What is a RESTOCKING FEE?
The restocking fee is the amount that is charged by the seller for the acceptance of any merchandise that is being returned for a refund. (Black’s Law Dictionary)
Are retail sellers in the United States required by law to accept returns?
No. In the United States there is no requirement or law that says that sellers must accept returns.
In addition, it is perfectly legal, acceptable, and customary for a retailer that DOES accept returns to charge a restocking fee.
The retailer might not charge a restocking fee if the customer is exchanging the item for something else but might charge a restocking fee if the customer wants a cash refund.
In some locations and instances in the US, it is required that a seller conspicuously post or require that a buyer read the return policies before the buyer can place an order.
Why do retailers charge a restocking fee?
Retailers charge a restocking fee when someone returns an item and wants a cash refund for several reasons – all related to the seller trying to recover part of the costs of a sale that has been reversed.
1. When someone places and pays for an order, the seller pays up to 5% to have that payment processed by a credit card processor or PayPal.
2. When the seller issues a refund to a buyer, the seller pays up to 5% for the credit card refund transaction. (Pay Pal transactions do not charge a fee for a refund.)
3. Often a seller provides free shipping or low shipping to customers but when an item is returned, the seller is out the extra shipping and handling that may have been provided.
4. When the item is returned, the seller must determine whether the item is still salable as new and unused. The item must be prepared for resale and put back up for sale. In the case of internet sales, this means relisting the item. The time and handling costs for this are part of what the seller is trying to recoup.
5. If an returned item is determined to be unsalable as new and unused, then it must be sold as used, usually at a reduced price.
6. While the item is in transit between seller and buyer and back to the seller, the item is off the market and unable to be sold. This is especially relevant with one-of-a-kind items such as art and hand made jewelry.
What is a customary restocking fee?
If a retailer accepts returns and the customer receives a return authorization from the seller, the restocking fees usually range from 10-30% depending on the circumstances.
If a customer does not follow a retailer’s return policies, there may be no refund at all.
To give you an idea of how various internet business use restocking fees:
- our credit card processing fee to accept your initial payment
- our credit card processing fee to issue your credit refund
- the excess shipping and handling fees that we did not charge you (we charge low shipping or provide free shipping and often pay for the balance of the shipping, the insurance, the signature confirmation and other packaging charges out of our own pocket)
- our handling of the returned item to get it ready for sale again
- possible lowering of the price of the item (we often put returned items as used in the Pawn Shop or Bargain Barn)
- our webmaster’s fee to relist the item.
If you are selling your jewelry, read this
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