How To Turn Your Amazon And DTC Returns Into A Revenue Recovery Channel — JD Sass | Why Returns Kill Profit, How To Recover Revenue From New Returns, Why Data From Returns Improves Production, How To Scale Faster With Smarter Returns (#476)

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00;00;00;00 - 00;00;25;22
Unknown
Amazon allows sellers to recoup money on fraudulent returns and several other issues. It's a consumer friendly platform, I think, and it's also opportunistic for bad actors to take play in some of that stuff where a product is bought and then switched out with something else and returned. Hello, welcome to another episode of the E-commerce Coffee Break podcast. Returns are one of the most ignored parts of e-commerce for many brands.

00;00;25;22 - 00;00;45;28
Unknown
Once a product comes back, it's out of sight, out of mind and treated as a loss. But that mindset could be costing you real money. Today we're breaking down what really happens to your return to inventory? What revenue gets lost and how smart brands turn the returns into a recovery channel. Joining me today is JD Sass is the founder and CEO of Axiom Return Solutions.

00;00;46;01 - 00;01;17;28
Unknown
He helps Amazon sellers and DTC brands take control of their returns, recover lost revenue and gain full visibility into every unit. JD, great to have you on the show. Course, great to be here. I appreciate it. Let's start. How do brands see returns as a cost That is a problem, but how about why? Yeah, so a lot of what what I hear brand saying on the front end is they're usually assuming a return rate and a lot of brands aren't even assuming a recovery potential for that return rate.

00;01;17;28 - 00;01;37;02
Unknown
They're writing it off as a loss or they're baking it in on the front end to a landed cost of goods on the product. So I work with a lot of Amazon sellers. It just assumes. So whatever their landed cost of goods is, if they assume a 10% return rate that's typically baked in on the front end, sometimes it is written off is like marketing, for example.

00;01;37;02 - 00;02;04;24
Unknown
Right? But a blanket, you know, for the most part, I can't say for everyone, but disposal is just assumed. They're just writing it off as a loss and filling that in where they need to. But they're assuming a return, right? They're expecting to take a hit and there's not a lot of providers out there that show, hey, there is an opportunity to actually recover revenue on this and also get a whole bunch of data to drive decision making processes on the front end.

00;02;04;26 - 00;02;23;28
Unknown
Mm hmm. You want to dive deep into this topic today. But before we get started to go into the details, I want to know what really happens to a product after customer clicks, return. Yeah, So? Well, I'll keep it with Amazon. I guess if you purchase an item from Amazon comes to your house, you don't like it, you return it.

00;02;24;00 - 00;02;46;25
Unknown
Oftentimes customers get refunded before an item, right? If you take it back to a UPS, for example, a customer, your refund it before it ever leaves the UPS right? Goes to an Amazon fulfillment center, a return center. And from there Amazon will say it's either can be sold again or not sold again. So the item, if it can be sold again, gets removed to a return address.

00;02;46;27 - 00;03;17;03
Unknown
A facility like ours where it is then inspected, graded and somewhere around half of what we receive as unsellable, for example, is brand new. And so we're able to reintegrate that inventory right back into Amazon. Mm hmm. I think a lot of brands, as I said, they just do the calculation and do it right off there. But there's a lot of money to be made, and I want to find out it's not necessarily only sending it back, but where do sellers lose money in that process?

00;03;17;05 - 00;03;43;29
Unknown
I think maybe a lot more than they anticipate right then. It's just simply an item that they're writing off and throwing away. What that item does is displays a lot of information. Right. So again, I'll keep it in the Amazon world. So if you choose to dispose of an item in Amazon versus remove the item from Amazon's fulfillment center and bring it back to you internally or a return center like us, the cost is the same, right?

00;03;43;29 - 00;04;07;05
Unknown
So there's some incentive for you to remove the item from Amazon now. Amazon also in their terms as when you choose disposal, they can dispose, recycle or resell your inventory. You waive. All right. So then they keep the proceeds, right? So why not even simply remove the item to offset those costs? The second thing is the item holds a lot of information about consumer feedback.

