pshea - 4:35 pm on Jul 20, 2012 (gmt 0)
Charging for re-ship: You have to judge this by your cost and the nature of your products or business.
Since you offer free shipping, it's almost impossible to open up the can of worms to charge for address input errors. Do you utilize address verification? If so, then shouldn't a bad address been pre-flagged?
If you do decide to charge, make sure you create an easy-to-understand explanation and include some sort of "Buy Now" button directly to the re-shipping charge in the email. Let the customer input the charge.
I do think it is important to create a well-written explanation that doesn't focus on the customer's error, many customers are easily affronted; the last thing you want is an insulted customer who thinks you are scamming for more money. A photo the returned shipping label is always good.
Restocking fee? Yes, it's become very common and customers do understand it. The return fees have to be easy to find on your site. Refunding customers promptly takes some of the sting from the fees.
I keep my re-stocking fee at 8%, which is a nice friendly number that covers my cost and doesn't create enemies.