Tuesday, December 13, 2016

Turnover Tuesdays - Reimbursements

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.

The previous posts in the series can be found at the bottom of this post.

Reimbursements, Yay!

I love reimbursement emails.  Makes my day when they are large.

It's not unreasonable to say that being on top of reimbursements and your inventory is the most important aspect of selling on Amazon after actually selling.

There are lots of reasons that you get reimbursements when you sell with Amazon, some more obvious than others.  They include Amazon not checking your inventory in (you sent in 6 and they received 5), lost and damaged inventory, returns initiated but never make it back to Amazon, returns after the return window has closed, returns that have been badly damaged.  All these can be reasons for a full or partial reimbursement.

I cannot underestimate the importance of reimbursements.  In 2016 alone, I have almost $500k in sales and over $42,000 in reimbursements.  I have almost as much in reimbursements as with refunds. I would have difficulty having any profit without reimbursements.

The actual numbers come out to 8.6% of my gross sales sales!  That's just straight crazy.  My rate of lost items seems to be greater than average but it is considered industry average to have shrinkage of about 1%-5% of inventory.  That same 1% of shrinkage can have a difference of about 5-10% on your margins.

Thankfully, as Amazon loses or damages your items they record everything in reports.  You can run your inventory adjustment and inventory reconciliation reports.  You can and should read them.  There is a wealth of information about what's happening to your inventory after it gets sent to Amazon.

Sometimes, about 40% of the time according to one person I spoke to who runs a company specializing in Amazon reimbursements, Amazon auto reimburses you.  Amazon acknowledges that they lost or damaged your item.  This should be auto reimbursed 100% of the time.  I'm pretty sure Amazon has software capable of doing that.  The reality is that if you aren't asking for reimbursements you won't be getting about 60% of the reimbursements owed to you.  That's your money, not Amazon's!  You can't let Amazon take that away.  Can anyone say class action lawsuit?

Inventory Shrinkage - Silent but Deadly

The biggest shame is that you don't even realize it's happening. If you get a return you adjust your overall margins with the money lost due to the return.  Once your business gets large enough it can be very difficult to track every bit of your inventory (it's absolutely essential).  You might have lost a couple of things and not even known.  If a couple thousand or even ten thousand dollars of inventory goes missing a year (not untypical), it can wreak havoc on your margins.  You might think you have sales of $100,000 and a profit of $15,000 for the year with 15% margins.  In reality, your profit was only $5k on the same number of sales and your margins were only 5%.  Not only that, when you pay your taxes you happily tell the Federal and State governments that you earned $15k for the year when in reality you only earned $5k.   You just paid taxes on $10k of inventory that you never profited from so you are losing even more than the $10,000!

Do it Yourself vs. Hiring a Company

For a long time I was filing all my reimbursement cases by myself.  The first problem with that is that I wasn't as effective as the company I eventually hired.  They did a better job, plain and simple.  I may have paid them but they recovered far more than their fees.

The other reason to outsource is less obvious to see in terms of money but it is far more important.  The reality is that the process of reimbursement filing is time consuming. The most important person in my business is me (I am also the most detrimental to my business at times!).  I am the only one currently capable of generating more deals (other than colleagues I share with but they aren't officially part of my business though sometimes it can seem that way).  Any time I'm spending reconciling spreadsheets trying to get $10 here and $10 there is time I'm not researching a possible wholesale deal worth $2,000 here, $2,000 there.

This is a general principle.  I have tried to outsource as much as I can.  I don't do my taxes, I don't do my own packing (well, rarely.  Well, maybe not so rarely but a lot less than I used to). Now, I currently don't do my own reimbursements (I still do some but I hope to pass that along as well).

In addition to time investment there is also mental energy investment as well.  My brain can only be filled with so many thoughts at once and all the cases I needed to start was constantly weighing on me.  Not anymore.  It's quite the relief.

The Different Companies

I started working with AMZ suites at first.  The main reason was price.  They charged you 1 credit per successful case no matter how much the case was for.  Each credit cost approximately $1.50 depending on how many you bought at any one time.

