The return policy of eCommerce stores has two sides to it. On one hand, it encourages the customer to make purchases even when they’re unsure of keeping it. But the flip side brings challenges and added costs for online retailers. Processing customer returns comes at a considerable cost and can account for a huge loss in revenue for the sellers. Strategies for Ecommerce Sellers eCommerce retailers need to take care of the entire procedure from shipping returned items to reselling them. Therefore, they are now moving from offering customers free returns to charging a restocking fee to cover the expenses.
Many companies charge around 15%-20% restocking fee, which can further increase. But should you charge restocking fees as an eCommerce seller? This article will help you understand how the restocking fee works, the reasons for charging it, and how to charge it.
Restocking Fee: An Explanation
Some businesses charge a restocking fee when finland phone number list a buyer returns an item purchased from their online store. Sellers charge this fee to cover the costs associated with processing the return, inspecting the item, repackaging it, and restocking it for sale. The amount of the fee is usually a percentage of the item’s original purchase price. However, the fee Strategies for Ecommerce Sellers charged may vary depending on the retailer’s policies, the type of product, and the condition in which it comes back.
The purpose of charging a restocking fee is not just limited to recovering costs incurred from handling returns but also to discourage frivolous returns in the future. You’ll commonly find this fee prevalent in industries where returned products are difficult to resell as new or require a lot of extra effort and cost to prepare for resale, like electronics, furniture, or special-order items.
Why Do Companies Charge Restocking Fee?
Companies need to recover many types of additional costs that they bear during and after customers return a product. There are various other reasons also for companies to levy a restocking fee on these returns:
Processing Returns: It’s a daunting task for businesses to handle returns, as it involves many steps including inspection, repackaging, and updating inventory. This process requires labour and materials, which majorly contribute to operational costs that the seller must recover to avoid losses.
Discouraging Unnecessary Returns: Strategies for Ecommerce Sellers A restocking fee acts as a barrier and can deter customers from making impulsive purchases or using the product with the intention of returning. It helps the business to reduce the number of non-defective returns and ensures that customers make more meaningful purchases.
Recouping Costs: Many times customers return products in a non-saleable condition. This may necessitate repair, repackaging, or a discount to be offered for resale. The restocking fee aids the company in recovering a share of these costs.
Inventory Management: Returned items how can digital tools and technologies optimize occupy inventory space in the warehouse and you may not be able to resell this stock immediately, especially if these items are seasonal or no longer in high demand. The restocking fee helps you offset the cost of holding and managing this inventory.
Loss of Sale: One of the concerning drawbacks of customer-returned items is that the retailer loses the opportunity to sell that item at full price during its prime selling period. Charging a restocking fee helps you mitigate this loss.
Key Considerations for Online Retailers Before Implementing Restocking Fees
Incorporating the restocking fee can be a challenging task as you may face several risks associated with it. Charging a high fee on returns may lead to losing customers. At the same time, a lower amount may adversely impact your revenue and profit margins.
So, you must take the following factors into account before charging a restocking fee:
Legal Compliance
The restocking fee is taxable under the business and occupation (B&O) tax and falls in the ‘Service and Other Activities’ category. Therefore, there are legalities involved in levying a restocking fee.
So, one of the most important factors to consider while deciding to apply a restocking fee is the terms and conditions under the local laws and twd directory regulations laid out by the government. This is to protect your business from any legal issues.