In this video I talk to Vladi Gordon from sellerboard who explains to us what happens when customers return products to Amazon, what losses the seller suffers and how to reduce such costs.
Vladi represents Sellerboard.com, a profit analytics tool for Amazon sellers. The company is ambitious and strives towards becoming the world‘s most accurate profit analytics platform.
According to Vladi, most sellers do not really understand the true costs of returned goods, which makes this type of cost especially dangerous, because it is often underestimated. Vladi gives an example of how hidden costs add up: when we sell an item at a certain price, Amazon adds a referral fee of 15 %, there is also an FBA fee, then we need to subtract the actual cost of goods, in Europe VAT also applies, and so, only when we have calculated all these costs, we get number that indicates the profit.
As soon as someone initiates the return process, Amazon pays back the entire sum to the customer, even before the customer send the product back. The refund fee is also charged. In Europe, you get the VAT back, and Amazon reimburses the referral fee. If the item is sellable, we can try to sell it again, however, we have suffered a substantial loss, in Vladi‘s example, where a product costs $18.90 USD, the loss is $9.61 USD. Why? Because you get back the VAT, the referral fee and the product cost (if it is sellable), however, when you sell a product, you assume profit as soon as the item is sold. So you see how much you‘ve sold monthly, but you don‘t take into account how many items will be returned, and neither does Amazon. We also do not get back the FBA fee, and we have to pay the refund fee. It gets even worse if your item is not resellable. Following Vladi‘s calculations we see that in fact every returned item kills two sales!
On Sellerboard.com there is an automatic evaluation function for refund costs as well as for calculation of resellability.
The question is, how to reduce the costs?
First – understand why customers return your items.
Another thing – you can use an autoresponse emailing tool, ask customers why they have returned the item and what could be improved.
Make sure you pictures are accurate, add dimensions, optimize your descriptions and work on the packaging. If your items are packed in a sealable package, once the customer opens it, it cannot be closed again. A good idea is to make transparent boxes, so that customers can see the item before opening the package. And of course, if you see that you can improve your products in any way, do it!