00;04;07;11 - 00;04;27;18
Unknown
You can choose as a consumer why you want to return the item. We find that's often not always accurate information. Why is that item being returned from a consumer standpoint? Are there areas for improvement on the front end? Right with production, manufacturing, packaging? Is there information we can provide back to a listing to help produce returns from happening?

00;04;27;18 - 00;05;00;20
Unknown
Right, Because ultimately a return happens before an item is ever purchased. Right. So if there are areas on the fulfillment side of things, if mods can be made to packaging to improve the appearance or reduce damage and transit of the item, typically over a period of time where you collect data on an X in number, you know, X amount of SKUs, for example, those trends become readily apparent and it's easy to also then you've got like bad production runs, defects from brands, you know, defective products that they don't know is happening unless they get that information.

00;05;00;20 - 00;05;23;26
Unknown
So that they can make the adjustments on the front end where they need to. So that's oftentimes overlooked. It's just an item that's going in the trash, you know, And from a brand control standpoint, like what we do, we offer manifested or serialized disposal. So a big, big part of brand control creating or curating a positive consumer experience is you don't want your inventory to end up somewhere.

00;05;23;26 - 00;05;48;24
Unknown
It's not supposed to end up in someone's hands, is going to sell it in a way that you don't want it to be sold. So we we provide like a manifested disposal, right? We ensure inventory is disposed accordingly, inappropriately, is not resold. And that's okay. I don't advocate for disposal, but at the end of the day, if you buy a product and it's defective or it comes as counterfeit, the bad review doesn't go necessarily on the seller, right?

00;05;48;26 - 00;06;02;12
Unknown
So with the brand, if I get a bad pair Nike shoes, it doesn't matter. I don't even know who really who I bought it from for the most part. So there's a lot that goes on in the back and I think it's just been been overlooked for a long time. Well, there's so much in what you just say.

00;06;02;14 - 00;06;25;06
Unknown
JD And I think our listeners have to listen to this part more than once. So I want to pick a couple of things that you just mentioned. First of all is the marketing side of things. I'm a marketer, so and I think that's something that stick out, sticks out for me is that you get really valuable information if your marketing is completely off and people just buy something and get something that they did not expect.

00;06;25;10 - 00;06;49;27
Unknown
Product Detail Page Selling something that's not the product. So that's very valuable information. Then also coming back from the production side of things, also very valuable. I did Dropshipping for, I don't know, seven, eight years or something like that. Most of the products I sold, I never saw. So as you said, if there is a product going out that you never see and is just not up to matched what people expect, you have a higher return grade.

00;06;50;00 - 00;07;10;20
Unknown
One thing you mentioned right in the beginning was fraudulent returns. Talk me through What does that mean? Yeah. So pretty simple. If I purchase an item on Amazon or someone purchases an item on Amazon, they say it's a bear Nike tennis shoes and then returns a pair of, you know, flip flops from the eighties or whatever it might be, right?

00;07;10;23 - 00;07;38;29
Unknown
If you don't have someone physically inspecting that inventory, Amazon allows sellers to recoup money on fraudulent returns and several other issues. Right. So Amazon's you know, it's a consumer friendly platform, I think. And it's also opportunistic for bad actors to take play in some of that stuff. Some high category targets are like your electronics, shoes are a big one or a product is bought and then switched out with something else and return.

00;07;39;02 - 00;07;57;10
Unknown
Okay. And electronics make it easy because oftentimes or tools, for example, there are serial numbers on the item and then on the box. And so if the serial numbers don't match up, you know, that can be classified as a fraudulent return. So we take pictures of the product, the packing slip, some other information and upload that to Amazon.

00;07;57;10 - 00;08;16;16
Unknown
And so our central for our clients and they get reimbursed for that item. What I see a lot of too is your Amazon will just return the wrong item. You know, maybe we're expecting to receive like a $20 eyeliner and we got a $200 pair of ASICs brand new shoes. Right? That we don't we don't expect that to be a fraudulent return.

