The Missing Insight in CNBC’s Amazon Beat Supply Chain Chaos With Ships, Containers And Planes

At 1:18 and 1:23 of this discussion by CNBC, two of the most important statements were made and overlooked. Those statements had graphics:

14% More items out of stock 

Prices up an average of 25%

While I only operate in one segment of the marketplace, sneakers, what is happening on the Seller Central side of Amazon, where traditionally half of all products sold on Amazon come from, is a contributing factor to the problems the platform is seeing. As a matter of fact, these increases in the stats above, are a problem created by Amazon itself.

While my experience is on the sneaker industry side, Amazon implemented guidelines which have contributed to an increase in returns and the removal of products from the platform. What were those changes? They may not sound significant, but once you place the problem in context, this video becomes a much different discussion topic.

Refund at First Scan

60 Day Return Window with an automatic return label generated by buyers as soon as they request a return

Every few years Amazon implements guidelines that seem directly aimed at small businesses. In 2012 the company removed guidelines required to attain a Seller Central Account. Originally, a seller had to own a website and format the site for approval by Amazon. This process took months in many instances. As they removed this requirement, it opened the door for an abundance of counterfeit products to aggregate on the site. In 2013 they began reaching out to brands to build Brand Registry accounts. This allowed brands to place product behind brand gates where only authorized sellers could list products on the platform. In 2015 they required all Seller Central Accounts to adhere to Amazon return policies of 30 days and free shipping. Any account not in policy, wasn’t notified, but their accounts were limited without explanation.

Now they’ve implemented Refund at First Scan. A number of sellers removed their products. I was one of those who removed my sneaker listings although it costs me 20,000 dollars a month. To be clear, I had stopped selling on Amazon since 2016. I returned only three months ago and lasted two months in my reopening of my account. I sold 400+ pair of shoes, but at one point my return rate per day rose to 200%. When you consider the price I sold sneakers for (shoes with an 80$ SRP I sold at 109$, and I won the buy box at this price) Amazon has long been a platform that overcharged consumers. Add in bots and Arbitrage sellers and the price increase becomes more apparent. With the rollout of Refund at Frist Scan, my return rate skyrocketed. Automatic labels and the extended deadline for sneaker returns allowed for product sold months ago to be returned and refunded:

While the image above is blurred, on my closed account you can see that the request was made 55 days ago and at 40 days the product still hasn’t been sent back. I haven’t made a sale on the platform in over a month and I still have 200 orders that could be returned if the customer wanted to request a return. More important, when the returns come back, they look like the picture below. The buyer doesn’t place the sneakers back into the protective brown box. They wear the shoes for a month and they return it damaged. Because the policy is return on first scan, the customer is given a full refund:

blank

Amazon is a vigorous company. As the video above shows, they are conquering the world of logistics, but to state that the supply chain is the reason for the decrease in listings and the increase in pricing, is a fallacy; it’s partially true. As more sellers remove their listings, those bold enough to remain are increasing their prices considerably to account for the amount of damaged returns and for the fact that there isn’t any inherent responsibility assigned to the consumer. Rising prices are a symptom of siding with the buyer at all costs. The buyer doesn’t realize what they are doing to themselves by abusing the system. Amazon has Web Services, Prime and Logistics to fuel their growth. The problems with Amazon marketplace is why other third party platforms, retailers and DTC are seeing improved numbers. Check out the video to and think about these things as you watch.

 

Leave a Comment