How Much Are Amazon Returns Costing You? 8 Tips from ECommerce Experts To Reduce Costs
January 18, 2022
In this article you will find out:
- The true cost of an Amazon return
- How merchants are managing the increase in return costs
- How expert sellers and Amazon partners reduce return rates on the platform
Amazon’s 30-day refund policy on most goods is causing a flood of returns for eCommerce sellers. And now, pressure on the supply chain is making the cost of returns rise: NBC Nightly News reports that a 2021 holiday return costs the seller ⅔ of the original item price.
A recent poll also revealed that a majority of eCommerce merchants (74%) are using their current workforce and paid overtime to process this increase in returns. Nearly half (42%) have also hired additional labor to process them. Check out the chart below to learn more about how merchants are handling online returns.
These returns are a direct hit to profit, and a high volume of them can negatively impact Amazon rankings or even get a listing removed. Taking steps to reduce your Amazon return rate will make you a more successful seller while saving you time, energy, and money along the way.
We talked with some Amazon influencers and expert sellers for advice on how to reduce returns on the platform. Here’s what they advised.
1. Collect Insights on Your Product and Brand
Companies that didn’t use to accept returns now have a flood of them, thanks to Amazon’s 30-day policy on most goods. Any seller who uses Amazon FBA must adhere to Amazon’s policy, and many sellers who handle their own fulfillment try to have similar return structures on the platform in order to stay competitive.
One of the best ways to reduce return rate is to manage, and continue to evolve, customers’ expectations of your product. An easy way to do this is to read and learn from your customer feedback.
“Read reviews to understand how customers receive your product and then either make changes to the product or to the listing,” said Liran Hirschkorn of Incrementum Digital.
For example, if you’re selling a technology product that is only compatible with certain devices, you may see a high return rate from customers who didn’t read the fine print. In order to reduce these returns, you could feature both photos of compatible devices and photos of incompatible devices with large red X’s on them.
If you are getting negative feedback on the product itself, you can improve development by finding a new manufacturer, updating your branding, or implementing a quality management system. You can also get ideas by reading competitor reviews to see what consumers do or don’t like about their products.
2. Use Fulfillment by Merchant (FBM) to Keep More Control
On average, return rates go down when you use FBM rather than FBA. This is mainly because fulfilling directly through a manufacturer, instead of through Amazon, gives you more control over your customer service.
Amazon customer service agents are always happy to return a product, whereas your own customer service team may initiate an exchange or other offering to keep the product in the field.
“Seller Fulfilled Prime gives your products prime status, but lets you handle the fulfillment yourself so you can connect with customers directly,” explained Adam Shaffer, President of Omni Channel Distribution. “While there are more upfront costs, it greatly reduces your return rates and gives you more control of your destiny.”
The downside to FBM is more time, money, and energy spent on fulfillment. Fulfilling through Amazon is more seamless, especially at a high volume. For larger, low-volume products that are a pain to restock, the cost of FBM is often worth it.
3. Improve Customer Service with Free Live Support
Some consumers would rather return a product than research how to use it. If your product comes with any sort of instruction manual, consider offering free live support to help walk customers through the setup process. This will enhance your customer service while reducing your return rate simultaneously.
“If the customer cannot figure out how to work it or set it up, they will return it,” Yungi Chu, owner of Headset Plus, explained.
If you fulfill through Amazon, it’s hard to keep control over your customer service since customers will likely be speaking to an Amazon employee. One way to get around this is to advertise your free live support number on the packaging and additional marketing materials, so customers can find it when they’ve received the product and reach out to you directly.
4. Provide Detailed Measurements, Materials, and More
You can reduce Amazon returns by providing specific and detailed product descriptions. This helps signal to customers whether a particular product or size is right for them.
“One way to reduce Amazon churn rates is to be very specific and detailed in the product descriptions,” said Alan Osetek, Chief Commercial Officer of Intentwise. “Be sure to include exact product measurements, size and color choices, materials description (example – for clothing), and answers to FAQs.”
Clothing is the most common item returned in eCommerce, so sellers in this industry especially need to invest in accurate sizing charts. Consider incentivizing customers to leave reviews with photos so other shoppers can see what items look like in the real world.
5. Optimize Amazon Listings for Mobile
Even though 79% of consumers have made an eCommerce purchase from their smartphones, many listings on Amazon aren’t optimized for mobile. But shoppers behave differently with smaller screens compared to large desktops and may be more likely to miss small product details when browsing.
“On mobile especially, Amazon consumers don’t always read the product description,” Emma of Laceeze explained. “Make sure that you have maximized the space in the bullet point section to provide as much important detail as possible about the product.”
When done right, creating a mobile-friendly version of your listing will help you edge out the competition and reduce returns. One example is to include as much sizing information as possible in a graphic format rather than just text, that way if users don’t read the full listing they’ll still intake the information.
6. Automate Review Requests
Learning from your customer feedback is essential, but in order to do so, a high volume of reviews is needed. Asking customers to leave reviews can be a time-consuming process, but there are services that help automate this task.
Nikki Bruner, the founder of My Perfect Plants, uses a review collecting service to save her time and energy. “We use a service that sends out automatic review requests as well as tracks our positive and negative reviews for us,” Nikki explained. “They will also alert us when we get too many negative reviews to help us keep track.”
Improving return rates is especially important for Nikki since her product is a live good that is hard to reship. Through a high volume of Amazon reviews, she’s learned to invest in top-notch customer service and get creative with addressing unhappy customers, such as sending them new soil mixtures to try to revive the plant.
“For us with live plants, things can happen during the shipping process that might negatively affect the health and growth of the plant,” Nikki said. “Instead of having customers return a live good, we can reship them the product to improve their experience with our company.”
7. Impress at First Touch with Quality Packaging
Your product’s first real-world impression is the packaging. For some consumers, unwrapping is everything, especially when it comes to luxury items and other highly anticipated purchases.
“Packaging is so important for first impressions. If you see a beautiful product and then it arrives in a tinfoil bag, it’s really disappointing and you might be more likely to return it,” explained Adam Shaffer, President of Omni Channel Distribution.
Junky packaging may make a consumer reconsider the purchase or even start to doubt its authenticity. Create an appealing look that also offers shipping protection instead. For example, folded boxes with nice branding are great at both protecting product and first impressions.
8. Advertise Your Product Accurately with High-Quality Photography
Give context to your product while managing expectations with high-quality and accurate product photography. This is a chance for your product to shine, and you can use the opportunity to show use cases.
“Your hero image and listing photography have to be amazing, don’t shortcut this part of the process,” Nick Steiner of Imagine Sourcing advised. “The images should look just like the product and tell a story to show your customer the outcome.”
Your main image should fill 85% of the Amazon square (and remember on Amazon, it’s always a Square). In the photographs, make your product the focal point by showing different angles and minimizing distractions in the background.
Don’t let the fear of returns be an obstacle to scaling in 2022. In fact, our data shows that larger sellers have a smaller Amazon return rate on average. Keep chipping away at your return rate by using the best practices discussed above to keep more profit and boost your rankings.
This commitment to reducing returns will likely involve bigger marketing spending, at least in the short term. An 8fig Growth Plan gives you access to continuous eCommerce capital to use at every stage of your supply chain, from marketing to inventory, freight, and more. Building a plan is free and takes less than an hour, and will help propel your online growth today.
Karlyn is an eCommerce writer and Content Marketing Manager for 8fig. She's on a mission to democratize online retail by empowering small and medium-sized businesses with resources and tools they need to compete in dynamic marketplaces.