00;08;16;16 - 00;08;40;13
Unknown
There's just an error in removal. And oftentimes, too, we're expecting to receive, let's call it 100 units from a brand. We're expecting 100 units. We only got 95. We're missing some units. So they were shorted or lost in transit and we're able to file claims on that inventory as well. Likewise, if you buy a set of five forks and only return three of them, we get money back.

00;08;40;13 - 00;09;04;21
Unknown
And so Amazon allows sellers to capitalize on that somewhere between depending on the category 8 to 12% of what we receive, we can file any one of those claims on. So brands who do not have this system set up internally, and I don't know many other if any other providers that are actually doing this at scale, filing these types of claims, taking pictures and uploading those cases into seller central.

00;09;04;23 - 00;09;28;21
Unknown
It's a significant revenue driver, right? You're then able to get all this information. And if you know, let's call it 40 to 50% of the inventory can be reintegrated. Again, back is new. So now you're reintegrating inventory, you're keeping it out of the landfill, Right. You're filing claims on these fraudulent returns or missing units. You're capturing data at a SKU level that you never had before, where the conversation on the front end is no longer emotional.

00;09;28;21 - 00;09;47;17
Unknown
Let's just throw the stuff away. Right? You're now providing data to drive decision making processes. You're removing emotion from the equation. Because when I talk to people, man, it's it's usually like two. You know, we're at that point where there's just I've said about it, you know, it's like, what? And you guys helped me. I don't know what we're doing.

00;09;47;17 - 00;10;06;10
Unknown
You know, there's this, there's been, you know, a truck or 220, 30 pallets sitting in storage for a couple of years, like the presenter not do anything with it and no, no false are the three bills or perhaps it's a separate business. So we learned we tried doing both. It didn't work. We, we just stuck with with one thing.

00;10;06;12 - 00;10;32;16
Unknown
It's the two inch wide, mile deep is the approach that we've taken and and it seems to work out. You know, there is a need and it's not blanket for us to help everyone but but odds are there's there's a lot of stuff that's being overlooked on this back end. Yeah yeah. And that shows for all of our listeners returns is much more complex than one might think on the first look and from what you just mentioned was the fraudulent ones.

00;10;32;20 - 00;10;48;17
Unknown
Not sure if it's a term, but I would say that's like reverse porch pirates or something like that. So it's basically coming on the back end. I just made this term. I'm not sure if this I don't think I like it, but it just shows that you need to have somebody who has really experience in dealing with returns.

00;10;48;17 - 00;11;11;29
Unknown
And I did it on my own. That was a pain in the neck. And when you're scaling, obviously it becomes a bigger problem. Now, when we go deeper in this, you said or you mentioned it's a revenue recovery channel, so there's a lot of things to do. How do you decide if a return is a restock item, a resell item, if it gets disposed or liquidated?

00;11;12;00 - 00;11;34;06
Unknown
What's what's how's the process there? Yeah, that's great. Usually I'll have you tell me. Right. I can provide suggestions, things that have worked for other partners that we work with categorically in the industry. Is this brand direct that we're working with? Is this an agency representing brands? Is this an accelerator type model? Is this a reseller or a wholesaler?

00;11;34;08 - 00;11;56;25
Unknown
Well, we'll determine essentially what happens with the inventory. Right. But if it's new, we want to reintegrate it back to our primary sales channel. Always. That's where your highest, you know, return is going to come from there and then what secondary options are available. So we utilize eBay, I still think is king of the secondhand marketplace. You've got Facebook and traditional liquidation channels politicizing.

00;11;56;27 - 00;12;16;16
Unknown
You've got your eBay whatnots, Tiktoks right. Where we you know, we work with some partners. Are there warehouses are just people streaming all day long selling secondhand, you know, items that don't need to go into the landfill. Is donation an option? Right. Depending on how your company structured is, is that advantageous to you if you're not wanting to just dispose of it?

00;12;16;16 - 00;12;41;19
Unknown
And then sometimes disposal is the most responsible option, right? If items are expired or, you know, eBay, the beauty products, if they've been tampered with or used, they've been exposed to like a mucous membrane, you can't obviously, you know, you can't resell that inventory. So that will will depend a lot on the front end. And usually all that's determined based on the grade and the SKU of the item.

