By Martin Heubel, Amazon Strategy Consultant at Consulterce
Here’s a data-driven approach to finding the answer:
Many vendors receive demands to fund a higher damage allowance during their annual negotiations.
A damage allowance aims to compensate Amazon for goods customers return within the warranty period.
It’s a highly controversial trade term, as Vendor Managers often don’t share the underlying data, and brands have no way of judging the legitimacy of the fee.
So what should you do?
Conduct your own research.
Here’s how:
- Go to Vendor Central » Retail Analytics
- Find the number of customer returns (Sales Report)
- Find the unsellable on-hand inventory (Inventory Report)
- Download both reports at the ASIN level
- Calculate the DA% entitlement (Volume x Cost Price / Net Receipts)
- Adapt your assumptions (watch the video to learn more)
The resulting percentage is the actual value to which you want to limit your investment for damage compensation.
Pro Tip: Invest in Amazon’s Warranty Repair Services if high return rates keep you up at night. It can help drive good CX and significantly reduce customer returns to your warehouses.
For further information and support, contact Martin Heubel here
