A merchant, who has recently started an affiliate program emailed me the following question:
Affiliates are currently being credited their commission at the moment of sale. What if an order gets canceled, or we sell something that is no longer in stock?
First of all, make sure you it is not possible for the end user to order something that is out of stock. Once it sells out, it should be removed from your website, your affiliate data feed, or at least the order function should be disabled.
Secondly, the short answer to the above question is no, you do not have to pay affiliate commission on orders that either get canceled by the customer, or are in any other way invalid for you. In fact, it is a good practice to clarify in your affiliate program’s Terms and Conditions that you compensate affiliates for valid sales/orders/subscriptions/leads, and clarify exactly what “valid” means.
Normally affiliate transactions are being voided if/when any of the following behaviors are registered:
- Payment authorization failed
- Fraudulent sale
- Returned order or unclaimed shipment
- Repeated order
- Canceled order
- Fraudulent transaction
- Test transaction
- Self-referral (if you’ve specified in your T’s and C’s that you do not allow it)
- Test transaction*
- Order non-fulfillment
The list may be longer, depending on your affiliate program agreement/restrictions, but the above list covers the most popular reasons for reversals. Beware that an affiliate may request you to provide proof of the above. Do not leave such affiliate requests unattended, as this will undermine their trust in you and the transparency of your affiliate program. *Also, when you place a test transaction at your website, and you do not want to test a particular affiliate link, make sure you have cleared your cookies before placing the order through. Otherwise, a commission may be credited to the affiliate account whose link you have clicked last.
A word of warning to close with: do not abuse your right to void sales. Some online industries – hosting, for example – are sadly known for a large volume of reversed affiliate transactions. Excessive numbers of such reversals often breeds suspicion in affiliates’ minds, thus compromising the issue of trust, a cornerstone of any merchant-affiliate relation.