According to the National Retail Federation, retailers lost $816 billion in sales due to returns in 2022. With more people shopping online than ever (27% of the global population and 70% of the U.S. population), many of those returns come from ecommerce. And since Amazon is the reigning king of ecommerce platforms, effectively navigating their returns policy is crucial to minimizing losses.
Many retailers use the Fulfillment by Amazon (FBA) service to take advantage of Amazon’s giant network of warehouses and get access to fast Prime shipping for their orders. This is an attractive option for some – but you lose a lot of control over your customer experience and communication. You also hand returns processing over to Amazon, which may or may not work out well for you.
Here’s what you need to know about FBA – and how to explain the advantages of your 3PL to your ecommerce retail customers.
Fulfillment by Amazon
The most convenient fulfillment model on Amazon, FBA also comes with some big drawbacks – especially when it comes to returns.
Merchants have many reasons for using this option – and some sound familiar to anyone who’s partnered with a 3PL in the past. First, Amazon holds all of your inventory in its fulfillment centers, so you don’t have to invest in your own warehouse space. You also get access to the company’s fast Prime shipping options, which customers now expect (and demand).
But for orders that result in returns, FBA quickly becomes much less attractive.
Amazon’s returns policy heavily favors the consumer – and unless Amazon’s inspection determines the item got damaged while in Amazon’s custody, the retailer is on the hook for shipping, processing and restocking fees, along with loss of items that return in unsellable condition. Problems can also crop up during the returns process.
First, the customer may request a return…but then not send the product back. Because Amazon puts the money from that sale on hold pending the return, this can make cash flow harder to track – you’ll have to wait until the 30-day return window is up before you get reimbursed for the sale. You also need an efficient way to monitor the return to make sure Amazon doesn’t make a mistake and fail to reimburse you.
Another issue: damaged products. Amazon removes any damaged return from your inventory at your expense, unless you can prove the damage happened while the product was in Amazon’s hands. You also have to either take their word for it that the item is no longer sellable, or request that they send the item to you so you can inspect it yourself.
When just starting out and your business is still small, FBA can be a great option. But for better control of inventory and communication with customers (to head off returns or turn them into more selling opportunities), FBA quickly becomes too limiting.
Fulfillment by Merchant via 3PL
Your other (and arguably better) option for Amazon sales is keeping your fulfillment under your own control. By using a 3PL to manage your fulfillment, you maintain control of customer communication, inventory and returns – but still enjoy benefits like not maintaining your own warehouse space and getting fast, reliable shipping.
The key to success with this option is finding a 3PL with an efficient returns process, managed by a robust software platform to reduce processing time. You also need a well-defined return policy and process so your 3PL knows how to handle each product that comes back.
Using a 3PL instead of Amazon to handle your returns will cut out Amazon’s processing and restocking fees – and gives you much better visibility into your returns. A 3PL with good returns management software will also give you better and faster information on your returns, such as real-time visibility into returned item tracking and status.
Amazon’s FBA program attracts many retailers who are either new or don’t want the headache of managing their own inventory and returns. But by choosing the right 3PL partner – with the right technology to back them up – retailers gain better control while enjoying many of the same benefits the FBA program offers.
Are you a 3PL who wants to give your ecommerce customers that same peace of mind? Get in touch today!