Saul Talks Episode 2: Amazon FBA Return Process, Leakage, and Flows

Hello, welcome to Saul Rambles episode two. So this is essentially a series where I'm answering questions that people ask me on the Internet, mainly through Twitter or Discord. And if you don't know who I am, a little bit about me. I've been selling on the Internet now, essentially full time, on or off, for about nine years. I sell on Amazon, Walmart, Shopify, I own two software companies, own A3PL, and then own a Discord or kind of support group called the Buy Box, which caters specifically to Amazon sellers, Walmart sellers, and kind of just general E Comm. All in all, between our DTC sales, that's physical products shipped out of our warehouse, we sell about $8 million worth of products every year. And then of course, we have the software and other things going on. So really, this whole thing is just unscripted, me sitting here and kind of answering questions that come my way. So you may need to fast forward a little bit. You might want to skip around. I did not plan anything other than read the question once and click record. So the question that came in today is.

Ben wanted to ask my strategy for FBA return, reconciliation and liquidation. He said, as I scale up, this has become a huge bottleneck. And I imagine if you're watching this, you're familiar with what FBA means, but it just means FIFA by Amazon. So he's like, hey, sell some stuff on Amazon, eventually those customers purchase it and some of them are returning those products. And now he's trying to figure out what to do with the returns at scale to make his life easier. This is by far one of the biggest problems that Amazon sellers face as they scale. And most sellers are just like me. And so for the majority of the time, and this is exactly what I did, and I've talked to others, you kind of ignore it, the problem, if I'm being honest, for many years, returns came back to me and they went into the corner of my warehouse and that pile grew and grew and grew and grew. Before it was a warehouse, it was in a side bedroom. It was in the basement, it was in the garage. It was a real problem because it's not the fun part of selling. The fun part is sourcing and seeing the revenue, if you will, and figuring out systems and figuring out how to actually grow on that side. And then when the stuff comes back to you, oftentimes you're like, wow, listen, I've already. I sold enough. The return hurts, but I'll keep growing. I'll outpace my returns with growth. But you're you're kind of just sitting on extra money. And oftentimes the speed at which you processes returns is directly relative to how much money you'll make on those returns or what you can get back in reimbursements on those returns. So it is important to not ignore your returns. I will say as of now, it's just September 2025, I'm almost entirely FBM, which means I don't do a lot of FBA anymore. I ship directly to the customer, from our warehouse to them. So we've got to bypass Amazon. I think that we'll go back to FBA probably in 2026 at some point, but with some recent changes they've made, it just did not make sense for us to continue FBA right now. It was just hurting more than it was helping, especially with Q4. FBM is perfectly viable for all the items I sell to just kind of handle fbm. But I still unfortunately do have some FBA returns and they still have some products in fba. So here is my current process for FBA returns. Number one, Amazon did make some changes this past year that were helpful. So if you go into your Amazon account and you go to settings or essentially ship settings, not the FBM ship settings, but like the receiving settings, the FBM settings for shipments, there is a section where you can decide how Amazon handles your returns. This wasn't always the case. For the mass majority of time Amazon existed when a return was processed, it came back from the customer. Amazon we just consider it either new or not if it was new and back to inventory if it was not. It went and got stranded and then you could decide what to do with it. Problem was that Amazon can sometimes be pretty wrong when it comes to if a product is new or not. And so oftentimes customers would then get resold products that were returned that weren't new, but Amazon would deem the new and it would hurt your account and the customer experience and better views, et cetera. So Amazon has recently and by recent in the last year made adjustments. So you can now control quite a few things. So you can say, hey, I want every return sent back to me, or essentially I want every return to go stranded so they're not going to consider it new and then push it back in to your inventory. You can also do it by ASIN itself. So you can go in and say I only want specific ASINs to be pulled or specific ASINs to be kind of reviewed. You really get a lot more control in that sense, which is really cool. And I'm happy that they've listened to the sellers in that regard. So my first recommendation is.

