When companies have return losses such as customers sending back obviously worn items, or new items that have been opened and removed from their factory package that now has to be returned to the factory, the company must pass on the loss in some way. Ultimately they raise their prices so that everyone in the consumer buying pool pays the price for return abuses across the board. This is a standard pattern in the retail world that can be traced back for many years. Why do you think that the price of everything continues to go up?
Other things to consider about restocking fees:
1. Companies must pay a transaction cost or fees on every credit card transaction that a customer makes – both at the time of the purchase and the time of refund.
When a customer returns a product, for whatever reason, the company still must pay a transaction fee that ranges in percentage points from 1.75% to 2.85%. Which is a loss to the company ultimately.
2. Humans must deal with any returned products.
So many customers ask why there is a 20% restocking fees when all it takes is to put the product back on the shelf. They often ask – how hard can that be.
Think about that for a moment.
When a return package arrives it has to be logged in by a human. Another human has to open the box, inspect and verify that the return is qualified for a refund. Once the return has been inspected (and is deemed unused) the human has to enter the information for the refund into the customer’s account. They have to follow up to make sure that the refund is processed.
After the return is completely processed it is then “repackaged” appropriately. This can mean a variety of things from replacing the original packaging or returning it back to the factory for new packaging. This requires a shipping cost be paid both way. The cleared item must then be re-entered into inventory in the software that manages the invertory. Once the inventory has been updated the item must be bagged, tagged and then added to its original bin area.
As you can see, receiving returned products is not a simple matter of taking the box, opening it and sticking the returned product on the shelf.
It is also important to note that most people who have jobs expect to be paid for the work they do. Therefore every return that requires human intervention is a return expense.
While we wish that some of the processes for returns can be automated – and many have been – the human component will never completely be removed. Which of course means that it costs a company money to pay people to manage returns. We also wish that Restocking Fees were not necessary but when we did not have them, we consistently lost money and it could be traced back to returns. Many companies would prefer to avoid Restocking Fees but do want to remain in business.
The Lost Sale Factor
Besides the transaction fees and the human labor cost of processing returns there is also the “lost” sale factor. When a customer buys an item from an online store and they keep it in their possession for 14 days and then ask for a return, it means that the store can not sell that item yet it must ultimately accept it back, the company has actually lost sales on that item in the interim.
Necessary Evil for both Companies & Consumers
When you weigh all the various cost factors into returns, it should be clear that restocking fees are necessary evil in the retail world – both brick and mortar and online.
If companies do not have restocking fees, check their prices. You will probably discover that the majority of companies that don’t have strict return policies or charge restocking have much higher prices than companies that are known for offering great pricing options.
Are there exceptions to restocking fee?
All reputable companies will not charge restocking fees when the return is due to the company’s fault. That means if the wrong product was shipped by mistake or the products are damaged during shipping (which will often be investigated by UPS).
All of the major shipping companies have learned all the major “purchasing over the internet scams” and have many procedures in place to guard against claim of damage that are an attempt to get a free return.
Savvy Internet Companies Regarding Returns
Internet companies have also become very savvy at spotting returns that are not a 100% unused, regardless of what the consumer says. Some companies refuse to take back some types of items that have history of return abuse.
While Restocking Fees charges can be annoying, ultimately they protect both consumers (from paying higher products charges due to return abuse) and companies that are trying to provide an honorable service and run a profitable business.
No companies ever get rich from Restocking Fees. If anything, it helps them break even. Everyone wins – the consumers do not pay unnecessary higher prices, companies stay in business and people have jobs to go to.