Amazon.com is a popular place for preppers to find deals on supplies and gear. Amazon often has the lowest prices and they certainly have created a “safe” atmosphere for buyers with their guaranteed delivery dates and generous return policy. On top of that, Prime members can also enjoy perks that are well worth the $99 yearly fee.
This article may seem a bit off-topic for a preparedness and survival blog but, as I intend to explain, many Amazon sellers rely on the sales that they make through Amazon for at least a portion of their financial survival.
Contrary to the belief of some Amazon users, Amazon is not the actual seller of the items that are purchased. Amazon is a business that helps other businesses sell their inventory. Amazon is responsible for bringing buyers and sellers together, much like eBay.
A seller has two options when selling on Amazon.
Option A: Businesses can send their inventory to an Amazon warehouse where Amazon will store the items until they sell. When an item sells, Amazon will process the buyers payment, find the item in the warehouse, put the item in a box, print the shipping label and have it sent to the customer. At the end of the month, Amazon will send a check to the item’s original owner. The payment that Amazon sends the seller will have Amazon’s sales commission, processing fees and storage fees removed from the cost of the item. If an item is returned by the customer, the cost of the return postage and the original cost of the item is also deducted from the payments sent to the seller. In some instances the original postage is also deducted from the seller’s paycheck.
Option B: Businesses can elect to simply advertise on Amazon. They are called “Third Party Sellers”. These businesses handle all the aspects of sale after Amazon processes the buyer’s payment. Packing, shipping and customer service are all handled by the seller. These sellers must adhere to the Amazon Seller policies or risk losing their selling privileges and, along with that, the exposure that Amazon provides. Amazon holds all the funds until the end of a given time period when they issue a payment to the seller minus Amazon’s sales commission. Refunds and exchanges are also handled by the seller (except possibly any disputed claims).
So how can the buyer tell who is really processing their order? You can spot that info at the top of the page under the title and pricing. I’ve put some photos below and circled the area with that information.
Sometimes there is more than one seller of an item. Amazon will put a link in the same spot declaring “Available from these sellers”. If Amazon is also warehousing the item they will always show the “fulfilled by Amazon” notice first and place the other sellers’ information obscurely on the right side of the item page.
Amazon often competes for sales with independent sellers. Even though they will get a commission no matter who processes the order, they will place their offering ahead of everyone else’s. That’s fine.. it’s their website with their rules. The important thing to remember is Amazon doesn’t care about the return or the postage on the orders that they process, all of those expenses come out of the seller’s paycheck. In fact, Amazon will make money even if the items don’t sell if the seller happens to be storing their goods in an Amazon warehouse.
Now about that Amazon Returns Policy… it’s great for the buyer but it can be a nightmare for the seller. As I mentioned above, the Seller must adhere to Amazon Seller Policy in order to do business through their website..this includes accepting returns and giving refunds. Amazon gives the buyer their choice of several standard reasons to request a return. The automated process does not care what the reason is nor does it care if the buyer has a legitimate claim or is choosing the correct reason for return. Since some of the options force the seller to pay for return shipping as well as reimburse the buyer for the original price and shipping charges, this policy can be an unreasonable financial burden on the seller when it’s abused by the buyer. It also hinders the one-on-one personal customer service offered by most of the smaller sellers.
Here’s an example of how a typical sale and an abusive return would go:
A buyer finds a large fishing pole and reel on Amazon offered by a third-party seller and decides to purchase it. The price is $99.00 and free shipping. The $99 payment is processed by Amazon and Amazon sends the seller the order information. The seller now has 2 business days to ship the item.
The seller packs and ships the item according to the Amazon policies. The seller is now waiting the pre-determined amount of time to receive his payment.This payment could be processed weekly or monthly depending on the Seller’s history.
The actual postage required to ship the item was $12.35. The Amazon commission collected on this sale was $15.84. The seller has now had $28.19 deducted from the $99 sale. While the seller is waiting for his payment to be released, the buyer receives the item and decides that they no longer want to keep it. The buyer of the fishing pole opens a Return Request and is given the choice of several reasons for the the return.
A savvy Amazon buyer knows that there is a way to force the seller to pay the return shipping cost and get the entire purchase price refunded. By selecting this option they knowingly must lie and say the item is defective.
So here’s the math associated with that particular sale:
$99 collected by Amazon minus the original $12.35 postage minus another $12.35 to return the item. The Seller loses $24.70 and gets an opened package in return and, quite possibly, will get a used item back. The Seller has the option to deduct a reasonable restocking fee from the refund but Amazon has been known to step in and settle any disputes arising from this. The $15.84 Amazon commission is reimbursed to the seller when the refund is processed.
So what is the purpose of this article?
For starters, I am a seller on Amazon. I have two businesses that use Amazon.com as a marketing tool. We process our own orders simply because most of our items are too complex to allow an outside warehouse to package and ship. The packaging process is actually our final step in the quality control process.
I suspect that some buyers will buy multiple items at the same time and keep the one that they like best knowing that they can use the “hassle-free” return policy to get a complete refund for the unwanted items.I also suspect that these buyers are under the impression that “Amazon can afford it” and they just don’t understand that they are most likely dealing with a small business and taking a bite out of a family’s income by making a false return claim.
We have had good success using Amazon to supplement our sales. Only a very small percentage of our sales have resulted in the above mentioned problem but I am seeing an increase in false claims. This has proven to be such a frustrating experience for us that we have adjusted our Amazon pricing to cover the costs associated with this hassle…meaning our Amazon customers must pay more than our website customers. I imagine that other small businesses have had to do the same.
I use Amazon as a consumer quite often… The Amazon business model is an awesome thing but we need to be careful how much we feed this beast. Their automated customer service and buyer-biased returns may be convenient and affordable to the BIG sellers but you may just be missing out on the best prices and customer service by not visiting the smaller seller’s website directly.