Stop Leaving Cash on the Warehouse Floor: Managing Returns
Managing returns can be complicated for many Amazon sellers, but it’s even tougher for high volume merchants. Eytan Wiener set out to find a better returns solution for his eCommerce company, Quantum Networks, a few years ago and ultimately created a partnership with Tradeport. Now he’s committed to helping other Amazon and online sellers understand why they should have a clear returns process.
In fact, he regularly speaks at major eCommerce events such as the upcoming PROSPER Show (of which he is a Board Member) to share his experiences and expertise with other merchants. I recently interviewed him to get his perspective on the importance of having a process for managing returns.
Avoid Returns When Possible
“The best way to manage returns is to not have them in the first place,” Eytan said. “Returns cost a lot of time and money for businesses.” Eytan notes that transparency in product descriptions and other content related to your listings can go a long way when it comes to helping customers buy the right item, which can thereby help prevent returns. Product images should be clear and accurate, and providing good customer support is key. It’s imperative to have clearly defined return policies in place for your products.
If one of your products has a high return rate, look at why you are getting returns. Is there something you could change to help prevent returns? There are a variety of different software solutions and systems you can use to manage returns, but the important thing is to make the process quick and easy for customers.
If you’re planning to try to resell a returned item, it’s important to test it and list it with a clear description. Failure to do so will lead to bad feedback and possibly even account suspensions or performance issues. “You’ll need FeedbackFive pretty quickly because people will start destroying your reputation left and right. And while you’re trying to do something good and just move an item, you’re creating a bad experience,” Eytan said.
Creating a Returns Process
Handling returns can be tedious, and even nightmarish. “Returns are very complicated...with Amazon FBA, you often just get back a large box of junk. When you send the new products out they’re pristine, and then all of sudden you get back a pallet and there could be 400 different SKUs and kits and items and you don’t know what’s what,” Eytan said. The return shipment can go wrong in several ways. “Sometimes they don’t send you back the right item. Sometimes you get a shoe instead of a hard drive. Sometimes you get other people’s stuff. Sometimes you get the kit and it’s missing a big part of the kit." It’s important to have a process to verify that you received all of your items back and to open cases with Amazon support if anything is missing or damaged. Tradeport has created unique software that allows it to scan verify each returned box and SKU, and to automatically open refund cases with Amazon in case anything is damaged or missing from the removal order.
(FeedbackFive allows you to automatically exclude refunded orders from feedback and review solicitation, to minimize the negative impact returns can have on your reputation.)
What to do with these items is the next challenge. "You have the stuff that you can’t return to the vendor, because you bought a take-all deal or a closeout or there’s no return policy or it's past the return expiration date. You want to sell it on eBay or online but you have to test it. You can’t just sell something that doesn’t work, because then you get your account suspended.” Is there a way out? Yes, setting up the right process for managing these items can help you resolve these dilemmas and avoid leaving money (boxes of returned items) on the warehouse floor.
Eytan found that it wasn’t beneficial to manage the returns process in house for his business, because he was focused on growth and his employees were busy trying to grow sales and fulfill new orders. He searched for a better solution and discovered Tradeport, a company which had previously focused on IT disposition, reselling used computers and electronics from schools, churches, retailers and other organizations in return for a share of the revenue from the sale. Eytan and Tradeport teamed up to create a process that worked for his eCommerce business, and when that worked well he invited them to meet other Amazon sellers at the first PROSPER Show. Quantum has since helped to grow Tradeport into a significant player in the eCommerce and retailer/manufacturer returns space, and has invested in Tradeport via a separate investment arm of the business.
Many companies put off handling returns, but that can be detrimental to profit margins. This can be especially true for items in technology-related categories. “Electronics do not gain value over time. They lose value every day, as most other items do too, but specifically this kind of stuff, so it’s important to deal with,” Eytan said. “When you’re in electronics making margins of maybe 15-20% or less, and you just don’t handle your returns, which are usually averaging a 5-7% return rate, you’re not making real money.” Having some kind of defined system for managing returned items is the best way to avoid procrastinating.
Understand the Numbers
When it comes to returned items, Eytan said, “A lot of people hold onto stuff, to them it’s gold, but in reality it’s not worth that much.” Sometimes it is better to just chalk up a loss and move on. “It’s also important to understand the price point of the return. If it’s a $10-15 item, it doesn’t always make sense, depending on your costs and your overhead, to resell it. You know, with something like an iPhone case that comes back and it’s a little bent, to sell it on the channel with the fees and the commission and the support just to make a few dollars might not make sense.” Take all costs and fees into account when deciding what to do with your returned inventory. If reselling your returned items takes too much time and money, you might want to donate or destroy those products instead.
There are several fees involved with a returned item from Amazon, something that Eytan often shares when speaking to sellers about this topic. “When someone returns an item to FBA…Amazon sends the seller the money back and the fee comes back, but technically, even though Amazon sends you a big box of stuff, they’re still processing the return for you and dealing with it, so they charge you for it. Most people don’t know that. It’s not really that much per item, but it adds up,” Eytan noted.
Those charges are only part of the total costs associated with returns. “It’s hard to normalize and put into a report, but you’ve also lost all of the money and effort on the outbound, right? Because you received the item from the vendor, you packed and picked it and shipped it to Amazon and paid for that, and then it was returned, so that’s all lost," Eytan said. "So, all of the effort you spent shipping it and supporting it is wiped out. Then there’s 50 cents just to remove each item back to you, which will probably trickle in over a few weeks in multiple shipments from different warehouses, which really hurts cash flow. If you want to destroy it, I think it’s only 25 cents." (You can calculate the cost of an FBA Removal Order for your items here.)
"My point is that once you get these items, you’re already probably at a loss, unless you have fabulous margins, but you probably want to make something of it or else you’ll lose even more. And that’s exactly what we try to help with," Eytan said. "Whatever the product is, whether we [Tradeport] can refurbish it, whether we can re-market it for rev share, return it to the vendor, whether we wholesale it, we try to get the most value for it.”
Multi-Channel and International Returns
Tradeport manages returns and is directly integrated with most online sales channels, including Amazon FBA, Amazon MFN, eBay, Walmart, Newegg, Shopify, Magento, Retailers and most multi-channel software solutions. The company focuses on trying to help sellers get the most possible cash back for their returned items with three main strategies:
1.) Some items are simply returned to vendor as a service.
2) Others are refurbished to Amazon’s standards for sale in the Amazon Renewed Program.
3) Many products are tested, graded and repaired prior to being resold in which Tradeport takes a revenue share for the sales depending on the item’s price point.
The company manages returns for everything from smartphones to snorkel gear. As global Amazon sales have increased, so have returns. The returns process becomes even more difficult when your products are thousands of miles away; often the cost to ship them back exceeds the products’ value. Tradeport is a member of the Amazon Solution Provider Network and has formed strong partnerships with companies in Canada, Europe, and Asia to handle international returns. They also represent several European, Australian and Indian merchants who sell in the United States.
“You really have to be on top of these things before you start selling. I learned a lot of that the hard way, and through that hopefully created a great solution. It’s not easy, but we try to make it easier and out of mind,” Eytan said of his partnership with Tradeport.
How do you manage Amazon returns for your business?
Originally published on January 25, 2018, updated October 15, 2019
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.