Amazon Marketplace sellers are in an uproar over the retail giant’s return policy. Some are going as far as to claim that new rules, which take effect October 2, will “crush” small businesses and force them out of the market.
With all the confusion and anger about these policy changes, I wanted to take this opportunity to look at them more closely. What are these new rules all about, and are they really the doomsday prophecy so many retailers are predicting?
What Is New to Amazon’s Return Policy?
Marketplace sellers are third-party retailers who sell through Amazon’s platform, but who operate and fulfill orders independent of Amazon. The updates say that all purchases—including those fulfilled by Marketplace sellers—will be “automatically authorized” for return. Customers will be able to initiate a return directly through Amazon, without contacting the seller, and the seller will have no choice but to accept.
The introduction of “returnless refunds” is another big change to the Marketplace policy. This program allowing sellers to automatically refund customers without the need to ship the merchandise back.
Returnless refunds have been offered on orders fulfilled by Amazon for years, but are now available as an opt-in process for Marketplace sellers as well. The practice is intended for merchandise that is too difficult or costly to ship, or which is difficult to resell.
As returnless refunds are an opt-in process, retailers don’t have to participate if they don’t want to. Automatic return authorizations, however, are not optional.
Why Are Marketplace Sellers Upset?
One retailer went so far as to claim the policy will “make it impossible to sell [their] products on Amazon”—but how? Well, the problem with this update stems from the new policy taking oversight and autonomy in customer relations out of the merchant’s hands. As a result:
Many retailers would normally attempt to communicate with the customer and work out a solution to avoid a return. Now, though, any customer can simply login to Amazon and print a return label without first contacting the seller. This eliminates the possibility of working out a mutually-agreeable alternative to avoid a return.
Sellers have no way of knowing ahead of time about an inbound return until the package arrives, but are still forced to process returns as quickly as possible.
This isn’t a problem for Amazon, who has expansive infrastructure to process returns quickly and can absorb the associated costs. Smaller merchants, however, could be strained under such strict return handling operations.
Maybe It’s NOT the End of the World
On one hand, Amazon’s new return policy places much higher expectations and responsibilities on third-party retailers. However, it may not be as bad as it seems. At the end of the day, the goal of these policies is to make returns as customer-friendly as possible, and there are clear benefits for businesses to simplify their return processes.
Remember: buyers will find a way to get their money back if they want it, one way or another. A customer who can’t get a standard refund, or who feels the process is too demanding or time-consuming, will often use chargebacks as a shortcut. These disputes—a process known as friendly fraud—cost sellers much more per dollar in transaction value than a standard return. In fact, friendly fraud is projected to cost online retailers up to $30 billion a year by 2020.
With a return, the seller refunds the cost of the original purchase, and eats the cost of the interchange fee and shipping. If the transaction escalates to a chargeback, though, the seller will lose all of that plus the merchandise, and will be responsible for fees to cover the cost of processing the chargeback. There are also long-term threats to business sustainability, like merchant account termination if the seller’s chargeback-to-transaction ratio gets too close to established thresholds.
To make matters worse, our proprietary research suggests that most chargebacks filed against retailers are cases of friendly fraud. Customers don’t understand the ramifications of friendly fraud; they just want their money back. Most won’t hesitate to request a chargeback if they think it’s a safer bet.
Two key challenges we see for Amazon merchants include not having time to answer dispute requests, and running multiple sites and having difficultly combining relevant chargeback stats for analysis. By adopting a new strategy with the necessary third-party support, though, sellers can make Amazon’s new rules work in their favor.
Customer-Friendly Policies are the Best Friendly Fraud Defense
To be honest, this new Amazon policy is what retailers should have been working toward anyway.
ALL online merchants—not just those in the Amazon Marketplace—need to look at simplifying customer-facing processes like returns. It will make for happier customers and reduced friction. Plus, an easier return process translates to reduced chargebacks and, counterintuitive as it seems, improved business sustainability.
Of course, simplifying the returns process is just part of the equation. Optimal service practices are vital at every stage of the transaction. The following policies and practices offer a few more ways merchants can help themselves deter friendly fraud:
- Provide 24/7 customer service. Online markets don’t operate on business hours in any single time zone. Merchants need live representatives ready to help customers at all hours.
- Get positive affirmation from the customer. Is the customer satisfied? Never assume that a matter is resolved unless the customer confirms that they’re happy with the outcome.
- Answer calls before the third ring. Customers are likely to hang up if their calls aren’t answered by the third ring, and the probability increases substantially with each subsequent ring.
- Be active on social media. This should be obvious by now, but it’s essential that retailers have an active presence on all major social media platforms.
- Identify room for improvement. Regularly review policies and practice with an eye to where improvements can be made. Consult employees and customers as part of this process.
- Build relationships with customers. Engage customers on a personal level by offering special incentives to regular shoppers. This will build positive feelings toward your brand.
- Value customer service representatives. These people represent the business to customers. Make sure they’re happy and take care of them to ensure they perform to the best of their abilities.
- Engage in chargeback mitigation. Chargeback management vendors like Chargebacks911 are equipped to manage workflows and free-up merchants to focus on improving the customer experience. Even with Amazon’s new policies, keeping relationships free of unnecessary chargebacks is key to a sustainable online business.
- Have a backup answering service. On-demand services can help handle overflow calls during peak season, after-hours, and during a crisis.
- Keep up with contingency plans. Have a detailed plan of attack ready to implement in the event of a natural disaster or other emergency that threatens to disrupt service.
Better Service, Fewer Returns, and Sustainability
Remember: customer service can be a “make or break” force for any business. Great service can mean more sales, better customer interactions, and long-term sustainability, all without contributing to increased returns. Believe me, that’s far better than the alternative.
Monica Eaton-Cardone is the COO of Chargebacks911. She specializes in threat metric analysis, technology system development, eCommerce retention, and risk relativity. Eaton-Cardone is an award-winning entrepreneur and respected thought leader in the payments industry.