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As affiliate marketers, we look at a number of factors to determine which programs we want to work with. Among these are obviously the type of products, the reputation of the merchant, the EPC, and how the program is managed. One other metric that is often debated is the Reversal Rate, shown only in some networks. The reversal rate can be an indicator of very good or very bad things, but you have to know what you are looking at to figure that out.
What is the Reversal Rate?
The reversal rate is quite simply the percentage of affiliate sales/leads that were reversed for any reason during a time period. I like that ShareASale shows both the 7 day and the 30 day reversal rate. You can see these even before you join the program.
Why Do Commissions Get Reversed?
Commissions can be reversed for any number of reasons. The most common is usually that the order was cancelled either before it was placed or after the customer received the merchandise. This would include orders where the credit card could not be processed. Orders can also be cancelled if they were duplicates for technical reasons or for fraud. Less commonly, a commission may be reversed because the customer exchanged the merchandise for a different size or color.
What Does the Reversal Rate Tell You?
In some cases a 0% reversal rate may tell you that the merchant never reverses sales even if the orders are cancelled. There are some merchants that do this for good will. We like those merchants. But I won’t list them here because I don’t want to encourage fraud.
A 0% reversal rate may also tell you that the merchant just does a great job with customer service and has a shopping cart that won’t process orders if the credit card cannot be used. These are merchants that are great to work with as well. There is little chance that you will end up pushing a lot of sales and then having to worry about having them cancelled.
So if a 0% reversal rate is optimal, does it mean that you should not work with merchants where the reversal rates are high? Absolutely not because there might be a great reason for those reversal rates. They key is to find out why those rates are so high. That requires communicating with the affiliate managers. Compare two programs I am in that both had reversal rates that bothered me this week:
- Amish Furniture. Reversal rates of 77.78% and 72.73%. I contacted the Affiliate Manager. It turns out that they had a technical glitch in their shopping cart such that if they hit the back button after checkout, it would fire the pixel again. Affiliates who saw the sales in their accounts would have realized it because they would have seen the same order numbers showing up over and over again. I didn’t have any sales so I didn’t know this. But the affiliate manager answered my question and I am satisfied with that. Affiliates are not losing any commissions that they earned.
- CafePress. Reversal rates of 30.67% and 25.54%. In this case, I did see a number of my own sales reversed, and using subid tracking I was able to tell that they were across all of my different niche sites (thus not isolated to any products in particular). I checked for duplicate sales and none of them were. The reversals were all marked as “cancellations,” so fraud was ruled out. I contacted the affiliate managers and they cannot provide me with any other reason except to say that the merchant in this case just reported them as all cancelled. This throws up a red flag for me because a merchant should not have a quarter to a third of its sales being cancelled unless their products are bad or people are targeting them for fraud.
These are just two incidents that I have encountered with reversals in the last week. That said, it’s not the first week I’ve dealt with reversal stats. I’ve seen Viator commissions reversed with reasons given each time, and I’ve talked to the Paul’s TV affiliate manager at one point about duplicate orders in their system. A couple of years ago Emitations was reversing sales where customers used coupon codes that were listed at the top of their site. I worked with them to have those codes removed from affiliate landing pages. As a loyalty site, I’ve had to work with Shoebuy on reversals for even exchanges.
What Should You Do If You See High Reversal Rates?
Reversals happen. How the merchants deal with them should give you the information you need to determine whether the program is viable for your purposes. The more information you can get about why the reversal numbers are what they are, the better decision you can make about 1) whether to promote the program at all, 2) whether to promote only certain programs, and 3) if there is a way to promote the program that will minimize reversals.
Do you consider reversal stats when you evaluate programs? To what extent do they factor into your decision-making process?
Hi Tricia, thanks for elaborating the facts of reversal rates. You described the terms beautifully and I liked it a lot.
Great Post Tricia
I bet a lot of affiliates can see the amount of fraud but don’t know to click on the little pie chart and it will show them more information about what type of reversals are all about.
We recently had a program we manage get hit with credit card fraud and we had to reverse a bunch of transactions. If you saw the 60% reversal in the 7 day and eventually in the 30 days it really didn’t tell the story unless you clicked on the diagram and it showed that credit card fraud was the problem. Affiliates only saw that high number and our program took a recruiting hit for 30 days.
Speaking of the Viator affiliate program (Which I am a manager) People change their travel plans/days and usually when someone cancels their order they book something else so the affiliate will get credit for the new sale so they really aren’t losing anything. Thanks for mentioning the program. 🙂
And that’s exactly why I don’t mind a few Viator reversals. When affiliate managers actually communicate the reasons for the reversals, it’s worth working with the programs.
Imho, in general if merchants had 25%+ return rates/cancellations they’d go out of business. Realistically you’d expect a min of 0% up to max of 7%(?!) returns; the affiliate channel reversal rate shouldn’t be too far of that number either. If it is higher than 7%, I’d be worried and follow up to see what’s up.
As an affiliate the reversal rate was always a vital piece of information. In general if I saw anything above 5% I was skeptical. A few reversals here and there for returned products, cancelled orders, credit card fraud, etc. are totally acceptable but if 20% of the orders are getting reversed? Something is wrong and I want answers.
I think 5% is fair as well. It’s hard to draw a line, but you definitely know when something is way beyond it!
Much will also depend on (a) the niche, and (b) the merchant’s return policy. I’ve read that Zappos’ return rate, for example, averages some 35%.
What did you register with ShoeBuy, Tricia?
I just did a quick tally of Shoebuy sales over a reasonable sample size and it looks like our reversal rate was 32%. Shoes are definitely higher, especially when companies have free shipping and free returns. But the free shipping and free returns helps increase sales, so I can’t complain. Interestingly, 6pm does not do free returns or exchanges and our reversal rate with them over the same period (but a little smaller sample) was 12%. Same set of customers but a higher number of sales and almost twice the commission from Shoebuy. It makes it worth the risk.
Interesting data. Thank you for it, Tricia! It’d be interesting to see how affiliate conversion rate differs (in programs with and without free returns).
Good post, Tricia. Here are a few more thoughts to consider:
1) Very few affiliate networks display reversal rates (especially to prospective affiliates). I wish more were doing this.
2) Without this important metric, it is nearly impossible to figure out what exactly to expect from an affiliate program (e.g.: if their prices are competitive, and they convert at, say, 3%… a 75% (assumed) reversal rate, would actually make the true “conversion rate” drop to 0.75%).
3) A number of my clients (whose affiliate program we manage, or have managed in the past) actually do have a “no (affiliate) reversals policy” (valuing the long-term affiliate contribution to their brands). Such programs are certainly a great place to start; but, as you have mentioned, reversals do happen, and it’s understandable when merchants reverse (or adjust) affiliate commissions. Provided they are honest reversals (and not abuse of the system), and they’re transparent about the reasons (as your Viator’s example), you can still work successfully with the merchant.
You are right about the networks, Geno. I don’t understand why more of them do not share that information. It’s in their system already and just a matter of displaying it. They give plenty of other stats that people do not always use properly, so it cannot be because they fear that affiliates will not know how to interpret it. It almost feels like they are hiding something when they continue to suppress it.
I wanted to ask which others besides Share A Sale display reversal rates.
Unfortunately, they are the only ones I know for sure who give that information. I have no clue why!
Carrie, another affiliate network that displays reversal rates is AvantLink.