Navigating the return management challenges for Amazon sellers is more crucial than ever, as rising return rates and new fees can drastically impact your bottom line. Are you prepared to handle these complexities?
Managing returns is essential for profitability and customer satisfaction on Amazon. High return rates, especially in categories like fashion and electronics, present significant challenges for both FBA (Fulfillment by Amazon) and FBM (Fulfillment by Merchant) sellers.
On June 1, 2024, Amazon introduced a returns processing fee for products with high return rates for FBA and FBM sellers, excluding apparel and shoes. This fee is triggered when a product’s return rate exceeds a category-specific threshold, making effective return management crucial.
This article examines the return management challenges faced by FBA and FBM sellers, using real-world examples and offering practical solutions.
Amazon FBA Return Management Challenges and Solutions
For FBA sellers, while Amazon handles most of the return logistics, new challenges have emerged with the introduction of the 2024 returns processing fee for products with high return rates.
This fee, along with the limited control over the return process, adds layers of complexity to managing returns.
In this section, we’ll explore the key return management challenges FBA sellers face, including how these issues with FBA returns impact profitability and account health, and practical solutions for mitigating their effects.
1. Limited Control Over Returns
Amazon FBA sellers have limited control over inventory after returns, which can lead to used or defective products being resold as new. This lack of quality control often results in negative reviews, damaging a seller’s reputation.
Example Scenario
In one particularly shocking case, a customer returned a used diaper with skid marks, which was later resold to another customer. The unsuspecting buyer received the soiled diaper, took pictures, and left a scathing review that severely damaged the seller’s reputation.
Despite the seller having no control over the return or resale of the product, the review remained on the listing, showcasing how detrimental these return management issues can be.
Want to learn more about this particular instance? Watch our Amazon agency’s video with the client who experienced this:
Solution
- • Return-to-Seller Option: Disable returns from going back into Amazon’s inventory and have them sent directly to your warehouse. This ensures you can inspect and decide the fate of returned items, maintaining quality control.
- • Monitor and Adjust Policies: Regularly review your product return rates and make necessary adjustments. Update listings or tighten return guidelines if certain products have consistently high returns.
- • Engage Amazon Support: Persistently work with Amazon to remove unfair reviews tied to return issues. File multiple support tickets if necessary, or seek professional help to
2. Increased Costs Due to Amazon Fees
Amazon introduced a returns processing fee for products exceeding category-specific return thresholds, excluding apparel and shoes.
This fee, based on size tier and shipping weight, significantly increases the costs for sellers.
Example Scenario
Consider a seller who shipped 1,000 units of a product in the “Consumer Electronics” category in June. During the following three months, 120 units were returned, exceeding the 11.2% return rate threshold for that category.
As a result, the seller was charged a returns processing fee for 20 units, adding unexpected costs and squeezing profit margins.
Solution
- • Analyze and Reduce Return Rates: Regularly monitor your product’s return rates using the FBA Returns page and take proactive steps to identify and address the causes of high returns. This might include improving product descriptions, enhancing packaging, or offering better customer support.
- • Evaluate Product Categories: Assess the return rate thresholds for your product categories and consider diversifying into categories with lower thresholds or more manageable return rates. This can help reduce the likelihood of incurring additional fees.
- • Consider Return-to-Seller for High-Risk Items: For products that are prone to returns, consider having them sent directly back to your warehouse for inspection. While this adds an extra step, it allows you to control the quality of returned items and avoid the costs associated with Amazon’s FBA return processing fees.
3. Impact on Account Health
High return rates can negatively impact FBA sellers’ account health through metrics like Order Defect Rate (ODR) and negative feedback. Frequent returns may lead to customer dissatisfaction, risking the Buy Box and even account suspension.
Example Scenario
Consider a clothing brand that experiences a surge in returns due to sizing inconsistencies. Customers start returning items frequently because the clothes don’t fit as expected.
As the return rate increases, so do the number of negative reviews and A-to-Z Guarantee claims. Despite the seller following all proper protocols, the high return rate causes their ODR to spike, putting their account health at risk.
Solution
- • Monitor and Address Return-Related Feedback: Actively monitor customer feedback related to returns and respond promptly to address issues before they escalate. Consider offering replacements or refunds proactively to mitigate negative feedback.
- • Quality Control Measures: Work closely with your suppliers to ensure that sizing is consistent across all products. Consider updating product descriptions and size charts to provide more accurate information to customers.
- • Engage Amazon Account Health Support: If return rates begin to impact your account health, reach out to Amazon’s Account Health team proactively. Explain the situation, demonstrate the steps you’re taking to address the issue and ask for guidance on protecting your account.
Check my video to learn how important your Amazon Account Health is and how to maintain it to avoid suspensions:
Key Points:
- • Account health: Focus on customer service, Amazon FBA return policy compliance, and shipping.
- Key metrics: Watch order defects, negative feedback, chargebacks, and policy violations.
- • Avoid mistakes: Don’t sell counterfeit, violate food safety, or make false claims.
- • Manage feedback: Respond to negative feedback, don’t ask for review changes.
- • Account suspension: Admit mistakes, explain, and prevent recurrence.
Amazon FBM Return Management Challenges and Solutions
FBM sellers manage every aspect of returns, from customer inquiries to restocking. High return rates demand significant resources and can lead to negative feedback and a decline in account health.