00;12;41;19 - 00;13;00;29
Unknown
So when we scan everything on inbound, we already know and are in agreement, we have a, you know, a scope of work in SLA with the brand. So we know with that item and that grade exactly what we're doing with that, the inventory. And it helps really, really keep us lean on our end because there's just so much stuff coming in.

00;13;01;02 - 00;13;22;08
Unknown
And if you don't have that in place, then, you know, we started that way. It didn't work out. You know, you really have to have systems and processes in place for the inventory and oftentimes it's coming up with it together with our brand because, you know, and some very large, large household name brands don't have solutions in place.

00;13;22;08 - 00;13;45;00
Unknown
Right. That we've come up with them together. What will be the best route for the inventory, the highest potential recovery, allowing to continue to curate a positive consumer experience? You know, do see, is there like a discount on your website, direct channel? Right. Is there are you interested in capitalizing on a secondary consumer offering a discount on these products so the next time maybe they buy new from you?

00;13;45;02 - 00;14;06;15
Unknown
Right. So there's a lot of avenues to explore. I'd say roughly around six with us. But, you know, again, ultimately it's up to the brand and what they want to do with that inventory. Yeah, you mentioned I think it has to do a lot with providing the right service quality and retention. If even a return can create a good customer who buys more from you.

00;14;06;15 - 00;14;27;00
Unknown
If the experience is great, they will buy probably more. Even if the first delivery was not right. Could you share some success stories or case studies of business that you have worked with and what kind of results there? So yeah, absolutely. We just did one with a Halloween costume company. So they sell to, you know, large brick and mortar stores.

00;14;27;02 - 00;14;48;11
Unknown
They they also sell a whole bunch on Amazon and DTC, but just Halloween costumes, just like you'd go and buy from any store. They come in clear packaging with a cardboard insert that is a picture of the costume with us. We did a pilot with them over a couple thousand units and what we received what was called as unsellable inventory in Amazon has to be removed.

00;14;48;11 - 00;15;15;10
Unknown
So of the inventory that was called unsellable, almost 84% could be reintegrated as brand new, almost 60% of that that number is brand new, could go right back into Amazon. We were able to add new packaging to some of the units, new inserts to some of the units. Some units just needed both insert and packaging, but that's a significant number that's exponentially higher, I think, than we see for the most part across the board.

00;15;15;17 - 00;15;36;01
Unknown
But there are opportunities like that that exist. And not only that, with the reimbursement claims, like I was talking about, you're able to add images to the listing pages that allows you to increase the potential to recover revenue if a customer returns an item missing a piece. Let's say the costume had a hairnet right? It's a piece that goes on your head.

00;15;36;01 - 00;15;53;05
Unknown
It comes with a hairnet. Someone buys the item and then wears it for a weekend and returns it. Right. Which is unfortunate because in Amazon's terms, it's like that with shoes. If they use the shoes and return them as this, I think last time I checked, it's fairly black and white. There's no like you just have to eat that right uses secondary channel to recover.

00;15;53;05 - 00;16;15;02
Unknown
They're not going to reimburse you. But if it comes back missing pieces, if that hairpiece comes back, missing the net or a mask or whatever it might be, then you can file reimbursement claim. But if you don't have the proper documentation on your listing and you're not documenting properly on the back end with the photographs and the supporting docs that you provide, then you can't capitalize on that opportunity.

00;16;15;02 - 00;16;35;14
Unknown
So we help tweak or provide suggestions to do a lot of that. And it was is fairly significant, you know, and some other things too. Very simple even for your audience listening, like I use my drink here as an example. So if you, if you buy an item, right, I put this in my camera here, the top of the box might have a tamper proof seal.

00;16;35;20 - 00;16;54;10
Unknown
Right? You got to pop the seal open to open the product. It needs to be on all sides anywhere there's an opening on the product. Because if you have it on the top and not on the bottom, a customer could open the bottom of the box. They can take out the item, manipulate it, put it back in, put something else back in and return it.

