What happens when a customer asks you to bring in a product you don’t normally have in stock, you order and pay your supplier, and they never come back for it?
That is the risk retailers take with special orders. A special-order item differs from items in normal inventory because it may have been purchased for only one customer. If they change their mind or never come back, you are stuck with another expensive item that you may not be able to sell to anyone else.
A clear special orders deposit policy can help reduce the risk. Thus, the deposit gives the customer a reason to complete the purchase and helps compensate the retailer for some of the money spent on the order. However, the deposit is only one part of a special-order policy. The customer should also be informed of the payment terms, pickup deadline, cancellation policy, and order pickup terms.
A regular item can usually be resold to another customer if the original buyer returns it. A special order is different. The retailer may have bought the item because a particular customer wanted it.
This creates risk for the business. The store may have already paid the supplier and shipping fees, or spent time ordering the item.
If the customer doesn’t pick up their order, they may not get that money back easily.
The situation worsens when the product is customized. A personalized product has little or no value to another customer. Resale may be possible, but it could take weeks or months to find a new buyer.
No single deposit amount fits all special orders. Determine the appropriate deposit size by considering how much the retailer can spend and how likely they are to resell the goods.
Therefore, a lower amount is more appropriate for a refundable product that is easy to sell in case a store cannot deal with it. Meanwhile, apply higher deposits to more expensive, unique, and hard-to-return goods.
Some retailers could use a percentage of 25% or 50%, while others may use the total amount needed for the ordered merchandise. The main thing is that the deposit should be based on the risk level and not the percentage that another company may use.
A 25% deposit may be sufficient if the retailer’s potential financial risk is low. This means the supplier can accept returns, resale of goods is not difficult, or the obligation to pay the full amount is deferred.
A lower threshold will also reduce the customer’s payment burden. Still, the seller must ensure the deposit covers at least a significant part of the costs in case of customer default; otherwise, the retailer will suffer losses.
Therefore, set the deposit for each order on its own risk rather than using one fixed percentage.
A 50% deposit gives the retailer more cash in hand and provides a stronger guarantee from the customer.
The deposit can be useful if the goods sold are expensive and difficult to resell. Thus, if the seller must pay a large amount to the supplier when the item is delivered and the customer cancels the transaction, the deposit will help cover the costs.
Finalizing the entire payment before an order could be suitable for goods or services that are highly personalized or can’t be returned or resold to another customer. For example, products produced with specific measurements or a consumer’s name, or with a unique design, won’t have value to other buyers.
The full payment terms ensure that the seller is protected from a customer who refuses to take delivery of an item. However, the company should disclose this policy explicitly in the contract prior to acceptance of the payment. In addition, a retailer can ask the customer to pay in full before ordering if the retailer must pay the supplier up front for manufacturing or shipping.
A verbal agreement is a poor way to document an understanding. A special-order form provides both parties with a written record of the sale. The form should state the product, price, deposit, balance due, pickup or delivery arrangements, and arrival date, if known.
The word deposit does not necessarily indicate that the amount paid will not be returned. A business must inform the customer of its refund policy before collecting the payment.
If the deposit is non-refundable in certain cases, customers should know this before placing the order. The terms and conditions must state the policy when the retailer cannot obtain the merchandise, the supplier cancels the order, or the customer cancels.
Do not rely only on a small note at the bottom of a receipt. Important terms should be easy for the customer to find and understand. State and local laws can affect what retailers are allowed to keep, so businesses should check the rules that apply to their location and type of sale.
The deadline may depend on the product’s nature and general operating procedures in a particular retail establishment. The company’s management should decide whether to offer a client a certain number of days or weeks to pick up the goods.
Most importantly, establishing a deadline should be consistent. It is better if clients know the conditions of a special order at the time of placing an order, not when the due date is approaching.
Contact the customer by phone, email, or text and give a final date to collect the order. Keep records of those calls and messages as evidence that the customer was told. That gives the customer a fair chance to complete the order and documents that they had it.
When the specified deadline has passed, proceed with taking action in accordance with your special-order policy and state or local law.
Good records can make a major difference when a customer later questions what happened to an order. These records help show that the retailer did not keep the customer’s money without trying to deliver the order. Additionally, this will reduce the burden on both employees and clients, since employees will not have to ask clients about the order details every time.
A retailer may impose a restocking charge when customers cancel special orders or refuse to take the merchandise. But it is the law and the customer contract that dictate what the charge should be and whether it should be applied.
Clear terms are much easier to apply than trying to work out every point of an order after the sale has been made.
Cards are convenient for both parties since they allow them to make a payment without withdrawing the cash or writing a check. At the same time, the card payment gives the seller an electronic confirmation of the transaction.
Yet, even when a seller says a payment cannot be refunded, that may not be enough to stop a chargeback.
That is why documentation is important in a business process. A proper set of documents comprises the order confirmation, acceptance of terms and conditions, payment record, and correspondence with the client.
A customer may dispute the seller’s deposit even if the seller considers it to be fair. In this situation, it is recommended to provide the following information: order form, payment records, deposit agreement, cancellation policy, pick-up notes, and messages with the client.
It is vital to analyze the terms and conditions that the client has agreed to in order to ensure that the business acts lawfully and honestly. If the retailer promised to provide a refund under certain circumstances, and if those circumstances are met, the business should honor its commitment to refund.
An abandonment policy is a set of rules that explain what happens if a customer does not accept a special order.
The policy should define the following for a special order:
Don’t use terms like “forfeited” or “non-refundable” without explaining what they mean and what customers will get instead of their money.
A good special order deposit policy should be easy to understand for both the customers and the employees. Instead of having complex wording, the simplest explanation of how, when, and why deposits work should be provided.
The deposit’s size may depend on an item’s cost, supplier terms, whether the product is customized, and how easy it is to resell the item. The more expensive the customization is and the harder it is to sell the product to another customer, the bigger the initial payment should be.
Retailers should have a procedure for customers who do not pick up. The company can give a call or send an email or SMS to the customer and ask them to come and pick up the order by a specified date. If the customer does not show up on the specified day, the company can proceed to take any action that is allowed under its policy and the law. The business should keep a record of all such interactions to prove that the customer had an opportunity to pick up the order.
A written policy will also help the staff handle special orders. The employee should know how to explain to the customer the rules about the deposit, cancellation of the order, refunds, and pick-up of the goods. This will reduce the possibility that different employees give different information to customers. The rules must be updated if necessary since the laws that regulate deposits, refunds, cancellation of orders, and unclaimed property may vary in different jurisdictions. This policy will help to minimize the risks and ensure that there are no misunderstandings between the company and customers.
A special order can be a financial risk to a retailer if the business is left with the obligation to pay for the product while the customer never takes it home. A well-drafted special order deposit policy will mitigate such risks and help establish expectations between the buyer and seller.
The right deposit is not always 25%, 50%, or 100%. It should be decided by the product’s cost, supplier terms and conditions, modification level, return policy, and resale potential.
It depends on the store’s policy, terms of sale, and applicable law. The refund policy must be disclosed before a consumer places an order.
A store may be able to charge one if it is clearly disclosed and permitted by applicable laws.
There is no single time limit for every store. The holding period can depend on the store’s policy and local laws.
