1. Returns: Deal With It! Robert Casto 1

2. 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 2© 2012 SellersToolbox

3. 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? 3© 2012 SellersToolbox

4. 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 4© 2012 SellersToolbox

5. 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. –Dont like it, doesnt 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 5© 2012 SellersToolbox

6. Are returns lower online? I see about 2.5% of sales get returned * Thats 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 6© 2012 SellersToolbox

7. 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 7© 2012 SellersToolbox

8. 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 1/3 rd, 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! 8© 2012 SellersToolbox

9. Discussion Outline How Returns are Processed Handling Returns Reimbursement Minimize Number Recouping Costs Outsourcing 9© 2012 SellersToolbox

10. 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 10© 2012 SellersToolbox

11. Sale: Merchant Fulfilled List Item Receive Order Deliver 11© 2012 SellersToolbox

12. Return: Merchant Fulfilled REQUEST RETURN Approve Ships Item Delivery Receive Notice PERMISSION PRINT LABEL 12© 2012 SellersToolbox

13. Sale: Amazon FBA List Item Order Deliver 13© 2012 SellersToolbox

14. FBA handles the return processs 14© 2012 SellersToolbox

15. Return: Amazon FBA Pickup Approves Request Return Collects & Ships Ships 15© 2012 SellersToolbox

16. 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 16© 2012 SellersToolbox

17. Disposition: Amazon FBA Delivers Collected Customer Returns Determine Condition Sellable Back into inventory Unsellable Amazon Responsible? Resell Y Y N N Reimbursemen t Unfulfillable Removal Order PERCEN T FBA CENTER 41.6%LEX2 21.0%LAS2 17.1%CVG2 17© 2012 SellersToolbox

18. 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 18© 2012 SellersToolbox

19. 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 19© 2012 SellersToolbox

20. Calculating Reimbursement 20© 2012 SellersToolbox

21. 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! 21© 2012 SellersToolbox

22. $200 Norelco Shaver Product Label Shipping Label Packing Slip FrontBack 22© 2012 SellersToolbox

23. 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 doesnt miss things –Set aside a specific time each week to review them –For lots of returns, use 3 rd party software to help * –When creating a case, include details about return Order ID, Order Date, ASIN, Return Date, links, etc 23© 2012 SellersToolbox

24. Removal Orders 24 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. © 2012 SellersToolbox

25. 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 25© 2012 SellersToolbox

26. Removal Settings 26© 2012 SellersToolbox

27. 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 27© 2012 SellersToolbox

28. Example Shipping Problem 28© 2012 SellersToolbox

29. Collision Damage 29© 2012 SellersToolbox

30. Forklift Damage 30© 2012 SellersToolbox

31. Dropped Damage 31© 2012 SellersToolbox

32. 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 32 Manageable Different from website description Defective / Does not work Missed delivery date Different condition than expected © 2012 SellersToolbox

33. Top Return Reasons PERCEN TREASON 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 33© 2012 SellersToolbox

34. 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. 34 Some unfulfillable items will be new. No way to know until you get them. © 2012 SellersToolbox

35. Disposition of Returns from Customer PERCEN TDISPOSITION 35.9%SELLABLE 28.4%DEFECTIVE 23.3%CUSTOMER_DAMAGED 9.1%DAMAGED 3.4%CARRIER_DAMAGED 35© 2012 SellersToolbox

36. Top Returns by Product Group PERCENTPRODUCT 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 36© 2012 SellersToolbox

37. Top Centers for Damage PERCENTFBA 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 37© 2012 SellersToolbox

38. Return Condition: New Around 40% of items returned are still new –Customers dont want to pay return shipping so they say it was defective –Amazons 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 38© 2012 SellersToolbox

39. Return Condition: Used About 20% of items will have been opened and then returned –Customer didnt 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 39© 2012 SellersToolbox

40. Light box damage: Like New 40© 2012 SellersToolbox

41. Light box damage: Like New 41© 2012 SellersToolbox

42. More damage: Very Good 42© 2012 SellersToolbox

43. Lots of box damage: Like New on EBay 43© 2012 SellersToolbox

44. 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 44© 2012 SellersToolbox

45. 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 45© 2012 SellersToolbox

46. Badly damaged item. Missing contents. 46© 2012 SellersToolbox

47. Missing packaging. Health care item so dispose. 47© 2012 SellersToolbox

48. 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 48© 2012 SellersToolbox

49. 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 2 nd hand stores –Sell as salvage to other companies 49© 2012 SellersToolbox

50. Recoup Cost - Liquidation Liquidations sites can help you sell large quantities, but they tend to have high fees 50© 2012 SellersToolbox

51. Recouping Cost - Liquidation More places to sell large quantities of goods 51© 2012 SellersToolbox

52. 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 52© 2012 SellersToolbox

53. Outsourcing - Business Payroll Taxes Accounting Writing Research Billing Scouting Shipping Labeling Cleaning Listing Legal 53© 2012 SellersToolbox

54. 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 54© 2012 SellersToolbox

55. 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 … 55© 2012 SellersToolbox

56. Returns Costs - Storage 56© 2012 SellersToolbox

57. Return Costs – Value Loss 57© 2012 SellersToolbox

58. Return Costs - Expenses 58© 2012 SellersToolbox

59. Robert Casto 513-442-2898 (leave message) robert@sellerstoolbox.com 59© 2012 SellersToolbox

60. Other Slides If there is time … 60© 2012 SellersToolbox

61. Shipping Statistics SERVICEPERCENT Expedited51% Standard49% * Based on 1 million sales CARRIER PERCE 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% 61© 2012 SellersToolbox

62. Top Ship-To States STATEPERCENT CA16.9% NY8.1% FL6.5% TX6.1% IL4.0% PA3.7% NJ3.6% VA3.4% WA3.3% MA3.2% OH2.5% GA2.4% MD2.4% STATE PERCEN T MD2.4% NC2.3% MI2.1% AZ1.9% CO1.9% CT1.6% MN1.5% OR1.5% TN1.4% WI1.4% IN1.3% MO1.3% UT1.0% 62© 2012 SellersToolbox

63. FBA Settings 63© 2012 SellersToolbox

64. Automated Long-Term Storage Removal Settings 64© 2012 SellersToolbox

65. Manage Returns 65© 2012 SellersToolbox

66. Refund Order - Full 66© 2012 SellersToolbox

67. Refund Order - Partial 67© 2012 SellersToolbox

68. Automated Return Settings 68© 2012 SellersToolbox