While selling on Amazon means that you will be making sales, and therefore money, it also implies that you will have to deal with returns. Amazon has made it super easy for a customer to return something that they did not like or found defective. Literally, no questions asked! Once a return is initiated, Amazon will immediately collect the money from you and keep it on hold to pay back to the customer within the 30 day period they are given to physically ship the product back to Amazon warehouses.
A lot of times customers may initiate the return process but never get around to packing the item, printing out some boring labels, arranging a pickup or do an in-person drop off at a UPS store. Irrespective of whether an item was actually returned or not, your money is blocked with Amazon, till you ask to be reimbursed!
In an idea world, Amazon should be keeping track of unreturned goods and seller reimbursements you would think. After all, they have access to all the data in the world, and the most sophisticated bots to process it, right? But guess what, they don’t. Anecdotal evidence suggests that sellers might actually be losing thousands of dollars of money that rightfully belongs to them because Amazon is holding on to it. Sounds unbelievable? How does this entire returns and reimbursement process work and where are the loopholes?
First, let’s get the terminology right
It’s easy to confuse the terms returns, refunds and reimbursements. And we want to break it down for you as simply as we can. So here are some simple definitions.
Return - A process initiated by the customer when they do not want an item any more.
Refund - Money that gets returned to a customer when they return a product. Amazon collects this money from you as soon as a return is initiated and passes it back to the customer once the item is actually returned.
Reimbursement - An amount of money that Amazon owes you for any of the following reasons:
- A customer initiated a return, but never actually returned it
- A package was lost or damaged in transit (unrelated to returns but good to know)
- A product was damaged in the warehouse by Amazon (unrelated to returns but good to know)
Now let’s dive deeper...
The Returns Process
If a customer doesn't like your product and they think something is defective, or they just changed their mind and didn't need it they can prompt a refund and are given 30 days to return it. When they ask for a return, Amazon immediately takes the full amount of the sale from you, less than 80% of the referral fee to pay to the customer once they return it.
Now, the customer has another 30 days to return the product. If the product arrives back Amazon then immediately returns the customer's full payment. If the product never returns to Amazon, then the customer is not credited.
When the product is received, Amazon will examine the returned item, and with trained judgment, return the item to inventory based on certain determining factors. If the product is still new or able to be restored, it is returned to fulfillable inventory by adding a polybag or sticker, and the seller is charged an FBA fee.
Not all products are returned to inventory, though. If the item is deemed unsellable as “new”, then the item will go into “Unfulfillable Inventory” and cannot be resold. At this point, the seller is asked to either have Amazon destroy the item for a $0.25 fee or return in to an in-country address for a $0.50 fee. Those are extra charges that you need to account for.
Reimbursements from Returns
If the customer did not return the item to Amazon, which could be a 45 day long process from the initial return request, the seller is “eligible” to claim for a reimbursement for the sale. The amount of reimbursement is calculated as the average selling price of the item without Amazon fees.
One thing to remember about reimbursements is up to YOU to recover your reimbursement dues, because Amazon is not going to volunteer to do so. The money lost on unclaimed reimbursements may seem minimal to a seller for each transaction, but over the course of time, it can add up to be thousands of dollars; money that could have been reinvested in your business.
Getting Help From Tools
If you are the type of seller who want to know their data and stay on top of it, then we would like to suggest you try Efficient Era’s Returns Tracker. This is a convenient repository of all your returns. You have the ability to search, sort and export your filtered view and analyze your data offline. You can narrow down your filters based on date, order ID, market, SKU, ASIN, reason for return and more.
Analysing your returns data is the first step in recovering money that is rightfully yours. If you are not able to undertake such a process yourself, then there are service companies out there that are willing to help you get every dollar you’ve earned, for a fee. In any case, the onus for claiming reimbursements is up to you. So don’t leave money lying on the table.