Share:

How to Minimize the Impact of Returns on Your Profit Margins

Blog
/
How to Minimize the Impact of Returns on Your Profit Margins
Updated: July 7th, 2022
Minimize Impact Of Returns

It’s an unavoidable reality for every seller who chooses to conduct business within the Amazon marketplace that they must deal with product returns and the ensuing refunds. A single return can turn a once successful transaction into a series of domino effect headaches.

Amazon has developed simplistic FBA return policies that have significantly contributed to an attitude of casualness on the part of shoppers regarding returns. It’s one of the most consistently cited reasons from online shoppers as to why they love shopping on Amazon. Unfortunately, this exposes sellers to the possibility of those policies being abused (fraudulent returns), and additional costs in managing the final outcome of the returned products.

There are a substantial number of sellers who view the return/refund policy as a very sharp double-edged sword that, at times, can cut deeply into their profit margins.

They believe that it’s just another way for Amazon to entice shoppers at their expense. 

How to Reduce Returns on Amazon

Provide a Comprehensive Product Description

Ineffective product listings often leave too much to the imagination. They force the prospective buyer to make quick assumptions based upon nothing more than a single image of the product and a short description, which may be overflowing with pitchy marketing jargon. If a specific product is returned more often than expected, there’s a good chance that the product listing lacks enough detail for setting the correct expectations with the shopper. Product descriptions should include details such as:

  • exact product dimensions
  • weight of product, if relevant
  • size and color choices
  • materials description
  • manufacturing location
  • warranty information
  • satisfaction guarantee and return policy
  • answers to FAQs
  • product instructions for use, if applicable

Create an “in hand experience” for shoppers. 

Sellers should include…

The exact product dimensions of the product in an image. Prospective shoppers are very visually orientated. A thorough description of the product will help to reduce returns because it limits the number of misinformed purchases. These details are particularly useful for products that can vary in size, shape, and measurements like apparel or items for a pet (like a litter box or mat). Sellers can also provide a close-up of an ingredient label when applicable. A shopper who knows precisely what they’ve bought is far less likely to return the product once it’s delivered. 

Provide a…

Sizing Guide – Sellers who have a line of products that are similar under one brand, but vary in their qualities (size, shape, measurements, color, accessory options, etc.), should provide a sizing guide. For apparel, sellers should include the specific measurements of each item, allowing potential buyers to take measurements at home in order to choose the best fit for themselves. They should also let shoppers know how their sizes compare with those of other popular brands in their niche.

 

Pro Tip: If you are having trouble producing a product sizing guide, you can consult with your supplier on what variables they use in creating your product(s). While tedious, the more precise and detailed you are in your size descriptions, the better off both you and your customers will be.


Be sure to use…

High-Quality 360-Degree Imagery with Variety – Making sure potential customers have a 360-degree view of a seller’s product helps to minimize returns. Use multiple pictures from different angles. Prospects want to see every side of the product: front, back, top, bottom, and all sides. A 360-degree view of the product provides essential visual information, so that potential buyers have a better sense of what they are purchasing. 

If a product doesn’t have multiple ‘sides’ to photograph, use close-ups of noteworthy features, attachments, or accessories. Also, if a product is available in several styles or colors, they should be featured by high-quality photography

Utilize modern technology (like a Smartphone) to create 360-degree product images that mimic in-store experiences. Shoppers will appreciate close-up views of a product’s stitching, material, logos, etc., and it will help them to better understand what sets a seller’s products apart from other niche competitors.

Create a…

Product Video – Videos are excellent marketing tools. Product videos compress product images and descriptions into an accessible visual package, giving potential buyers a look at the product from all angles in motion, a full description of the product in text form or with vocals, and a full explanation of the product’s features and how it works. It fills in the visual and sensory gaps that otherwise plagues online shoppers. A seller’s promotional videos are unique to their products and are possibly the most powerful tool for giving shoppers an experience that satisfies their sensory needs to see the product in action. 


