Have you rented a car lately? If so, you may have noticed the many fees you could incur should you create additional work for the rental car company. Fail to fill the tank before its return and you could pay up to five times the current price of gasoline. Lose the keys and you'll have to pay a minimum of $250 for a replacement set.
In the past, LBM dealers have said Yes to returns, but No to restocking fees. Now I am seeing a turn to more fees, similar to that of rental care companies. In the most recent ProSales online survey, 67.3% of all participants reported they were charging restocking fees. By profession, the replies break down this way:
- Dealers: 64.8%
- Wholesalers: 82.5%
- Molding/Millwork Specialty Firms: 72.6%
- Short Line Distributors: 71.4%
Next time you meet with your management team, ask them these questions:
- Can we place a burden on our customers when they order the wrong type of products?
- Can we keep the customers from over-ordering by imposing fees?
- If we can reduce our pickups from customers, can we reduce our delivery expenses?
I agree with the two-thirds dealers in the survey who said they have restocking fees. If you'd like to join that group, here are some suggestions:
1) Create a restocking fee policy and post the restocking fee policy at each sales counter in your facility. When first implementing the policy, snail mail or e-mail all customers so they have a copy of the policy and understand their investment should they decide to return materials. In a recent discussion with a pro dealer, he said that out of a possible 900 customers, only three challenged the policy. He felt it was a good move.
2) When creating a policy, ask for advice from your top 10 customers. Get them to buy in early and your transaction to restocking fees will go smoother.
3) Consider a multi level restocking policy:
- Level 1) You might charge between 10% and 15% of the value of the goods for regular stocking items.
- Level 2) If you have a item that might require more labor or special handling, consider a higher restocking fee in the range of 15% to 25%.
- Level 3) For special order items ordered from vendors, consider a 25% or more restocking fee. Of course, if the item is unique and can't be returned to the vendor, you should not take it back period.
4) Watch out for contractors that charge homeowners by the amount of material invoiced rather than the amount of material picked up for a job. This was suggested to me by a dealer during a recent roundtable discussion. He used the example where he would sell 20 squares of siding to a siding installer and the installer would always return on average 25% of the material. When he confronted the installer, the installer admitted to pricing the job by the square and not factoring in the additional material returned. In this case, the dealer began charging a restocking fee of 15% and the builder gladly paid it.
5) Get on board with your vendors' return policy: If your vendor will take back the materials and charge you a restocking fee, don't pass the exact fee on to your customer. Instead pass on the fee plus an additional percentage to cover your pickup and handling costs.
6) Consider not charging a restocking fee to builders that might return materials on their company trucks as opposed to asking you to pick up materials on your own vehicles.
7) Spend more time up front in the quoting process working with your builder verifying quantities and products so that the order is right the first time.
8) If you are absolutely opposed to restocking fees, consider only making a few pick ups per job for free.
9) If you want to impose a fee, consider allowing two % of sales as a pickup on an annual basis, otherwise the customer will pay a fee.
10) Why do we call it a "Restocking Charge/Fee?" How about we become creative and call it a "Shipping Return Variance?"
In my early years, I used to profess, "Your company is only as organized as your customer." Today, by boxing in your customer to help you run your deliveries more efficiently and take on the burden of their disorganization, you can push them from chaos to order. In the end, we want to keep the customer and reduce our delivery expenses.
On the flip side, don't be surprised if you competitor challenges your restocking fees and plays the card to sell products against you. If your competitor attracts all of the unorganized builders in your market, you are (hopefully) left with the crème.
If you are considering a fee, now is the time to impose the fee as your customers are already aware of the high fuel charges and costs associated with deliveries. The trend is moving to more fees. Don't miss out.