law differs by country and changes — see our terms.