Should I provide a free return label on Etsy when an exchange falls through?

Hi! If your Etsy listing/shop policies clearly say free exchanges but buyer pays return shipping for refunds, you’re generally OK to stick to that—as long as the item arrived as described and you didn’t explicitly promise (in Messages) a free return label no matter what. An exchange not working out because the replacement is out of stock doesn’t automatically make a refund return “seller-paid” under Etsy rules; it’s still a return-for-refund scenario unless you choose to make an exception.

That said, whether it’s better practice to cover return shipping here depends on why the exchange fell through and what you want to optimize for (profit vs. customer experience/risk of a case/negative review):

• If the buyer is returning simply because they changed their mind (fit/style preference, etc.) and your policy is clear: it’s reasonable to say they can return for a refund, but they’ll cover return shipping.
• If the buyer only wanted an exchange and you can’t fulfill it due to your stock, a lot of sellers will cover the return label as a one-time courtesy because the alternative (buyer paying to send it back) can feel unfair to the buyer and can escalate fast. It’s not required, but it can be smart “damage control,” especially if the item value/margin supports it.

If you want a middle-ground that’s still consistent with your policies, you can offer one of these options:

1. Buyer pays return shipping (policy-based) and you refund the item price when it’s received/inspected.
2. You provide a label as a courtesy this one time, and make it clear it’s because the exchange couldn’t be completed due to stock—without changing your general policy.
3. Partial shipping credit (e.g., refund up to X amount of return postage) if you want to cap the cost.

A simple message you can send (policy-first, but calm):
“Totally understand. Since we’re no longer doing an exchange, this would be processed as a return for refund, and my shop policy is that return shipping is covered by the buyer for refunds. If you’d like to proceed, please ship it back within my return window and I’ll refund once it arrives in original condition.”

Or if you decide to cover it as goodwill:
“Since the exchange couldn’t be completed due to the replacement going out of stock, I’m happy to provide a prepaid return label this time as a courtesy. Once it arrives back in original condition, I’ll issue your refund.”

If you tell me roughly your item price/margin and whether the buyer is in the US (returns cost varies a lot), I can help you choose the option that’s most likely to end the situation cleanly without costing you more than necessary.