Determining Whether You Should Charge Restocking Fees
by Carrie Hinkel on November 12th, 2007
Some companies accept a return on a product, but will then deduct a portion of the price (usually between 10% and 20%) for restocking fees. Over the years, restocking fees have gotten a bad reputation – customers think they are just another way for retailers to unjustifiably keep their money. However, when you take a closer look, restocking fees are really just ways for retailers to recoup some of the costs they incur when accepting a returned item.
There are definitely times when a restocking fee is warranted, and other times when it is not. Here are some examples of each:
A restocking fee should be charged when a customer:
Returns used merchandise - When a retailer agrees to accept merchandise that has been used or tested, that means they can no longer sell it as new. So, that product either ends up in the trash or sold as refurbished. Even with the restocking fee the retailer will, most likely, still lose money.
Returns opened merchandise - For certain items, once the packaging is opened, it can no longer be sold as new. Think of items like software and games that have plastic wrap on them. Also, for products that have been opened and with pieces moved around, these also cannot be sold as new. Again, they will either end up in the trash or being sold as refurbished.
Changes his or her mind - Whether or not a customer even opened the box, there are still plenty of additional costs that the retailer will incur, such as handling of the return – both over the phone and in the warehouse. These costs may not be as much as the other two examples listed, but they are still costs.
A restocking fee should not be charged when a customer:
Returns defective merchandise - If your product is defective, then your customer shouldn’t have any other costs associated with your product. If the item was defective upon receipt, your customer may decide he or she wants a replacement item or their money back. Since the problem was on your end, your company should cover all the costs associated with fixing the problem.
An important rule to follow: If you charge a restocking fee,
you MUST disclose that to your customers.
By law, you cannot just decide to charge a restocking fee after the customer purchased your product. Your customers must know about it before they place an order. You should state clearly on your website if you charge a restocking fee and what the fee is. Back in 2005, the Department of Consumer Affairs fined seven large companies (including Best Buy, Sharper Image and Bombay Company) for charging customers “restocking fees” without clear disclosure.
So, if you are thinking about charging a restocking fee on your website, you may well be warranted to do so. Just decide on a fair percentage for certain circumstances and clearly disclose your restocking fee policy on your website. That should help to avoid dealing with any upset customers regarding your policy.