Be available to…

Offer Customer Service in Real Time. Providing a method for shoppers to ask questions in real time is an effective way to alleviate “buyer’s remorse” that may lead to product returns. If your product contains Amazon compliant marketing materials that lead customers to an external website, a live chat system on that site can go a long way in helping shoppers to be satisfied with their purchase. 

Don’t hesitate to…

RatingsAsk for Customer Feedback and Reviews. Sellers should use customer feedback and reviews to try to determine why their products were returned and work towards solving those problems in order to minimize return rates. Use Amazon compliant messaging to ask for reviews, and consistently monitor customer feedback for detailed information about reasons for returns. In all communication, remember that you can not ask customers for positive reviews specifically.


Bonus Tip
: Don’t just look at 1-2 star reviews. 3-4 star reviews often contain valuable information on the customer experience.

 


Be sure to have…

Excellent packaging. A shopper’s online experience doesn’t stop once a product has been bought. Packaging can help to minimize returns. 

Packaging is not just about knowing how to pack a product; it also has to do with ensuring the right products are being packed in the first place. FBM sellers should always double-check their orders to ensure that customers are receiving the correct product. Delivering the wrong product not only guarantees the swift return of an unwanted item, but it can leave a massive dent in the shopper’s opinion of the seller’s business. 

When packing products, FBM sellers should make sure they are following Amazon’s packaging standards. This will help prevent damage and reduce returns.

Price competitively

The perceived value of a seller’s products plays a large role in customer expectation and the level of disappointment they may feel if products aren’t exactly how they imagined when delivered. Shoppers are seeking products that are reasonably priced for the value they receive. If a seller’s price points are high and their products don’t last, they’re more likely to see a high return rate.

Sellers must make sure that they have a quality product…plain and simple. This means paying attention to the tiniest of details and making sure they are collaborating with a supplier that understands their expectations and the product, inside and out.

And don’t forget to…

Gather shopper data on product return rates.  Tracking any patterns in the cycle between a customer purchase and its return can give sellers powerful insights into what to improve upon or do away with entirely.

Sellers should be tracking data on: 

  • which products are being returned (if multiple products are offered), 
  • which products have the highest return rates (if multiple products are offered), 
  • what is the principal reason given for customers returning the products, 
  • if certain types of customers return products more often than others (you can stop targeting them with deals and discounts), 
  • how much time passes between the initial purchase and when the customer asks for a refund, and
  • if products are returned more often during a particular time of year (knowing if there’s a seasonality to returns can be valuable information).

 

Along similar lines, another important process when evaluating return rate data is to look at it by parent products. By doing so, sellers are able to see if there are certain variations or products in their catalogs that have a higher-than-average return rate.

If a product is returned more frequently than expected, it is likely that your listing is playing a part. After identifying a high return rate product, sellers can then look internally to determine how this issue can be resolved.

What to Do When a Product is Returned to Amazon

Returns

When a customer initiates a return of an item ordered via Prime shipping, Amazon immediately issues that refund, without waiting for the item to be returned. 

Amazon immediately takes the return funds from your upcoming disbursement and usually gives the customer a shipping label to return the item to the proper warehouse. Customers are on the honor system to return the item they no longer want within 45 days.

Amazon will notify you that the refund has been issued from your account. Keep a record of the return notification email sent from Amazon, so that you will have a record of this refund and can verify that the return actually occurs within 45 days.

If you have not previously saved these notification emails in a folder and need access to the information to determine which item(s) have been returned and why, follow these steps:

  1. Login to Seller Central and hover the cursor over REPORTS at the top of the screen.
  2. Click on the PAYMENTS link under REPORTS.
  3. Click on the TRANSACTION VIEW tab. 
  4. From there, filter view by Refund, select the time frame, and click Update

 

Once you know which item(s) has been refunded, you need to find out if the item(s) has indeed been returned. Here is how to do this – (skip to step 6 if you have the Merchant SKU or ASIN from the Returns Report):

