Tuesday, September 22, 2015

Turnover Tuesdays - The Impact of Returns

For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.

This week, I won't be highlighting a particular deal, rather the damage done by returns.  I am discussing what has happened for myself, your results may be wildly different.

The next two Tuesdays are holidays for me so we will be skipping Turnover Tuesdays for two weeks and resume after that.

Week 1 - First attempt at reselling
Week 2 - My second straight fail
Week 3 - My iPad mini collection
Week 4 - Bed Bath and Beyond
Week 5 - An iPad Idea for Your Staples Gift Card Collection

Using Amazon Charts

As I mentioned last week, I have many spreadsheets and they are invaluable to me to figure out what is going on since there are so many variables to track.

I started reselling about May and I started to pick up the pace more in June.

I decided to pick and arbitrary starting end point for this post and the easiest way to do that was to pick the earliest transaction that I haven't finished selling all the product yet, which was something I bought in the end of August.

The following calculation is for illustration purposes and to show the effect of returns.  It does not include any shopping portals, credit card points or loyalty points (though it includes some loyalty points since the cost of future purchases have been severely discounted due to loyalty points). 

Based off that starting point, since May I have spent $65,554 on inventory.  I spent approximately $6,000 on FBA fees and shipping combined.

This product was sold for about $78,900, which leave a profit of about $7,300 or around 11%.  I'm very happy with those numbers, especially since I've had some real duds.

In Amazon, you can see your sales charts by month and I can see how my general trends.

You can find this general chart by scrolling over "reports" and clicking on "business reports".  On the left side you click on "seller performance" and you are there.

From the chart, you can see you sales per month and it also shows the number of returns and the return rate.

Mine says 17 items refunded for a refund rate of slightly less than 6%.  This doesn't tell the whole story.  Notice that it says refund rate, not return rate.  You'll see what soon

Different Types of Returns

Returns that aren't returns at all

There are various levels of returns.  There are returns that aren't really returns at all.  Amazon is just holding your money hostage.  Once someone fills out online that they plan to return, Amazon takes that money from you.  However, the person has 45 days from then to return the object.  If they don't return it within 45 days, you are reimbursed in full.  That's not really a return, you just give Amazon a free 45 day loan.

How many of those do I have?  You can check on Amazon.  Scroll over "Reports" again and this time click on "Fulfillment Reports".  On the left side click on "reimbursements".  I leave mine completely blank to generate a report of all reimbursement for 365 day.

All the reimbursements labeled "Customer Return" under the reason are full refunds.  That's because the customer never sent in the item for the return.  So of my 17 refunds, only 11 actually resulted in any loss.  There are 2 more items that haven't made their way back to Amazon yet, but it hasn't been 45 days yet so we will see what will happen with those.

Returns that are barely returns

The next level of refunds are barely a return at all.  They are partial reimbursements.

Here is an example:

I have had 3 price adjustments like this.  One is for $3.99, one is for $4.99 and one is for $16.39.  That's a total loss of $25.37 from three more customer refunds.  We have 6 more left.

I have another item that was damaged by UPS according to the seller.  She was given a full refund and I lost $50.  So now it is a loss of $75 with 5 more left.

Real Returns

I have had 5 legitimate returns so far.  One item I originally sold for $694.  It came back in good condition and I was able to return the item to the original store.  No loss there except the shipping fees to and from Amazon, which aren't too bad.

Another return I originally sold for $224, it came back in good condition but it was past the return window.  I sent it back to Amazon and I was able to sell as "good" instead of new at $194.  I lost $30 besides the extra shipping and fees.

The third item has been sent to Amazon and is in the process of being sent back to me.  I don't know what will happen yet.

The last two returns are actually the same item.  I sold it originally for $405.  It was returned.  I sent it back to Amazon and sold it for $395.  Unfortunately it was returned again.  This time it was broken.  It was past the return window.  I have actually sent it to the manufacturer under the warranty and I hope to resell it once it comes back.  I had to spend about $20 on shipping to them.  Let's call this one a $150 loss to make sure it covers it

Overall Impact of Returns

I think I've been pretty lucky with returns so far and I hope that continues.  I lost $75 on partial refunds.  I will probably lose about $250-$300 overall after all the returns are accounted for as long as I can still sell the items in the process of being returned.  That has about a 0.5-1% impact on my margins.  As long as you are earning 10+% on your sales, returns are a nuisance, but they are just part of doing business and built into your margin of error with your profit calculations.

I would love to hear from others.    Please comment with your experience with returns