To have most everything sent back to you. There are maybe some categories I would be a little more open to. Not. I can't tell you what those are. Off top my head, probably not categories that I sell in. I would say if you sell in any clothing categories, electronic categories are a high ticket category. So that's like things that are 150, $200 or more for the most part, I want all those back to me. You know, it's really, really easy for a customer to try on a pair of shoes for a week and return it. And Amazon kind of missed the dirt and grime that are on the bottom or, you know, hair that's like in the shoe itself. It's just not a good experience. Oftentimes with higher electronics or consumer goods, you're going to have people that kind of yank out specific pieces. So they buy a $300 sound bar and it gets returned. And Amazon's like, oh, this is new. But reality is like they, they took out, you know, two of the components of that sound more because they need to replace their own. I used to sell a lot of fishing poles and I would get returns and Amazon would consider them new, but someone actually would steal the reel. So they would keep the pole, but they would take the reel off and they would keep that. And obviously sometimes customers just suck. Right? It's just the reality of selling online. Regardless of where you sell, Amazon just makes it a bit easier for people to suck. So for all that stuff, I want it all back. So that's kind of step one. Step two is then what happens when it actually gets returned? So there are two things that you need to be mindful of. Number one, just because in Amazon. Well, actually, let's go back. There's three. This isn't really the question. I'm going to go walk through the whole process and I have this notepad here. I don't. This is going to be crummy. So I apologize. So, you know, step one is, you know, the customer essentially starts the return. Wow, look at that. That is horrible. Okay. Customer starts the return. And that is. I'm just saying, hey, Amazon, I want to return this. So that's step one. Step two, though, is Amazon.

Receives the return.

This point here can be problems because not everything that's supposed to get returned actually gets to Amazon. So the customer could ship the return.

But Amazon never receives it. So there is leakage that can happen between these two Steps. It's not the biggest leakage, but it does occur because obviously if Amazon doesn't, sorry, the customer never returns it, Amazon will automatically take that. You'll get an email saying, hey, there's a refund, there's return. You'll see that deduction if, if the customer doesn't return it to Amazon, you are supposed to get reimbursed. So you do have to be mindful of that. And there are some ways to run reports. If you go into your. Your report section and there's some tools out there that help you to go to your report section, you can kind of see the process of what is essentially the returns report is number one. But then you could actually watch the returns come back if there's tracking numbers and etc. And so obviously for the return report, you just want to be mindful of how long the return has been open. And has Amazon actually received the product they've changed this date for? It used to be 45 days and it was 60 days. I think during Q4, it's 75 days that Amazon has to reimburse you if they don't get it back. But something to be watched there. So that's kind of. I'm not going to write this out because that would take me forever, but down here would be. Maybe we could do it this way, actually. Can I do this? Yeah, let's do that. And then I can just. Oh, well, I don't know if this is any better, but.

This is some big text. How do I move this around? Don't mind me. First time I've ever used this tool. I assumed I could just grab. Oh, there.

So never returned.

So that's first leakage.

Second leakage.

Is.

Returned, but never. Wow.

Received by Amazon. So the customer did actually drop it off, but Amazon never got it. So that's something that you'll have to be mindful of as well. And those are really the two big leaks here. Number three.

Recall.

More leaks here.

Going off script here. This was not really part of the question, but since we're talking about it anyway.

Amazon loses inventory.

In warehouse. That's the first one.

Amazon.

Receives inventory.

Ah, inventory. But it is never able to be recalled. So this is something that actually shows up in your inventory. Stranded, but they won't let you recall it. And we can go into that for a second. And then this one is like lost in transit.

Okay, so there's our three steps so far. There's a leak there, there's the leak there. Amazon loses inventory in the warehouse. So it was actually returned. It was actually received. Amazon is proof that they received it. And then somewhere between here and here, it just disappears. This is something, again, that Amazon should be catching proactively. They don't always. You can use the inventory ledger report. You can use a couple different reports here. Also, once it's received, it does show up in your report, and then it just would vanish one day. So that's why when someone creates a return, it's your job essentially to follow that product from the return request to it in your hands. And so you can do this kind of manually. There's a couple tools we'll talk about in a second. And then, of course, there's people you can pay to do this for you that you just kind of give them a percentage. But we don't have to get into that either. So Amazon loses it in the inventory in the warehouse. Amazon received it, but is never able to recall. This has happened to me. Never is a strong word here, but when I say never, it's like extended periods of time.