  1. Copy the order number from the Refund Notification email.
  2. Login to Seller Central and hover the cursor over ORDERS at the top of the screen.
  3. Click on MANAGE ORDERS, then click on ADVANCED SEARCH.
  4. Paste the order number in the search bar and click SEARCH at the bottom of the page.
  5. You’ll be able to see exactly which item was returned. From this page copy the item’s Merchant SKU.
  6. On the top of the Seller Central page, hover over REPORTS and click on FULFILLMENT.
  7. On the left side of the column, in the Inventory section, click on the SHOW MORE option.
  8. Click on INVENTORY EVENT DETAIL.
  9. Paste the Merchant SKU in the search bar, make sure the event date includes the date of the purchase (or just choose LAST 365 DAYS if you’re not sure, and click GENERATE REPORT.
  10. From there you should see all of the activity this item has experienced

 

Amazon should automatically reimburse you when an item is not returned, but this is not done 100% of the time. Things fall through the cracks…some incomplete returns are missed. When this happens, you’ll need to be proactive.

If you find that an item was not returned within the 45-day limit, it’s up to you to contact Amazon and remind them that they owe you a reimbursement.

When you open the case with Seller Support, simply ask them to look into the return in question for you. Communication is key; be as succinct as possible.

  1. Enter the specific item information
  2. Tell them the buyer received a refund but has not returned the item to an FBA warehouse within the 45-day period.
  3. Ask for a reimbursement of the original sales price.

If Amazon insists that the item in question was returned on a specific date, you have the option of sending them a screenshot of the Inventory Detail Report, to help substantiate that the item wasn’t returned to your inventory.

Several things may happen to a product after it is returned to Amazon’s warehouse:

  • the item is thrown away
  • the item is resold
  • the item is placed on hold
  • the item is sold via liquidation

When Amazon receives the return from your customer, the warehouse worker will look at the customer’s return reason and then make a decision on whether the item is still in sellable condition or not.

If you have multiples of an item returned and put back in your inventory as ‘sellable,’ then it’s up to you to decide if it’s worth it to have them all removed for inspection. If you are worried that the item isn’t really in sellable condition, then open up a removal order to inspect the item yourself.

If an item is deemed by Amazon as ‘unsellable,’ many sellers just click to have Amazon dispose of the item, assuming it’s not worth selling anymore. This can often be a mistake because it’s very possible that the item could still be in saleable condition.

Taking a few extra steps to see if that item is actually unsellable or not could help you minimize your loss, because often the ‘unsellable’ item can still be sold.

Don’t ignore your unsellable returned items because they will just sit in an FBA warehouse and continue to rack up monthly storage fees.


Pro Tip
: Between lost/damaged units, incorrect refunds, and lost inbound inventory, Amazon owes 99% of sellers money. You can have a team of reimbursement experts handle all of the claims and follow up work for you without having to pay anything up front (they’ll just charge a percentage of what they recover for you). For more information, click here.

 

Managing the Unavoidable 

The occasional return is just part of conducting business and is nothing to worry about. Customers can return products for a variety of reasons. 

While some returns are unavoidable, there are many ways in which a seller can reduce their Amazon product return rate. As long as you are diligent and transparent with your product listing, you can weed out the avoidable returns and maintain your seller reputation. 

Approaching this process proactively, with a game plan for minimizing the impact of returns and refunds on your Amazon business is crucial to its long-term success.


Entourage:
Software to Scale Amazon Ads and Results Driven Management.

See how the all new Entourage 2.0 tool can help you lower your ACOS and drive more Amazon sales in MINUTES not hours.

  • Automation that WORKS!
  • Simple and easy to understand reporting!
  • Guided tutorials from Mike that help you save money!
Sign Up Today and Try Entourage 2.0 FREE!

About Mike Zagare

He is the owner and founder of PPC Entourage, one of the original amazon ad software and management companies. Mike started off as a physical therapist in 2015 and just knew there had to be a better way so he started his ecommerce journey. Using the power of Amazon Ads, he built a 7 figure brand in less than one year. Now he helps other sellers do the same with free valuable education, PPC Entourage software and the ad agency. He is also the author of the Amazon Ads Playbook series.

entourage series

Get More Love (and Profits) from Your Amazon Ads

Sign up and receive 30 advertising tips in 30 days.