00;16;54;13 - 00;17;13;21
Unknown
This comes back to Amazon. Amazon sees that the tamper proof seal is still intact, so they call it new. So then it gets resold to another customer. Another customer gets this item that's been used. They're upset, right? They leave a bad review. The bad review goes to the brand. They don't, you know, Amazon doesn't, Right. They don't know.

00;17;13;21 - 00;17;41;05
Unknown
And it's not it's no one's really no one's fault. They just don't know. So I always say just simple, too little things like that. Just adding the seals across all sides that way, specifically with Amazon, if it's if it's popped open, it's coming back out. And really for any retailer like that, it's just easy little things that can be implemented on the front end to help to help mitigate some of that or at least allow inventory to end up where it's supposed to go, new versus not new.

00;17;41;07 - 00;18;04;21
Unknown
Yeah, people become really creative when it comes to being fraudulent or doing fraud. So anyway, walk me through the typical process when you start working with the client, what steps are involved to get up and running and what are the next steps once you're receiving returns? Yeah, so really the first part is, is we hop on a call.

00;18;04;23 - 00;18;22;24
Unknown
I want to know if if you know one, are we a good fit for you and are you a good fit for us Because at the end of the day we want to provide value and be of service. And I don't want to be a part of wasting anyone's time, energy, money or resources. If we can't help, maybe I know someone who can.

00;18;22;26 - 00;18;45;22
Unknown
And I'm happy. You know, I do often not not often, but I do refer to competitors in the space. I think the ocean is plenty big, and if there's someone else who can provide value, then that's what we want to do. But really, are we a good fit? Right? Onboarding is really simple with us is just changing your return to removal addresses and we just have to agree upon what the scope of work looks like for your inventory.

00;18;45;22 - 00;19;10;04
Unknown
What is your inventory? We become the return address. We receive items based on whoever you want us to inspect. Then we will do that. Scan them on inbound grade them. Reintegrate is fairly automated. We'll reintegrate inventory back to our primary sales channel, afford it downstream to another facility, will utilize our secondary channels and pay out for sales that are made, whether that be eBay or traditional liquidation.

00;19;10;06 - 00;19;28;29
Unknown
Right. We file those claims for our clients. You don't have to do any work there. All of this information becomes available in a in a custom portal. So we have our own tech. My business partner cabin built everything. We don't find anything out. We built everything that we have and oversees the development of our tech. So it's specific for returns.

00;19;29;00 - 00;19;51;09
Unknown
This is it, This is it, right? There wasn't anything that exists that we could use. So we had we just built our own and that allows us to provide and to pull this data that I was referencing in a really, really granular fashion. Obviously, you have to have, you know, numbers there. You have to have volume to start to identify those trends.

00;19;51;09 - 00;20;17;07
Unknown
But you will see there are SKUs to sellable or, you know, off this return. A we receive 100% is always sellable and then this return 2% is always sellable. So there's there's something there with that item to take a look at it. It's that simple. And then with the donation and disposal, everything is skewed or manifested, right? And if clients want to see photos of the inventory, we do a bunch of that to, you know, as many slots, about 8 to 12 slots for images in the software.

00;20;17;07 - 00;20;40;18
Unknown
If they're wanting to see images of the items as well. We'll work with like your counterfeit, I guess, items or unauthorized resellers assisting legal teams to to weed some of that stuff out as well. But you know, the onboarding is fairly simple. And if it's not simple, in my experience, it it just doesn't work out that well. As we receive those returns.

00;20;40;21 - 00;21;06;17
Unknown
Everything's available on the dashboard, you know, and it's a hand-holding process. Early on, we're open ended. So if it doesn't work out, they're not finding value in our service or they're wanting to pivot as a business. That's great. Like I said, we should be providing value. And if we're not, it doesn't make sense to work together. But also if they decide they want to pivot or they got their data and decided, hey, we were doing the right thing anyways, we don't need you guys anymore.