This section explores key challenges and solutions for FBM sellers.
1. Amazon Return Policy Flexibility
FBM sellers must follow Amazon’s standardized return policy, accepting returns within 30 days. Under the Refund at First Scan (RFS) policy, buyers may receive refunds before sellers can inspect the item.
Additionally, the Amazon Prepaid Returns Label program leaves sellers with little opportunity to engage with customers before refunds are issued, potentially leading to losses.
Example Scenario
A seller sends a high-value item in perfect condition to a customer. However, when the item is returned, it is completely destroyed.
Despite this, Amazon’s RFS policy means the buyer was already refunded before the seller could inspect the returned item, leaving the seller with a damaged product and no compensation.
Solution
- • Open a Support Ticket: Immediately open a support ticket with Amazon to report the issue.
- • Provide Evidence: Include photographic evidence of the item’s original condition and the state in which it was returned, along with the order slip or relevant documentation.
- • Request Reimbursement: Clearly explain the situation and request reimbursement to offset the loss caused by the reason for the inaccurate return. This can help recover some of the costs associated with the damaged return.
2. Operational Burden and Customer Service Demands
Managing high return rates for Amazon FBM sellers increases the operational burden especially since they manage the entire return process, including customer service. This can be especially challenging during peak seasons or with complex returns, leading to more customer inquiries and A-to-Z Guarantee claims.
Example Scenario
An FBM seller receives a surge of returns during the holiday season, with many customers contacting them about product defects and return procedures. The increased volume of customer service inquiries overwhelms the seller, leading to delayed responses and unresolved issues.
This results in several A-to-Z Guarantee claims, which further strain the seller’s resources and negatively impact their account health.
Solution
- • Streamline Internal Processes: Develop a streamlined process for handling returns and customer service inquiries, particularly during peak seasons. This might include using templates for common customer inquiries or setting up an automated system to track and respond to returns.
- • Proactive Communication: Keep customers informed throughout the return process to reduce confusion and dissatisfaction. Proactively addressing potential issues can prevent them from escalating into more serious problems like A-to-Z claims.
- • Leverage Customer Service by Amazon (CSBA): Enroll in Amazon’s CSBA program, which can handle customer service for self-fulfilled orders, reducing the burden on the seller. This service that Amazon offers provides 24/7 support and can help manage return-related inquiries, potentially reducing A-to-Z claims and negative feedback.
PROS
- • 24/7 Support: Provides round-the-clock customer service for self-fulfilled orders.
- • Potential Buy Box Advantage: May enhance your chances of winning the Buy Box.
- • Improved Metrics: Can boost customer service metrics, potentially reducing negative feedback.
- • Reduced A-to-Z Claims: May help decrease the number of A-to-Z claims filed against you.
CONS
- • Additional Costs: Adds 10 cents per self-fulfilled shipment, increasing overall costs.
- • Uncertain Effectiveness: The actual impact on A-to-Z claims and customer experience is still unclear.
- • Lack of Transparency: Amazon doesn’t provide clear details on how the CPU rate is calculated.
- Potential High Fees: If your CPU rate exceeds 5%, fees could rise significantly.
3. Higher Logistical Costs
High return rates significantly increase logistical costs for FBM sellers on Amazon, who manage the entire return process, including receiving, inspecting, and reshipping items. These operations demand additional resources, impacting profit margins and efficiency.
Example Scenario
An FBM seller in the electronics category experiences a high return rate, where many returned items arrive damaged or non-resellable. In addition to the direct costs of handling these returns, the seller starts noticing an increase in cases where customers claim to have returned items that were never actually received.
This fraudulent behavior adds another layer of financial strain, as the seller struggles to manage both legitimate returns and fraudulent claims.
Solution
- • Optimize Return Handling Processes: Set up a streamlined return handling process that reduces time and resources spent on returns. This could include dedicated areas for return inspections and standardized procedures for repackaging items.
- • Negotiate Better Shipping Rates: Work with shipping carriers to secure better rates for return shipping, especially if return volumes are high. Lowering shipping costs can help mitigate some of the financial burden.
- • Analyze Return Data: Regularly analyze your return data to spot patterns or recurring issues. By identifying and addressing the reason for the returns, whether due to product issues or customer misunderstandings, you can reduce overall return rates and, in turn, lower logistical costs.
- • Identify and Address Fraudulent Behavior: Be vigilant about potential fraud. If a customer claims to have returned an item but you haven’t received it, immediately open a support ticket with Amazon.
Provide all relevant documentation, including tracking information, photos of the original item, and proof that the item wasn’t returned.
Learn how to deal with customer fraud through this video guide from our Amazon agency:
Best Practices for Selling on Amazon: Managing High Return Rates for FBA and FBM Sellers
In the competitive world of selling on Amazon, managing returns efficiently is not just a necessity but a best practice that can make or break your success.
Whether utilizing Amazon fulfillment services (FBA) or handling everything in-house through FBM, sellers need to be proactive in addressing return management challenges. By implementing the strategies outlined in this article, such as refining return policies and leveraging Amazon’s support services, sellers can navigate the complexities of returns efficiently.
Adopting these best practices ensures that sellers maintain profitability, protect their reputation, and continue thriving while selling on Amazon.
Do you need help with your Amazon business? Contact our Amazon agency to get expert advice!
