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-enter
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. Our Wire Break locator is one of
those items.
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.
