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.