This is usually, you know, Amazon gets it in a fulfillment center, and then that fulfillment center goes offline. So there's construction, there's a chemical spill, there's a fire. There's something that occurs at this fulfillment center, and your inventory essentially gets stuck in limbo. And my longest one was three years, and it would show up there, and it was just always grayed out, could never recall. Eventually, I was able to get it back. But it can take a long, long time. And Amazon will not practically tell you this. You'll just see stuff, and you'll be sitting there, and you'll have to open tickets, and you'll have to request information. Eventually, they will admit to why you can't push them to try to get it expedited out of that warehouse. But it's not. I don't believe they need to do anything. Right. It's not necessarily part of their purview to force that. It's just kind of. If you're kind of a pain in their side. And that's. It's pretty limited as far as how often this happens. And in lossy translate, this is probably the bigger one you. You. You actually create. I guess this would have gone here for being honest. So let me just do. Let me do this. Can I scroll over? Okay, for.

What? What kind of word did I just type?

Did I spell receive wrong?

It's so weird to type when it's.

No. Yeah. All right. Receive.

Okay.

So let's go back here.

English language all right, so lost in transit. So this is when you recalled it before it gets to you, it gets lost somewhere in between. There is a report for this specifically, that you can actually see all of your inventory that's coming back to you. So with tracking numbers. So again, if you tracked it from step one to, to step four, you'll realize that it never made it back and you need to open a ticket. And they will actually, they will refund you if you can. If it just disappears, they will, they will admit to it's being lost, but again, maybe not proactively. So that is probably the biggest leakage that's going to happen between recall and receive. Okay, now we're going to get to the actual question, which was.

Five.

Right? Which I would consider, like.

What are we going to call this? We want inbounding and call it receipt.

Call it sorting. It's not really the right word for it, but let's call it sorting. All right, so it's arrived at your place of business, warehouse house, but it's still in the box.

Oftentimes, Amazon FBA returns will arrive in a brown box with green writing. So if you see that green barcode is a green writing, it's usually a return. So it's nice when you kind of look at a box and tell, because if you do a 2A or anything else, they can get mixed up. It's not always the case, but nine out of ten times, green box.

So now they're sorting. So this is where you've received the product and now you need to open the product. And now we got some leakage here, too. So this was Amazon shipped you the wrong.

Product. Right. So we're going to blame Amazon for this one.

Customer.

Switch. Switch. I don't know how they call it. Switcheroo. Switcheroo. Switcheroo.

Switch. We're just gonna call it that. Switcheroo.

So this is the customer purposefully is deceptive and they've switched out their product for another one. It could be an entirely different product.

Then down here, we're going to write.

Product missing pieces.

Try not to sneeze. Okay, so we have Amazon shipped the wrong product to you. This is actually Amazon's error. This does happen where Amazon is somehow messed up somewhere along the way. It's hard to tell if it's an Amazon problem or a customer problem. But I can guarantee you Amazon does this customer switch review. This is where the customer themselves has, you know, again, purposely just created some deception. And then product missing pieces, where the customer has returned the right Product, but they've taken out key elements or something. Even toast technically Amazon will consider like missing pieces or like product not complete, even if they. The box is not there. So if someone buys like I use this in another video, but if someone like buys this from you and they return it because it's damaged and they actually return the product, the backbone is there, but the entire packaging in box and insert is gone. That's technically not the complete product anymore. So you do have a case there that you can make. You also have a case if it's like. Like we actually had a person recently in the Discord talk, like they get products back with like human elements on them, if you will. And that's disgusting. And they were able to get a reimbursement. So you do have some room if you are willing to fight for it.

So the reason that we actually into the question now, like 15 minutes in, how do. And the question was reconciliation and liquidation. So this is the reconciliation part, this is the sorting. You want to do this right essentially within two days.

So when something arrives, you really want to be fast about your process to open those boxes and review them. And the reason is because you do have a short window to request reimbursement through a safety claim.

Or a ticket if it doesn't fall under the scope of a safety. Once a certain period of time passes, I think it's three days. And I know this changes depending on Q4 or not. I believe as well, at least they did last year.

You. You lose the opportunity to fight. So the longer you wait, the worse it could be for you. So at the very least, even if you're going to stack things in the corner of your warehouse, your house, open them quickly, review them, and do what you need to do to get your money back, this video isn't really designed to go over the process of creating those claims. You can do a lot of templates, so it's not like you're sitting there writing 800 words every single time. It's a lot of like copy and pasting templates and just filling in the key details. The thing that can be super, super helpful here is when you do open the box, there's a little slip, a little return slip in the box that has a barcode on it, so you can actually scan that barcode and it'll give you all the information you need. There are a couple companies that help with this. The one that I recommend is called.

