Tuesday, December 6, 2016

Turnover Tuesdays - Returns, Returns, 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.

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

Returns, Uch!

Just the word returns gets me upset.  Oh, and those emails!  They can ruin your day.  I hate returns, it's just money out of my pocket.  Returns had a major impact on me in 2015, especially during the holiday season and immediately thereafter.  Last year I had over $8,000 in returns in December and then again in January.  Salt was just getting poured further and further into the wounds.

I was mostly ok with that since I was still making money despite the returns.  I had over $100k in sales last December so my business could survive those returns.  Still, that's a ton of returns and it would be nice to cut that down for this year.  I also want customers to be able to return item - just not mine ;) - so that they are more confident making purchases.

Many of those returns were either reimbursed or deemed resellable.  The reimbursed ones are especially nice because you are reimbursed based on your sales price.  If something is deemed resellable by Amazon, besides the possibility that it isn't resellable and the buyer might be pulling a fast one on you since you won't inspect it and they pulled a switcharoo on you, it also means it needs to be resold.  The second sale can lead to a new return or prices could have decreased tremendously if it is no longer the 4th quarter.

In addition, even if you are reimbursed, there is a still a return fee that Amazon hits you with which if you don't fight for is just a loss.  You also just need to deal with it all.  Whether it is following up to make sure the return made it back to Amazon, that you were reimbursed if it wasn't returned, that it gets reimbursed properly, possibly having to return to the store yourself, reselling it and all that involves.  Obviously, I would just rather it get not returned to begin with.

2015 Returns

Last year I had so many returns.  I had 7% of my sales in returns (gross numbers, not units).  That's insane, like really insane.  Totally insane.  Do you realize how insane that is?  Quite.

Looking back, I'm impressed that I made any money at all last year and the truth is that I didn't make so much and a big part of that was returns.

Especially, when you consider I had over $8,000 in returns in January that were almost entirely related to 2015 purchases (it would closer to 10% of gross sales if those counted against 2015 numbers - yikes!), it was not a stellar year in terms of returns.  I blame a lot of that on Apple Watches but it wasn't just those.

Turning the Ship Around in 2016

It only started dawning on me how bad it was a few months into 2016, especially when I was comparing sales numbers, returns and total profits with some friends (get some reselling buddies, it's really, really important).  I had more sales than some, which I was proud of, but my overall profit numbers weren't so great.  Many had far better profit numbers than me with much lower sales.  It's not about the sales, it's about the profit.  So I've been trying to make an effort to both increase profitability in general with higher margin items while at the same time decrease my returns.

I had a lot inventory built up from my old habits so it took a long time for this transformation to take place, especially when long term storage fees started coming and I needed to sell a lot of that old inventory.

Moving Away from Electronics

The biggest thing I did for most of the year is avoiding electronics in general and especially high priced electronics like Apple Watches.  They sell very fast but it doesn't help if it gets returned and electronics are returned at a much higher rate than some other categories.  I actually can't remember the last time I bought an iPad.

It isn't just the returns though.  There are a few other reason to avoid electronics.  The first is margin. This is more closely related to higher priced electronics.  It's hard to find a $100 tablet selling for $200 on Amazon.  More likely it is going to be selling for $130.  That's just not enough for me anymore, especially after fees.

The other problem with electronics, and this is item specific, is warranties.  I've mentioned before that if you can't provide a warranty to the buyer based off their purchase date instead of your purchase date, you are technically not fulfilling the requirements set by Amazon for selling as new.  That's a big deal.

  • New: Just like it sounds. A brand-new, unused, unopened item in its original packaging, with all original packaging materials included. Original protective wrapping, if any, is intact. Original manufacturer's warranty, if any, still applies, with warranty details included in the listing comments.

You are putting your account at risk for every sale that should come with a warranty because if the manufacturer doesn't accept the warranty because the buyer didn't buy it from an authorized reseller and the person complains to Amazon, that could mean big trouble for you.  You are at fault for this.  It wasn't new and you listed it as new.  No beauno.

For all these reasons, I've shifted my focus away from Electronics.

Moving Towards Health, Beauty and Groceries

A much larger percentage of my business has moved towards Health and Personal Care, Beauty and Groceries, though it is still smaller than I would like it to be.

These categories are gated so many sellers can't sell in those categories.  The profits are usually better and the returns are far, far lower.

In these categories, the returns I get are usually do a mess up of some sort (either mine, Amazon's or the carriers) and most of those are reimbursed.  Think about it for yourself.  If you bought a $10 hot cocoa which would have been $2 in the store because you didn't want to go out, you will just use it and then go to the store next time but you aren't very likely to return it.

How Has 2016 Been?

On the surface, returns have been even worse.

Truth is, they have been even worse.  More than 9% of gross sales.  That's even more insane!  Just crazy!  What the heck?!

That being said, trends going forward are far more important to me than actual past numbers.

As I mentioned, I had over $8k of returns in January 2016.  I hadn't been selling in 2015 so I will be able to more properly compare how I've been doing in 2017 to 2016.  That 8k is almost entirely related to 2015 sales, not 2016 sales.

In addition, through May my return rate was always 10% or above my gross sales numbers.  June, July and August were a bit lower but pretty high still.  It crept back up to 10% in September but that is mostly related to overpriced items that were selling like crazy in September.  A lesson not to jack up prices too high.  Tons of returns and customers said they found better prices elsewhere.  Oh well, live and learn.

I didn't start to really see major improvement until October.  About $1,000 in returns for $34,000 in sales.  November was $2,000 for almost $50k in sales.  These are numbers that are between 3-5%.  Still high, but stuff I can live with.  Also, the returns tended to be for reasons I can pinpoit.  I sent in a 2 pack and amazon sold it as a one pack.  That will be returned 100% of the time.  Annoying but understandable and fixable.  We will still see how December and January go but the general trend is much, much better.  

So far I have $650 in returns for this pay period which will end December 10th for me which is in line with the lower return rate considering sales of $28k so far during that pay period.

Overall, I've been very happy with this switch and hopefully I can improve on this as well.

What have your experiences been with returns?  Any ways to decrease them that have worked for you?

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