How Return Rates Affect Your Amazon Seller’s Performance -

How Return Rates Affect Your Amazon Seller’s Performance

McClain Warren

McClain Warren

McClain Warren is a Colorado-native who graduated with a B.S. in Communications and Marketing. She has written for some of the top marketing agencies in the Amazon and e-commerce space and is an Amazon seller and Entrepreneur herself.

Remember that kid in middle school who would get called into the principal’s office for doing dumb stuff like the “truffle shuffle” in the middle of class? And every time that kid went to the principal’s office, he would get a mark on his file until, one day, there were too many marks and he ended up mysteriously leaving? 

Well, think of Amazon as your principal and you pretty much want to do whatever you can do to avoid getting in trouble (ya know, like Chunk-wannabe). The last thing you want is bad marks on your Amazon listing. but as we all know, they happen. And there are a million reasons you can suddenly get suspended with no prior knowledge that sh** was about to go down. Honestly, it might make for a great suspense show if it wasn’t YOUR brand and life on the line. 

Of the many things Amazon can get you for, having a high return rate is one of them. Of course, merchants don’t want a high product return rate because of the implied costs and potential bad reviews, but they have little control over what happens on Amazon – other than doing everything from their end to make their product high quality and to ensure it fits the description.  

A good practice for newer sellers is to understand what kind of return rate they can expect on the platform so that they can consider it into their pricing model.  

Amazon has a big problem with brands that have a higher return rate than what they deem normal for each category, and usually they will investigate such cases. Remember: the principal only wants well-behaved kids in her school.


The acceptable average product return rate for Amazon can vary from category to category. Here is the breakdown of product returns on Amazon and how a high product return rate could influence the success of your brand:  

Typically, products with reasonable return rates have less than 10% returns.
Products like books and media: 5-7%
Home, kitchen, and garden, and sports and outdoors: 8-10%
Consumer electronics: 25-35%
Clothing and fine jewelry: up to 40% 

How Is Your Order Defect Rate Calculated? 

The Order Defect Rate (ODR) is a key measure of your ability to deliver a good customer experience. It includes all orders with one or more defects represented as a percentage of total orders during a given 60-day time period. This is measured in 3 ways:  

  • Negative Feedback Rate, represented as a percentage, is the number of orders that have received negative feedback divided by the number of orders in the 60-day allotted period.  
  • A-to-Z Guarantee Claim Rate, represented as a percentage, is the number of orders with a relevant claim divided by the number of orders in a given 60-day time period. 
  • Credit Card Chargeback Rate, represented as a percentage, is the number of orders that have received a credit card chargeback divided by the number of orders in the relevant period. 


What Happens If My Amazon Return Rate is Too High?

You will receive a performance alert from Amazon to notify you if your product return rate is over the acceptable percentage. They will then take down your product page due to your Order Defect Rate (ODR) and you’ll have to file for an appeal to get your listing reinstated.  

To check your product return rate and your product return dissatisfaction rate in Seller Central, click here 

Why Do Marketplaces Do This?  

Online ecommerce platforms like Amazon or Walmart often set quality targets to ensure sellers meet standards to protect customers from defective products. You might need to increase inspection frequency to ensure your business meets these standards. Order defect rate is a common ecommerce quality target. Amazon sets an order defect rate of less than 1 percent, calculated from card chargebacks and 1- or 2-star ratings for its sellers.  

Back to the principal analogy – when the kids behave poorly in class it makes the principal look bad and Amazon does NOT want to look bad to their customers. Remember: Amazon is only interest is customer satisfaction, so if your product isn’t performing well and you are getting a lot of negative feedback, they will put you in detention.  

How Quality Inspections Can Help You Avoid Having Your Listing Shutdown  

Plain and simple, properly implementing inspections for your products is the best plan of action to avoid returns. Of course, returns will undoubtedly happen. But at least if you put in defensive, quality-control processes, the returns for defective products should be very, very low.  


How effective your inspection process is will be determined by a lot of variables like batch test size, certifications, who is doing the inspections, what kind of tests you want performed, what level of testing you want done, and your defect discoverability percentage.  

Sample Size Levels and DDP 

If you have a low risk-tolerance, then you’ll want to choose a sample size that’s on the larger side for a higher probability rate of quality. If you don’t want to pay as much for the inspection process and are more of a risk-taker, your sample size will be smaller. Here are the different levels and what they mean:  

Level I  

This is the most basic level of testing and isn’t often recommended. The sample size is much lower, meaning less opportunity to catch defaults before they go out. However, if you’ve been working with the same manufacturing company for years and have not had any history with faulty products, then you could opt for Level 1. Even then, it’s highly not recommended, and most major retailers set their minimum threshold at Level 2 or more for their products.  

Level II  

This is the most widely used inspection level and often used by default. At Movley, we tend to recommend this Level for brick-and-mortar stores because, should someone return a malfunctioning product, that’s usually the end of the transaction. Brick-and-mortars don’t have to worry about reviews and permanent reputational damage the way ecommerce retailers do. Usually, if someone purchases a product in a store and there is something wrong, the shopper will simply replace it. With ecommerce, shoppers are readily available to leave scathing reviews should they not receive exactly what they wanted. This can influence future online sales and entire business valuations.   

Level III  

Which brings us to level 3. More units per sample are inspected here and an entire batch of products will be rejected if it is below the quality criteria defined by the buyer.  

Some buyers opt for level-III inspections for high-value products. Movley recommends (almost) any online sellers to use this level for the same reasons that brick-and-mortars probably DON’T need it – there is simply no room for error with online retail.   

Another thing you will want to figure out if your defect discoverability percentage (DDP). 

Say for example you inspect 50 units out of 1000 for a particular product test (in this example, we’ll say plugging in a lamp to make sure it’s working). You could have all units pass the test and still have a 2% defect rate since the sample size is so small.   

An easy way to calculate your defect discoverability percentage is to divide 1 by the number of units in the sample size (i.e. 1/50 is 2%). This comes down to basic probability. If you have 100 units, and one of them is defected, you have a fairly low chance of finding the one defective unit if you sample only 50 units.  

Keep in mind, you can always set your own sample size regardless of what the ISO or any other industry standard recommends. 

Bottom Line 

Ultimately, it’s up to you to safeguard your Amazon business as much as possible. If not just for returns, but for liability purposes. The best measures to do this are as follows: 

1) Make sure you understand the inspection process inside-out so that you can fix any problems before your products get shipped out 

2) Make sure you have a quality product – plain and simple. That means paying attention to the tiniest of details and making sure you are working with a supplier that understands your expectations and your product, inside and out. 

3) Make sure that the images and description on your Amazon listing are true to the real product. This is often the reason businesses experience a lot of returns.  


 

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McClain Warren

McClain Warren

McClain Warren is a Colorado-native who graduated with a B.S. in Communications and Marketing. She has written for some of the top marketing agencies in the Amazon and e-commerce space and is an Amazon seller and Entrepreneur herself.

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