I looked at the tickets they were opening and the language looked quite robotic.  It looked like a script.  They would get rejected often.  They didn't reopen the case if it was rejected.  While I got my $1.50 back, I would much rather have my money from the case than the $1.50, I mean, that's the whole idea.

I found that AMZ suites was great at removing unwanted feedback that I hadn't been able to remove myself and for $1.50 I was happy to keep paying them but for the most part I wasn't super happy.

They did find about $600 for the 2 months that I was working with them and I paid about $50 or so it was worthwhile at the time, at least I thought.

They removed this option a few months later and went to a $79 a month model.  They weren't cheap and they weren't very good so it wasn't very useful anymore.

I started with a Glasshouse Inventory.  I was actually one of the beta testers.  They were fantastic, I mean really much better than AMZ Suites.  It wasn't even close.  They reviewed the same periods as AMZ suites during a week trial period and found almost $10,000 that AMZ suites left off.  Their success rates were much better, they continued opening cases when rejected and got top dollar reimbursements based on sales history.

I know that they hire Amazon customer service reps for R&D to understand why certain cases aren't getting reimbursed.

At the time they were $150 a month which was pricey but worth it when they are finding you many thousands of dollars a year.

Recently, though Glasshouse sent out emails that they are changing their business model going forward.  Instead of $150 a month, it is now a $150 a month or 50% of reimbursements found, whichever is more, starting in the new year.

That means if they find $300 a month of reimbursements, you have broken even with their minimum pricing.  This already cuts out most small time sellers since they might not be missing more than $300 a month.  If they find more than $1,800 for the year you will be earning 50% of any reimbursements found.  If they find $10,000, you would now be responsible to pay Glasshouse $5,000.

It sounds expensive and the truth is that it is.  Not only is it expensive but it isn't close to the other companies as you will see.  It might still be worth it if they find a lot more than everyone else or receive higher reimbursements rates for the same tickets.  I guess we will see.

Refunds Manager is probably the most well known company of the bunch.  They charge 25% of what they find and they cover a bit more services than GlassHouse Inventory.

I have not started with them and I don't know anyone who has so I can't say specifically how good they are but I honestly think they are worth a shot rather than paying 50% which is exorbitant in my opinion.

Let's say Refunds Manager finds $10,000, they would charge you $2,500 for that.  You keep $7,500.  Glasshouse Inventory would need to find $15,000, 1.5x more, for you to breakeven and take the same $7,500 home.  It's possible but would be impressive.

I will sign up soon and compare what they find going forward with the average that I was getting from Glasshouse.  It won't be a true comparison but it will be helpful for me.

AMZ Refund charges 8% of expected reimbursment.  That means you are paying them even if the reimbursment is denied.  Sounds kind of shady.  They claim to have found over $2,000,000 in reimbursements for their clients.  Again, I've never used them so I can't specifically say whether they are good or not.

Training a Virtual Assistant or Part Time Employee

I haven't figured out exactly what I will do in January but one possibility is to hire someone and train them to do it for you.  This will require a big time investment at first which I'm not sure I'm ready for but some people should go this route.

Keep in mind that if you are paying an outside service to do this

There are a lot of options out there and you should think about trying one or more because it is your money being lost.

Week 64 - The Buy Box
Week 65 - Amazon Restrictions and the Future of Selling on Amazon
Week 66 - Fun with Inventory Reimbursements
Week 67 - Q4 Storage Fees
Week 68 - Start Your Own Listings
Week 69 - A Long Tail Sale and Calculating Storage Fees
Week 70  - Prices Always Come Back Except When They Don't
Week 71 - Past Performance is No Guarantee of Future Results
Week 72 - Automation Beyond Amazon
Week 73 - Some Quick Holiday Tips
Week 74 - Update on Miles vs. Cashback Opportunity Costs
Week 75 - Pricing for the 4th Quarter Madness
Week 76 - Returns, Returns, Returns