Amazon Returns

C: I’d like to know a bit more about the problem, how big is the problem of returns. How much are we incurring?

I: We are incurring $30 on $100. There is a problem. We want to know how to reduce the returns first. 

C: May I know what our customer base looks like? The share between men, women and children etc.? 

I: Our customers are 50% men and 50% women, 50% in cities and 50% in other areas.

C: Right, and what about our competitors, how are they doing, are they also seeing such high number of returns?

I: No, they’re seeing returns but we’re observing higher numbers. There’s this problem with us and it’s been a long-standing problem. I want you to think of how we can reduce returns.

C: Alright, I’m going to be discussing 6 factors here for why a product might be returned. The Product, is the product defective or of inferior quality. The Packaging, is the packing subpar and torn giving a bad customer experience. Is there a Delay in delivery, for example a birthday dress arriving late has no use for the customer now. Inaccurate information, is the information being shown about the product incorrect leading to a gap in communication. Is it a problem with our customer service, is the consumer not able to interface with the customer service about the details of the shipment or the product. Is the price higher than those available on other platforms or in the retail stores.

I: Great, now how can we look at reducing the costs of returns?

C: Firstly, I’ll divide the returns in two segments, the defective and non-defective categories. If the product is defective, it’s either the supplier’s fault or Amazon’s. If it is the supplier’s fault, we will return it to them and bear no further costs. If it’s our fault, we will investigate it further. If the item is not defective, we will repack it and sell it. 

Next the different heads for return costs I’ll be discussing are 5 in number. The collection costs, we would need to collect the product from a delivery boy. We can categorize the collections as urgent or non-urgent. The urgent collections can be done ASAP and the non-urgent collections can be clubbed with other collections in the nearby areas. This would reduce costs on transportation. Next would be the processing cost, since an item coming back to the warehouse would need to be processed in the system, this would consume time and labor. We can categorize items as primary and secondary; the primary item will be processed with priority the secondary item can wait for the peak traffic hours to be over. We can also bucketize the items for example all apparels together, all electronics together. This would save sorting and categorizing time and costs. Next would be the storage costs, since the returned item would occupy physical space in the warehouse. We can reduce this by deferring the collection to as late as possible. For example, if we have a 3-day collection policy, then instead of collecting on the same day, we can contact the customer and collect it on the third day and save the 2 days of storage costs. The fourth would be repacking costs, we can ask the customer for the original packing and return it along with the item. We can also go for standard repacking solutions for all sizes and different types of apparel, this would save costs on different sizes of repacking material. Finally, the compensation for bad customer experience. We can opt for providing the compensation as Amazon coupons instead of cash so that we can get that lost revenue back later and tie the customer in, or we could opt for the Amazon wallet since the chances of it being used on an Amazon purchase are higher.

I: Great now suppose you’re Amit Aggarwal, Amazon India Head, what 5 steps would you take to keep or gain the market share against Flipkart, Jiomart etc.

C: First I would focus on continuing to deliver value to the customer. To filter the bad supplier and avoid cases such as where bricks get delivered instead of a smartphone, these incidences invite bad PR. Secondly, I would move forward with an India centric approach, investing and creating programs to collaborate with local retailers since the biggest accusation against e-commerce is that it will kill the local retail infrastructure. Also, JioMart and Tata have a reputation for bearing losses to support the Indian public, hence an effort in that direction will be beneficial for us. Third, I’d increase the cohesivity of our products by bringing people into the Amazon ecosystem. This can be done by increasing the utility of the Amazon Pay Wallet, so that people get tied in the ecosystem and look at Amazon as the default platform for payments to shopping. Fourth, I would promote bundling Amazon Prime with more products, say with a data recharge we can provide 2 weeks of prime subscription. When people will use it for video, music, shopping etc. they’ll get hooked onto it and subscribe. Finally, I’d look to capture exclusive sales such as OnePlus. How Motorola has partnered with Flipkart, Oneplus with Amazon, with more such exclusive partnerships of popular products we will get more customers for these products, and when they will have a positive shopping experience, they will come back to shop with us.

I: Great, Thank You.

C: Thank You.