This is taken from a premium post about his experience as a 3rd party seller on Amazon:
But the biggest killer of profits for us 3rd party sellers are the incredibly high number of customer returns. US consumers have been spoiled so bad by Amazon that they feel it is their right to buy multiples of similar items from multiple merchants, see which one they like and return the rest at seller’s expense. We get pallet loads of returns every day from Amazon an a lot of them are not even what we sold but what the dishonest customer returned. We sell over 30 of the same SKUs we sell in Amazon US in the Amazon Australia as well. In over a year, we may have had 2 or 3 returns in total in Australia. I wish return volume in USA was 10 times that of Australia. It is orders of magnitude more and incredibly costly for us.
The return processing fees are so large that we could be selling 30 of an item in a month and make a descent expectable 15% net margin after all expenses on the 30 sales. It is enough to have 2 returns out of the 30 to take away all the profits and then some. On some products, we end up paying Amazon to sell them for us due to the high volume of returns.
So, after almost 25 years of selling on Amazon, we are forced to stop selling a large number of our items on Amazon and rely on other sales channels such as our own web sites. Volumes will be much lower elsewhere but at least we won’t work for Amazon.
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Every retail business has returns, it’s generally included in the overall “shrink” statistics we’ve been hearing so much about. Mrs. Goofy worked for a TV and online jewelry retailer, they sometimes had returns of 30% (or more) on some product. They also sold gemstones, and it was not unusual for someone to buy a diamond ring or a loose ruby, and then try to return a stone of lesser quality and demand a full refund. There was a whole room full of gemologists to deal with this sort of thing.
The reality is that some things are more susceptible to abuse, and schmucks are going to abuse the privilege. Clothing which sells by size is one of those, especially given that clothing sizes aren’t really standard. I notice that Amazon now had some listings marked as “frequently returned” in an attempt to get people to pay better attention to the listing (I don’t see this on clothing as I don’t buy clothes that way, but on technological products which may or may not work for you depending on your set up and level of expertise.)
This “problem” certain doesn’t affect Amazon, and if a vendor has to shoulder the issue, well, that’s no different than at Costco, where the vendor also gets back charged for returns. Likewise, I’m sure, at WalMart and other major retailers.
Sidebar: Here’s a great story of a vendor who refused to sell at WalMart. It’s Snapper, maker of lawn mowers who dealt through small dealers all over the country, a vastly more complicated business than simply shoveling product out the door into WalMart distribution centers. But he realized that WalMart would demand more and more, require him to make the product cheaper and cheaper, until the brand was destroyed in the process, and he said “no”. Great story for today’s times - even though the piece is almost 20 years old.
https://www.fastcompany.com/54763/man-who-said-no-wal-mart
You gotta know which sales channels work for you and which don’t. If a vendor gets swamped by returns at Amazon, then maybe that’s not the one. There are others, lots of them. Got to work.
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This observation doesn’t really deserve its own thread, so I’ll just stick it here:
Amazon opened a distribution center about 15 miles from my house about a year ago. They took over an abandoned mall and are opening another one about 15 miles in the other direction within a month. All of my stuff used to come via USPS or UPS, and now maybe 20% of it does. The rest comes from Amazon drivers, sometimes in brightly logoed Amazon vans, sometimes in generic white vans, occasionally in something else.
Yesterday I was at Enterprise truck rental to get a 4-wheel drive truck to pull my boat out of the water (steep boat launch) and two guys were trying to rent a utility van. “Don’t have a single one”, the counter guy said. Haven’t for six months, won’t for another six months at least. Since Amazon opened the distribution center [edit to add: “to independent drivers”] they’re all out, and I can’t get them from anywhere else, either. There’s a Budget truck rental place up the street, but I’ve talked to them and they’re flat out too. Craziest thing ever.”
The guys left, offered a box truck but the job is 300 miles away and they don’t want to buy the gas for a truck that size.
Amazon, sneaking up the back route, is building one of the most prodigious transport and distribution infrastructures in the country, even as USPS and FedEx and UPS watch and can do nothing about it. In a way, it’s how they built AWS, and how they took over the “retail by mail order” business from Sears 30 years ago. Impressive, really, a colossus built brick by brick right before our eyes.
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