Unfulfillable Inventory

Unfulfillable inventory is often ignored by sellers. It is that awful moment of truth when you debate just what you can do with all those products.

Maybe they are OK, so you really want to find a way to get some value from them. However, the logistics of that can be difficult. There is always the temptation to simply click the “Dispose” option to make the problem go away.

Here’s what Amazon says when you click the Dispose option. Not a lot really. They just focus on the process of what you need to do.

However, this option allows Amazon to pile them into huge bins with other products, and sell them to the highest bidder. Professional resellers (as well as mom & pop businesses trying to make some extra cash) bid for the bins. Sometimes, they find little of real value but other times they get a windfall. eg a Seller is up against long-term storage fees so “destroys” 200 perfect products that they get for pennies.

While these are often sold on eBay, many find their way back onto Amazon which is a huge risk to your brand.

If a customer buys a product from a reseller that is actually a faulty return, they will likely leave a low star review on YOUR listing. So, you kind of shoot yourself in the foot!

They have now brought in a hybrid model, for want of a better description called FBA Liquidations. Instead of paying to remove or dispose of excess or customer-returned FBA inventory, you can choose to use FBA Liquidations to have the inventory liquidated through a wholesale liquidator. 

Amazon will determine the average selling price (ASP) of your inventory by evaluating several factors, including your sales history, average FBA selling price, and the sales history of the specific ASIN you what to get rid of.

Based on contracted rates, wholesale liquidators will purchase this inventory for a gross recovery value, which is about 5% to 10% of its ASP. Amazon will then deduct fees and pay you the net recovery value.

However, you have no visibility of where your products are going. These will be professionals who want to maximize their investment so they could still end up being sold on your listing.  If you have a poor performing ASIN and are cashing out, this is certainly not the pathway for you as the ASP calculation mentioned above will be extremely low.

Amazon has two other pathways you can select to dispose of these products. They come under the heading of Value Recover Services. Kudos to them as they keep trying to find a way to stop these unwanted products from going straight into a landfill.

The FBA Donations Program allows Amazon to make these products available to selected US charities. Their usual disposal fees apply which range from 32c to several dollars for larger items.

If your products aren’t eligible, they simply dispose of them as if you had requested the Dispose option mentioned above. So don’t assume and tick this option. Get into the details so you know where your products might end up.

The newcomer is called FBA Grade and Resell. This allows you to relist and sell unfulfillable inventory as used, instead of paying to return or dispose of the inventory. When you submit an item, Amazon evaluates the condition and creates the listing for you. You set the price and manage the listing, as you do for your current new and used items. It is simple but complex in a way but may be a good option for you.

However, our underlying concern remains. A customer may not be happy with the discounted price paid and leave a low star review on your listing. 

That covers the 5 Amazon options. Dispose, Liquidate, Donate, and Resell but there is one more option you need to consider…

Use a 3PL service that specializes in reverse logistics which is the industry terminology for managing returns. You will also get direct insight into why these products are returned. Maybe you will find your packaging is clearly not good enough, or some other insight so you can take action to actually reduce the number of returns.

Some of these 3PL’s will even resell damaged products and agree a price split so you recoup part of your investment. Sure, there’s a cost for them to receive your returns but the key behind this is to get your products out of the Amazon ecosystem. It is still a very automated process as Amazon’s but the key difference is that you maintain control of your brand.

It is very simple to automate the process. We recommend you do this weekly in case your business needs suddenly change and you want to do something different with your returns.

Log in to your Amazon account and navigate far right, and select Settings/Fulfillment by Amazon. Then just scroll down to Automated unfulfillable settings. You want to select Enable, Weekly, and Return.

Don’t tick the Refurbishment option! This is a disaster for most sellers, as it gives Amazon OK to carry out the following to make good your product and resell it.

Depending on the item, Amazon can re-tape, re-glue, and re-staple boxes; remove excessive tape, non-product labels, and stickers; and re-box branded and unbranded corrugated boxes. Shoes and apparel refurbishment can include steaming and removing stains and odors.

Sure, some of our clients are OK with this eg auto parts which are often B2B where a workshop orders the wrong part so it’s returned unused. However, if you’re selling items where the display box is part of the value purchased, sending a repaired box almost guarantees you a low star review!

One of the most popular with our clients is Back-Track. They offer a wide range of services including refurbishment and reselling.

However, it is their ability to salvage key parts from damaged returns that is of huge value. In the “old days,” we would just send a replacement product. However, with the cost of getting inventory to the US and restrictions of the number of products you can ship into Amazon, replacing a whole product vs a part where possible represents a significant saving. 

In addition, consider shipping some replacement parts with your finished products to your 3PL if replacement parts are an integral part of resolving customer issues. Parts replacements don’t have to come from Amazon – just get them straight out the door from your 3PL!

If your long-term vision is to sell your Amazon brand, it’s this sort of process that will give a buyer peace of mind that you truly do have a robust business for sale! Put your business under the microscope and look at all parts of your supply chain.

As always, ask us anything. If we don’t know the answer, we’ll know someone who does!