Amazon FBA: How to Manage your Returns Inventory
Wanted to talk to you a little bit about returns because with increased sales (as hopefully you have begun to experience entering Q4) come increased returns. I will talk about different types of returns and what you can do about them, how you might be able to minimize them, recoup some of the expense that is tied up in those returns, and how to dispose of returns in some creative ways.
First, let’s talk about what creates a return. It could be a customer who orders one of your products, and then decided that they don’t want it anymore: maybe they already have one, maybe it’s the wrong size, maybe it didn’t work like they thought it would, it could be any number of things. Amazon makes return process really easy for customers.
When Amazon has unsellable or unfulfillable goods, either because they are damaged or they were returned, you need to request a removal order and have those items either sent to you or handled in another way. You can even pay Amazon to destroy those goods.
But sometimes that inventory is resellable. Let’s say that you sell baseball caps, and somebody orders your baseball cap, they receive it, and do not like the way it fits. So the items is perfectly good condition, it hasn’t been damaged. Maybe it’s the wrong color? So these items upon return are perfectly good. And if you let it sit in the warehouse somewhere or have it destroyed, you are literally throwing money down the drain.
There are couple of ways to deal with returns: simply destroy those items, inspect and send back inventory that is in sellable condition OR donate items.
Destroying items may only be a good idea if you know that goods are damaged, or if you calculate that freight price and times are not worth the hustle. Usually I do not recommend having Amazon do that for you, i recommend that it is sent to you, or having those items sent somewhere else and destroyed.
If items are small and light weight, or not of significant value, the selling cost if just $10, and it’s not even worth the postage to send those items back – you might think of simply destroying them. The other items that will fit under this category are products that are damaged, or clearly been used. No one wants a half empty bottle of shampoo, right?
Inspect and send back resellable inventory
But if your sales price is high enough on the product you might want to consider to request a removal order on Amazon, so your items are sent back to you for inspection. So later you can sort through those and find out which items are in new/like new condition and put that back into your inventory through Amazon FBA. This way you are giving yourself an opportunity to have another sale and recoup those costs.
Donate your returns inventory
The third option, and the one that a lot of people ignore, is donating items. This way you are not only doing a right thing, but you are also having tax write-offs because of the items you donate. You can donate inventory in any condition (new, used) as long as it’s safe. And as mentioned previously if you are donating your returns you will receive a receipt that is tax deductible.
Donating products and your unfulfillable inventory is not only just a great thing to do ( to help out people, animals, whoever that might be less fortunate, and could really use those items), but from a business standpoint it really can be a great way to lower your tax liability as well.
I use a little of a combination of all three with my brands. And the question I get is: how do you manage this? Don’t all the boxes fill all your work space? Well, yes, they do fill up all of my garage, but I do sort things out regularly, once or twice a month.