Returns: Deal With It!
Robert Casto
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Introduction
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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
© 2012 SellersToolbox
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Why discuss returns?
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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!
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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?
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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
© 2012
SellersToolbox improving sales overall
Industry sees lenient
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 Processed
Handling Returns
Reimbursement
Minimize Number
Recouping 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
Receive Order
O
R
D
E
R
S
H
I
P
Deliver
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Return: Merchant Fulfilled
Receive Notice
Approve
Delivery
PERMISSION
PRINT LABEL
REQUEST
RETURN
Ships Item
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Sale: Amazon FBA
List Item
S
H
I
P
Deliver
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FBA handles the return processs
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Return: Amazon FBA
Request Return
Approves
Collects
& Ships
Ships
Pickup
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Collection Process
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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 FBA
Delivers Collected
Customer Returns
Reimbursemen
t
PERCEN
T
FBA
CENTER
41.6% LEX2
21.0% LAS2
17.1% CVG2
Determine
Condition
Y
Amazon
Responsible?
Unsellable
Sellable
N
Back into
inventory
Unfulfillable
Resell
Removal Order
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Amazon will refund me?
• Amazon will reimburse when it is their fault
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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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It pays to ask!
• 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
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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
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– I paid $90 and would©have
been out that and fees
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$200 Norelco Shaver
Front
Back
Product Label
Shipping Label
Packing
Slip
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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
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return
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 the
address where items will be sent. It
also lets you see what items you have that
are 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
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• Cost is $0.50 per item and $0.60 for oversized
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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Example
Shipping
Problem
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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
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Damaged during shipping
Damaged by the warehouse
Found a better price
Accidental order
Manageable
No longer needed
―Different from website
or wanted
description
– Defective / Does not work ―Defective / Does not work
―Missed delivery date
– Buyers Remorse
―Different condition than
– Unhappy with quality
expected
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Top Return Reasons
PERCEN
T
REASON
23.7% UNWANTED_ITEM
17.5% DEFECTIVE *
Only 15% of
returns can
be fixed!
10.6% NOT_AS_DESCRIBED
6.0% ORDERED_WRONG_ITEM
4.6% APPAREL_TOO_SMALL
4.0% SWITCHEROO
3.8% APPAREL_TOO_LARGE
Only 5%
are due to
damage
3.0% UNDELIVERABLE_UNKNOWN
2.7% DAMAGED_BY_CARRIER
2.3% DAMAGED_BY_FC
2.0% CR-UNWANTED_ITEM
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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 of
Returns from Customer
PERCEN
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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 Damage
PERCENT FBA CENTER
23.4% PHX
22.5% IND
15.8% ABE
10.5% CHA
6.7% SDF
6.5% LEX
4.6% TUL
2.7% PHL
2.5% RNO
1.8% LAS
1.8%
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
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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 dispos
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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
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– Sell as salvage to other companies
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
SellersToolbox
• Increased Capabilities©–2012Do
far more than on your own
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Outsourcing - Business
Payroll
Taxes
Accounting
Writing
Research
Billing
Scouting
Shipping
Labeling
Cleaning
Listing
Legal
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Outsourcing - Technical
• Product and pricing research
• Data processing and gathering
• Report generation
– Sales
– Inventory
- Forecasting
- 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
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Return Costs – Value Loss
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Return Costs - Expenses
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Robert Casto
513-442-2898
(leave message)
robert@sellerstoolbox.com
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Other Slides
If there is time …
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Shipping Statistics
SERVICE PERCENT
Expedited
51%
Standard
49%
CARRIER
UPS
SMARTPOST
ONTRAC
USPS
FEDEX
LASERSHIP
BLUE_PKG
* Based on
1 million sales
ENSENDA
PRESTIGE
SMARTMAIL
PARCELPOOL
© 2012 SellersToolbox
PERCE
NT
44.54%
25.12%
7.30%
6.20%
4.79%
4.53%
3.06%
1.65%
1.24%
0.57%
0.49%
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Top Ship-To States
STATE PERCENT
PERCEN
STATE
T
CA
16.9%
MD
2.4%
NY
8.1%
NC
2.3%
FL
6.5%
MI
2.1%
TX
6.1%
AZ
1.9%
IL
4.0%
CO
1.9%
PA
3.7%
CT
1.6%
NJ
3.6%
MN
1.5%
VA
3.4%
OR
1.5%
WA
3.3%
TN
1.4%
MA
3.2%
WI
1.4%
OH
2.5%
IN
1.3%
GA
2.4%
MO
1.3%
MD
2.4%
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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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