And it is not free. So keep that in mind. They're not giving me any money. To say this, but it is called Prep Ship Hub. And what's cool about Prep Ship Hub, I don't know if like Inventory Labs or any of those other ones do it is they actually have a whole module built in for returns, for FBA returns. And because there is an FBA return report, as we talked about, and on the report, it'll tell you the reason that the customer returned it. I'll tell you the comments, they'll tell you when it was returned, it'll tell you all the stuff that you need to know to decide if the problem is one of these. And so what prep shop will help you do is if you open the box and there's the insert, if you scan that barcode, it'll automatically pull that information in to the software and it'll align it up for you so it'll tell you all those details. So when you talk about like flows or reconciliation, that is a huge part of it because you might think it's the wrong product or a switcheroo or depending on the customer's return reason. So for example, like if a customer creates a return and says in the return comments and the return reason missing pieces, that's much harder for you to win a reimbursement case on product missing pieces because Amazon's gonna say, well, you shipped it, it was, it was missing pieces when it was sold, and vice versa. If you know, if the slip is for a product that's totally different, then that's very easy to tell. When you're looking at the box, you scan it, it'll also have the words on the slip, but sometimes the text is like weird. The thermal printer that they use doesn't always work super well. So scanning that will be able to tell you 100%, one to one if it is the right product or not, etc. So that is the first step. Reconciliation number two, decide what you're going to do with that product somewhat quickly. So we talked about this here. When someone processes a return and what we want to do to get that recalled to us, there are going to be products you receive and probably about 50% of the products you receive are still going to be sellable. So if you want to resell on Amazon, you can. But some products that you're going to sell may be seasonal, may have a keepa chart that indicates that you should sell it somewhat quickly. The longer you wait. Now, waiting can be benefit to you, but you want to make that choice yourself. You don't want to have fate leave that. You know, let's actually let fate decide. So you want to open the box, you want to look at the product. You want to decide if it's new. If it is new, it should go into your new pile and it should be either sold on Amazon or Walmart, shipped back to fba, shipped fbm. But you're going to sell that product new somewhere because it is still new. Then you're going to have a other pile that's going to be for lightly used or modularly returned. Like, those are things that you can still sell, but you might not consider them new. So we talked about the shoes. You know, shoes come back with some dirt on the bottom or some cat hair in them or something that you were like, I can't clean this up and make it new. But it's not trash, right? So that's something that you might want to sell on ebay or Poshmark or Mercari or somewhere else or whatnot. And then there's going to be the pile of just straight either trash donation. That's going to be. These products came back disgusting.

And so they need to go in the trash. They came back unusable. They need to go in the trash. Or they came back and they're usable, but they're not really worth reselling. Right. It's an $8 product. It doesn't make sense. It's not new. It doesn't make sense to sell on ebay. You can donate that, right? You're not. You're gonna donate it and put it off to the side to your donation pile. I had something else I was gonna say there, and I've lost my. I've lost my thought.

There was something else I was going to say about. About that process, but I don't remember what it was. But that's kind of the current flow as far as liquidation goes. There are some options there if you want to streamline it. There are people out there, companies that will handle liquidations for you. So they will instead of you, essentially you do this part 1, 2, 3. But instead of recalling it to yourself, you're going to recall it to them. So they have a warehouse somewhere. You ship it to them. They then receive it and sort it. They handle all of the templates and all of the claims if needed, and then they resell it and then they give you a portion of the money. It can be great if you're limited on space and limit on time, of course, like you are going to pay them for that. So the ones I've seen, they usually sell on ebay. And I think they sell, they give you like 50% of what they receive. So if it's a hundred dollar product, they sell it for 100. After fees, you may be getting like $35, $40.

Obviously if you sold it yourself, you could get $80. So it's going to be up to you to decide if you have the space and time for that. But that is an option to consider. And then Amazon does offer their own liquidation services. If something's really, really cheap, it's like a, you know, again, you sold a $9 product, you don't really think it's going to come back new. You can have Amazon liquidate. That's easy enough. Oh, I remember what I was going to say. If you do resell it as new, keep in mind there are tax implications for how you process that when you send it back because the cogs get a little funky. I have a whole write up I did on Twitter about this.

