I always do a full refund, no discussion. I consider it a part of the cost of doing business. (It doesn't mean I like it though ).
Only time I did a partial refund, was on an order that returned to me. It appeared the buyer had moved but didn't update his shipping address to his new address. Even then, I refunded the payment fees but not the shipping fee. This seemed fair, and the buyer as well agreed this to be a fair solution.
Found out the other day, you can not cancel an order that has not been fully refunded. Got an 8 cent order + $5.25 shipping, customer paid, then asked to cancel. I tried keeping the fees, but could not cancel the order, so I just fully refunded, ate the fees, and finally cancelled the order.
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Normally I would just cancel and move on, but I don't really feel I should end up out of pocket over this.
Only time I did a partial refund, was on an order that returned to me. It appeared the buyer had moved but didn't update his shipping address to his new address. Even then, I refunded the payment fees but not the shipping fee. This seemed fair, and the buyer as well agreed this to be a fair solution.
Maybe I should ask nicely too