00;21;06;19 - 00;21;31;22
Unknown
Cool. Mission accomplished, right? Like, that's that's our take on it. And there's just a large demand for something to be done on this. And, and the longer that that I'm in the space, the more conversations that I'm having. It's clear that that there is a need for it. And that's not going away. It's continuing to expand. I definitely can see the value.

00;21;31;22 - 00;21;49;12
Unknown
It reminds me on my set of years where I had a three EPO warehouse that received the returns and then did send me a box from time to time, and it was up to me to make something audit, which again I repeat myself was a pain in the neck. And I think a lot of our listeners can completely relate to this.

00;21;49;14 - 00;22;25;21
Unknown
Let's talk about pricing. How do you charge for your services? Yeah, I'll give you some boilerplate. So traditionally there's just two models. So I'll charge on inbound. I'll charge for any rework, refurbishment, repackaging and then an outbound fee. I charge commission on successful claims. So maybe it's let's call it $2 on inbound to receive scan, inspect, grade, SKU and then store starts at $0.25 a unit for any like refurbishment, repackaging, adding new inserts or pieces and then maybe $2 on outbound to go back to Amazon or forward to a downstream facility.

00;22;25;21 - 00;22;50;17
Unknown
This is just fairly boilerplate. It goes up and down from there. If I get your money back on a fraudulent return, I'll charge 20%. I also operate on pure consignment models or commission based models. You'd say where we split, maybe on sales made on eBay or more importantly, if they just want to remove inventory to us, we will liquidate it and we will split on the liquidation.

00;22;50;17 - 00;23;07;29
Unknown
So that way, if cash is a constraint or a concern like cash flow, I know a lot of times can be people don't want to pay for their returns, you know, like, why would I do that? Right? I already paid all this money to get it in to wherever the primary sales channel might be in, and I had to pay to remove it out.

00;23;07;29 - 00;23;29;07
Unknown
And now you guys want me to bet there's there's a bunch of data and it took us some time to get that. That shows if you have a 10% return rate and what if you cut that in half, right? And then what if you're able to reintegrate a bunch of that inventory that was disposable before back into a primary sales channel and then increase recovery on the secondary channels?

00;23;29;07 - 00;23;49;09
Unknown
Right. So it just there's a conversation to be had there. But like a peer commission or consignment model might be like a 5050, for example, right, where you don't pay, we'll take the inventory, liquidate it, sell it and split commission on that end. So it's pretty simple. It just comes down to the scope of work so it can vary.

00;23;49;11 - 00;24;04;25
Unknown
How do you want your inventory inspected and what do you want to do with it? At the end of the day, typically we don't charge for disposal. I don't charge storage unless you want to store the inventory. We want to get it in and we want to get it out right. That's the goal. It does no good sitting stale.

00;24;04;25 - 00;24;25;16
Unknown
It's that defeats the purpose. And I flirt with the line of being part of the problem versus the solution. Right. So in terms of inventory just sitting right, we want to we want to keep it moving. We want to make it liquid again. And what's the best way to do that? And can we give you some valuable information along the, you know, along the way to help your business improve?

00;24;25;21 - 00;24;47;01
Unknown
So I think it's a no brainer because if you have 10% or more of writing off, that's really lost money. And from what I hear from you, you only can win. And so it's not only timesaver, it's generating revenue that otherwise would be gone. JD Before we come to the end of our coffee break today, is there anything you want to share with our listeners that we haven't covered yet?

00;24;47;04 - 00;25;12;21
Unknown
Yeah. Anyone listening feel like reaching out? You know, I guess I'd say axiom return solutions dot com slash backslash contact. If you mentioned the the coffee break here you know happy to do 100 returns for free. I just mentioned class and and and your channel here and I'd be happy to honor that so we'd love to talk more and I really appreciate you inviting me on and let me be a part of this today.

00;25;12;23 - 00;25;27;29
Unknown
That was a great overview about how you can make money from your returns. And I appreciate also the offer for our listeners. I will put all the links and the links to your site in the show notes and you're just one click away. Thanks so much and I hope to talk to you soon again. It sounds great, man.

00;25;27;29 - 00;25;39;28
Unknown
I look forward to it. Thank you.