I can see if I can find the link and post it with this video. I don't know if I'm going to, but essentially, you know, if you use Inventory Labs or Boxam or Perpetu Pub or any of these that store your cogs, when you sell the product once and then you sell that same product again, you're, your cogs have to change because you, you can't put the same, you know, if you put the same cogs in twice, you're essentially double counting your cogs. So there is a process. I think the officially correct process is to go back into the official, the first one. So on Inventory Labs, I know for a fact when something gets returned, Inventory Labs goes in and actually changes. It forces a change on the report and wipes out the cog. It, it essentially adds a line item that balances out the cog because that cog doesn't like it's no longer a sitting on your balance sheet as a cog. Right. You said if it's a return and then if you go to resell it, I think what you're supposed to do is go back into the original order and change it back. And then when you sell it the second time, it has a zero cog. Don't quote me on that. I'm not a cpa. I, I have to look at my notes for how we do it now because I don't, I wrote a whole kind of system for it and then I handed it off and I don't do it anymore myself. But I can go back and see which, which method that we did. But in short, as long as you're not double counting your cogs, you're going to be better. Some people will double count their cogs where essentially they get it a second time and they resell it and they load it into inventory labs and it's going to auto load your cogs the same price that you paid the first time.

Or they're going to actually some people zero it out. They like they'll sell it a second time and they'll have zeroed it out, but inventory labs will already have zeroed it out the first time. So as long as it's counting at least once in there of your cog and then of course you're counting the return as the return, you'll be okay. But it can really mess up your profit because you actually be under counting your profit if you do it incorrectly, which is the main way that people mess up. So that's something to consider when you go to resell stuff, especially cross platform because obviously if you sell it on Walmart or eBay the second time, that changes things because you won't be using Material Lab for both. So just be sure that you're counting it correctly when you look at your books and feel free to talk to your CPA or bookkeeper about that because every, every books are slightly different and unique viewed in cash approval, etc. So that is how we currently. So to round this all out. In this super long video.

We receive everything at the warehouse. I have a team there, they open every box, they scan the code, they check, they go through this process. Is it a switch route? Is it missing pieces? We file the claim, if so we take pictures. So take pictures of if you're going to file a claim, take some pictures of the box, take pictures of the product, take pictures of the slip.

We file claims where needed, we fight to get reimbursements. That is the number one thing that I screwed up for the first many, many years of doing this. I lost probably thousands of dollars by not doing Reimburs correctly. Number one, by not opening my boxes in time. But number two, not fighting for the products I should fight for, for the, you know, middle or expensive ones that, you know, you can't let customers get away with missing pieces or switching products out. And then they'll look at the product, they'll deem if it's resellable and where, if it needs to go back on Amazon, we have an Amazon section, they then have a sheet. So essentially my same buy sheet, there's a tab so they'll put it back on my buy sheet. Because I am in charge. My role in the company is I buy stuff and I reprice stuff. So if I see that it got back on the buy sheet, that means I know I can relist it FBM and I can reprice it accordingly.

And then if it goes into the ebay pile, they handle all that. So they picture and list for ebay and they actually price. They've gotten really good at looking at the market and pricing. So I don't really touch the ebay stuff anymore. They handle all of that right now. And then there's like a random third, like 5% of the products come back. I'm like, actually, this would be a decent hold. Because sometimes, you know, things come back to you months after you sold them, and by the time they came back to you, the price keeps going up, and there's a reason. And you're like, hey, I think the price is going to keep going up. So sometimes I'll occasionally hold stuff, but most of the time it goes into one of those two piles, and it's new. And then we do have a trash. We have a dumpster. We'll trash stuff if we need to. And then, of course, we have donations. I'm partial to Salvation army, but you can use any of the ones that near you that do good work. Just kind of do some research into who you're donating, where that. Where the product actually goes. So that's my ramble. That was really long for. For a simple question, but hopefully it was helpful. They said, I'm not planning these out, so forgive me, I didn't know how to spell receive there for a second. Forgive me if the information is, like, slightly ajar. I can go back and look through my notes to make sure that everything is correct that I'm putting on here, but it's correct for the way that we do it. The only thing I want to double check honestly is how we pronounce how we handle the cogs on the returns. But hopefully you found this helpful. This was number two. I have a bunch of questions that people asked me that I'm going to go through and answer similarly. I bet you they're all going to be like 30 minutes long. So buckle in if you like. Just me sitting here talking at you, because that's what I'm here for. So, again, I'm Saul. I appreciate you listening. You can find me on Twitter, if you didn't already find this on Twitter at Solstuff. And yeah, I'll see you. I'll see you next time.