A restocking fee is charged by retail manufacturers if you return an already purchased product. This Buzzle article will explain what you need to know about restocking fees.
“Our drivers carry mobile scanners that use software to detect expired or fake IDs. If you aren’t 21, you will not be charged for the order but you will be charged a USD 20 restocking fee.”
― Marques Warren, Owner, Downtown Spirits, Seattle
While buying a product, there may be situations where we may discover that it isn’t exactly serving the purpose it was intended to. Or you might find some other defect. Whatever the reason, the first thing you want to do at such times is to return it immediately. This however, is easier said than done, for retailers are actually at a loss if the product has been partially used. In order to pass on the extra cost to be incurred on the returned product (by means of packaging and shipping) to the customer, retailers charge a stipulated percentage of the price. This price is called a restocking fee. The paragraphs below will explain what restocking fee is and the related terms.
The Concept Explained
- If you watch television or pay close attention to sale hoardings, you must have witnessed several ads that visually scream “Full refund within 20 days of purchase” or “If you do not like it, you’ll get a full refund”. Well, excuse my candidness, but they are completely false.
- Thinking of it from a logical perspective, what profit would the seller earn if he returns all your money and keeps the product for himself? It is just a marketing tactic to get the consumers to buy the items.
- Coming to the point, if a consumer does not like a product (after purchase), he can decide to return it.
- However, this would mean that the sellers have to recheck the item, repack, and sell it again at a reduced price, all of which consumes time as well as money.
- This is especially true in case of electronic goods, since they cannot be sold as a brand new piece if the customer in question has rejected it after examining its working procedure.
- In such a case, retailers cover up the extra costs by demanding a price from the consumers when they return the product. This price is called a restocking fee.
- It is usually a percentage of the selling price, say 20% or sometimes, even 50%.
- The underlying theory behind charging this amount is to maintain the existing profit margins.
Restocking Fee Laws
A number of policies apply when charging restocking fees. They are mentioned below:
- Some retailers charge restocking fees only when a special item is being purchased.
- What these special items are, is dependent on the retailer himself.
- Some others have rules that exceed the requirements of the state.
- Some of them charge fees only if the item has been opened.
- For these reasons, a customary fee range is set by many companies.
- Most electronic and electrical goods manufacturing companies charge about 15% to 25% as the restocking fee.
- Items ordered online are generally shipped to the customers.
- In such a case, the company may make a mistake by shipping the wrong product. For instance, the customer might have ordered the first three books of the ‘Harry Potter’ series, and he would have received the next three consecutive books instead.
- Since this is solely the company’s fault, no restocking fees are applied.
- This practice however, is not followed in all the states.
- If the product that was ordered is defective (either before shipping or during shipping), the company cannot charge a restocking fee.
- The customer is notified about the same and is given a proper place and time where he can return the product.
- If the customer does not adhere to the stipulated time range, the company will need to forcibly charge the fees.
- Many states follow this law stringently.
Verification Prior to Sale
- The return and fee policy needs to be made very explicit to the consumer.
- Before ordering or purchasing, it should be clearly mentioned that a particular percentage of the selling price will be charged as a fee if the product is returned.
- Most consumers prefer to be aware of the return policy prior to purchase.
- This has to be displayed/printed at a proper location.
- When electronic goods like laptops and computers are opened and returned, they cannot be resold as a new piece.
- This causes a loss for small-scale ventures.
- The retailer should then sell it for a discount, and all the records of the previous buyer should be erased.
- It gets even more difficult if the buyer does not return certain accessories, like pen drives, headphones, etc.
- At such times, the restocking fees can be very high, since the seller has to either replace the items, or sell it for a considerably low price.
Some More Important Points
- Every state has different laws with regards to stocking fees.
- Some laws favor the consumer, and some favor the retailers.
- If the retailer is charging a restocking fee according to the store policy, the amount is subject to the business and occupation (B&O) tax, which comes under the category of ‘Service and other activities’.
- While reporting for tax, the seller may deduct an allowance amount.
- If the consumer feels that the fees were charged unfairly, he/she can report to the local Better Business Bureau (BBB).
- Even in case of electronic goods, if the item is unopened and has not been tampered with (returned with full functionality), no fees can be charged.
Ideally, the law gives the consumer a legal right to cancel a purchase order. This is done so that the consumer gets time to examine the product and check for himself if it is fully functional. With small businesses however, every penny counts, and hence restocking fees are charged. As long as they comply with the state laws, it is fine. If not, the consumer can certainly file a complaint.