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:

Amazon sellers “can charge a restocking fee up to 20% of the item price if the buyer changes mind due to buyer remorse or price difference.”

———————————————————————————————————————

eBay sellers “can charge a restocking fee on returns as long as the policy is stated in the listing.” No limits are set.

——————————————————————————————————————–

What about Horsekeeping?

Horsekeeping has a policy page that is posted on the website. Every buyer must check that they have read and accept the policies before they can complete a purchase.

Our return policy is YES – ((except for a short list of non-returnable items)) – we DO accept returns within 7 days of your receipt of an item. If you don’t like something or it doesn’t fit, you can return it for its FULL ITEM VALUE in an exchange for something of equal or greater value – the exchange must take place within one week from our receipt of the return.

However, if you are not going to exchange, but want a cash refund, then the moderate restocking fee of 15% will be deducted from your refund if you paid by credit card. If you paid by PayPal, a flat fee of $10 will be charged for restocking.

This restocking fee covers:

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.

Some people say that the costs associated with returns should just be absorbed by the seller as they are just the cost of doing business.

Well, it wouldn’t take too many returns for a seller to feel the need to raise prices across the board on items or shipping and handling.

Here at horsekeeping, we would rather keep our item prices fair and charge reasonable shipping and handling fees. It wouldn’t make sense for us to penalize the majority of our customers by raising prices or fees to cover the costs of returns by a few. Instead, we feel the responsible approach is to have the very few customers that want to return things pay the appropriate restocking fees.

Returns are costly for a seller. Read my previous post which has some interesting examples: