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Returns: Deal With It!
Robert Casto
2© 2012 SellersToolbox
Introduction
• Software developer for 18 years• Worked for Amazon from 2004 to 2006• Member of the Product Advertising API team• Used to be called E-Commerce Services (ECS)• First external web service Amazon made• Developer for Frontgate.com & GrandinRoad.com• In 2009 wife started selling for extra money• Wrote software in evening to help business• In 2011 started working on SellersToolbox
fulltime
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Why discuss returns?
• A problem that affects everyone• Typically disliked by retailers• Frequently ignored or put off to later• It affects your bottom line (profitability)
• Why do businesses ignore their returns?
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Returns are a pain!
• Not a pleasant part of retailing• Time consuming. Got better things to do.• Processing them is complicated• More fun to look for products to sell• Easier to write off as a cost of doing
business• Too many items to deal with• Low ROI for the work involved• Too busy researching or scouting
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Is it a “big” problem?• NRF says 8% is average for the retail
industry sales• Some markets are much higher than this• Zappos sees 35% returns, 50% for best
customers• Are EBay and Amazon accepting too
many?– Return any item, anytime, for any reason.– Don’t like it, doesn’t fit, 365 days & free
shipping– 180 days and to any retail store– “Guaranteed to last”. Anything, anytime, any
condition.
– No receipt and any length of time– Industry sees lenient policies improving sales
overall– So trend is to provide easier and longer policies
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Are returns lower online?
• I see about 2.5% of sales get returned *• That’s much better than regular stores• Possible reasons for the lower percentage– Difficult to return items from a other sellers– Not possible to fake receipts for a purchase– Usually have to pay shipping to return item– Different type of customer / clientele
• Size of you problem depends on # of returns
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How many returns?
• Using an average return rate of 2.5%• 25 out of every 1000 sales or 3 out of 100• Quick way to calculate your return count– Divide # sales by 10 and then divide by 4
• Examples …– 500 sales per month: 500 / 10 = 50, 50 / 4 = 12.5– 10 sales / day? 70 / 10 = 7, and 7/4 ≈ 2 / week– 100 sales / day? 700 / 10 = 70, and 70/4 ≈ 18 / week– 1k sales / day? 7k / 10 = 700, and 700/4 = 175 /
week
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Should you care?
• If you are a larger seller, most definitely• For small sellers, could be a large hit on
profitability• These items are worth something
– Average sale is $32.62 (looking over multiple years)– If cost is 1/3rd, then that is almost $11 per item
• Doing nothing ensures that money is lost• Prices will continue to fall• Get money out of them to put towards new
inventory• Just need to know where to start!
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Discussion Outline
How Returns are ProcessedHandling ReturnsReimbursement
Minimize NumberRecouping Costs
Outsourcing
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The Return Process
• Returns are the opposite of sales• Items follow a different path from the
customer back to the seller• This is known in the retail industry as
Reverse Logistics• It is a $100 Billion industry
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Sale: Merchant Fulfilled
List Item
SHIP
ORDER
Receive Order
Deliver
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Return: Merchant Fulfilled
REQUESTRETURN
Approve
Ships Item
Delivery
Receive Notice
PERMISSIONPRINT LABEL
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Sale: Amazon FBA
List Item
Order
SHIP
Deliver
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FBA handles the return processs
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Return: Amazon FBA
Pickup
Approves
Request Return
Collects& ShipsShips
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Collection Process
• Return label has a special zip code• Post office sorts these items to a special
bin• Couriers pick up items while doing
deliveries• Returns are consolidated to sorting
facilities• Items are shipped motor freight to retailer• Amazon has them sent to Lexington KY
and Las Vegas NV, their main return processing centers
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Disposition: Amazon FBADelivers Collected Customer Returns
Determine
Condition
Sellable
Back intoinventor
y
UnsellableAmazon
Responsible?
Resell
Y
N
Reimbursement
Unfulfillable
Removal Order
PERCENT
FBA CENTER
41.6% LEX221.0% LAS217.1% CVG2
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Amazon will refund me?
• Amazon will reimburse when it is their fault– Damaged while at a fulfillment center– Lost in a fulfillment center– Missing for 30 consecutive days– Carrier lost or damaged the item
• When shipping to the customer or as a return
• What is not their fault– Condition of product not as described– Product damaged by the customer
• Items may end up being sold by
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Amount Reimbursed
• Based on their determination of unit value minus FBA and Amazon fees
• Factors in value– Sales history– Your price– Other seller prices
• Will use table at the right if there is not enough info
• Limit of $2000• Get insurance on items
above $2000
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Calculating Reimbursement
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• Amazon does not reimburse for customer damaged items• Amazon makes mistakes too so you need to watch them
• Example – $180 Norelco Arcitec 1050 shaver got returned– Used removal order to ask for the shaver back– Got all the parts in a zip-lock bag– Customer said the item was defective– I asked Amazon to reimburse because the item had been used
• Make sure you cite the rule and where it can be found in the case
– They asked for pictures of the item and shipping labels– They granted my request and reimbursed the sale– I paid $90 and would have been out that and fees– Instead, I received $149.85 so $30 was taken out in fees– My net profit was $59.85, just as if the item had been sold
It pays to ask!
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$200 Norelco ShaverProduct Label
Shipping Label
PackingSlip
Front Back
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Improving the Odds
• Take pictures to document condition– of item returned from a removal order– of shipping box to show any carrier damage
• Monitor the status of each return in Seller Central– You need to ensure Amazon doesn’t miss things– Set aside a specific time each week to review them– For lots of returns, use 3rd party software to help *– When creating a case, include details about return
• Order ID, Order Date, ASIN, Return Date, links, etc
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Removal Orders
• To create a removal order– Log into Seller Central and click on
Manage FBA Inventory– Sort table by Unfulfillable– Select items you want to remove– Change dropdown and click Go
• The next screen lets you choose theaddress where items will be sent. It also lets you see what items you have thatare unfulfillable so it is easy to select them.
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Removal Orders
• Takes 10-14 business days to pick, pack, & process• 30 days during peak times: Feb, March, Aug, &
Sept• Large quantities may be packed on pallets• Email is sent when all items have shipped• Any address can be used for where returns are
sent• Items will come from different fulfillment centers
and may arrive spread out over many days• Cost is $0.50 per item and $0.60 for oversized
items
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Removal Settings
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Avoiding Returns
• Only sell high quality products• Be conservative when assigning condition• Make sure the product description
matches what you are selling– On Amazon, these pages can change so you
will need to monitor them
• Decrease time between order and delivery• Package product carefully for shipping
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ExampleShippingProblem
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Collision Damage
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Forklift Damage
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Dropped Damage
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Why are items returned?• Out of your control– Damaged during shipping– Damaged by the warehouse– Found a better price– Accidental order– No longer needed
or wanted– Defective / Does not work– Buyers Remorse– Unhappy with quality
Manageable―Different from website
description―Defective / Does not work―Missed delivery date―Different condition than
expected
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Top Return Reasons
PERCENT REASON
23.7% UNWANTED_ITEM
17.5% DEFECTIVE *
10.6% NOT_AS_DESCRIBED
6.0% ORDERED_WRONG_ITEM
4.6% APPAREL_TOO_SMALL
4.0% SWITCHEROO
3.8% APPAREL_TOO_LARGE
3.0% UNDELIVERABLE_UNKNOWN
2.7% DAMAGED_BY_CARRIER
2.3% DAMAGED_BY_FC
2.0% CR-UNWANTED_ITEM
Only 15% of returns
can be fixed!
Only 5%are due to damage
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Product Returned Defective?
* 6-8% of all returns are due to fraud
Some customers will try to avoid paying return shipping. They will indicate product is defective, but you will get back a new item.
Thare187: They don't price match anymore. Just say it's defective. I used to return games to Amazon that I would get free from yourfree360games.com. Never has a problem.
Some unfulfillable items will be new. No way to know until you get them.
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Disposition ofReturns from Customer
PERCENT DISPOSITION
35.9% SELLABLE
28.4% DEFECTIVE
23.3%CUSTOMER_DAMAGED
9.1% DAMAGED
3.4% CARRIER_DAMAGED
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Top Returns by Product Group
PERCENT PRODUCT GROUP
13.5% Toy
12.0% Baby Product
11.1% Shoes
10.4% Kitchen
6.8% Health and Beauty
6.0% Apparel
5.0% Beauty
3.7% Home
3.1% Book
2.3%Personal Care Appliances
2.2% CE
2.1% Sports
2.0% Drugstore
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Top Centers for DamagePERCEN
TFBA
CENTER23.4% PHX22.5% IND15.8% ABE10.5% CHA6.7% SDF6.5% LEX4.6% TUL2.7% PHL2.5% RNO1.8% LAS1.8% CVG
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Return Condition: New
• Around 40% of items returned are still new– Customers don’t want to pay return shipping
so they say it was defective– Amazon’s policy is very lenient and favors
buyers– Check that item is still factory sealed
• Include with your next FBA shipment or put them back into the regular shipping process
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Return Condition: Used
• About 20% of items will have been opened and then returned– Customer didn’t like the color, fabric, something?– Amazon marks all items unfulfillable that come
back in a condition worse than how it was sold– Check that no parts are missing– Contact manufacturer to try and buy missing
parts or see if they are for sale somewhere
• If no parts are missing, sell on EBay or Craigslist
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Light box damage: Like New
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Light box damage: Like New
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More damage: Very Good
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Lots of box damage: Like New on EBay
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Where to sell Like New?
• Amazon allows Like New items for most categories except these:– Clothing– Baby– Toys
• Some categories allow refurbished or collectible
• EBay if in doubt but be conservative– Better to surprise than disappoint
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Return Condition: Other
• About 40% of returns will be worthless– Customer broke something– Returned without packaging– Missing parts– Scratches and / or dents– There is no way to tell how badly something is damaged before
requesting it from Amazon. Just ask for everything.
• Keep the item for its spare parts – Especially if you sell many of the same item or get multiple returns
of the same item– Document what you have and where so it is fast to find the parts
• Throw away anything that cannot be resold such as clothing, food, vitamins, and Health & Beauty items
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Badly damaged item. Missing contents.
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Missing packaging. Health care item so dispose.
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Recoup your costs
• Get new items back to into sales process– Ship the item back to FBA with next shipment– Relist product on Ebay or other venue– Add back to inventory if running your own site
• Will supplier reimburse you in some way?– Damage allowance (2% or return for credit)– Unsold item buy back– Guaranteed sale programs
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Recoup your costs - Venues
• In order of highest possible sale value– EBay is great for selling items with bad
packaging– Local flea market dealers may buy some items– Craigslist is easier to list but not as effective
nor are the prices paid as good. People want to dicker a lot.
– Local public auctions. People usually overpay.– Consignment or 2nd hand stores– Sell as salvage to other companies
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Recoup Cost - Liquidation
Liquidations sites can help you sell large quantities, but they tend to have high fees
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Recouping Cost - Liquidation
More places to sell large quantities of goods
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Outsourcing – Benefits
• Focus on what you do best – Sourcing and selling• Cost and efficiency savings – Others do it better
and cheaper• Reduced Overhead – Fewer employees, office
space, etc• Operational Control – Change arrangement to fit
needs• Hire Top Professionals – Hire those who are the
best• Control Capital Costs – Converts fixed costs into a
variable• Reduces Risk – Can adapt to changing business
conditions• Increased Capabilities – Do far more than on your
own
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Outsourcing - Business
PayrollTaxesAccounting
WritingResearchBilling
ScoutingShippingLabelingCleaningListingLegal
Virtual Assistants
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Outsourcing - Technical
• Product and pricing research• Data processing and gathering• Report generation– Sales - Forecasting
– Inventory - Taxes
• Custom Integration and tools• Whatever is taking up lots of your
time
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Outsourcing - Returns
• Eliminate handling them all-together• Ship to another address using
removal order• Nothing shows up at your door or
warehouse• Can get paid for the returns• Cost associated with returns …
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Returns Costs - Storage
RentHeat
Electric
Lost spacein warehouse
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Return Costs – Value Loss
Depreciation
Falling Prices
Obsolescence
Money Tied Up
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Return Costs - Expenses
Receiving
Evaluate Condition
Sell on Other Venue
Employee Time
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Other Slides
If there is time …
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Shipping Statistics
SERVICEPERCEN
TExpedited 51%Standard 49%
* Based on1 million sales
CARRIERPERCE
NT
UPS
44.54%
SMARTPOST
25.12%
ONTRAC 7.30%USPS 6.20%FEDEX 4.79%LASERSHIP 4.53%BLUE_PKG 3.06%ENSENDA 1.65%PRESTIGE 1.24%SMARTMAIL 0.57%PARCELPOOL 0.49%
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Top Ship-To States
STATEPERCEN
TCA 16.9%NY 8.1%FL 6.5%TX 6.1%IL 4.0%PA 3.7%NJ 3.6%VA 3.4%WA 3.3%MA 3.2%OH 2.5%GA 2.4%MD 2.4%
STATE
PERCENT
MD 2.4%NC 2.3%MI 2.1%AZ 1.9%CO 1.9%CT 1.6%MN 1.5%OR 1.5%TN 1.4%WI 1.4%IN 1.3%MO 1.3%UT 1.0%
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FBA Settings
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Automated Long-Term Storage Removal Settings
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Manage Returns
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Refund Order - Full
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Refund Order - Partial
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Automated Return Settings
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