Cut Costs in E-Commerce: Smart Returns Strategies with Chinese Suppliers

Dec 6, 2023 | 0 comments

Brands, here’s how to save big $$$ by asking your suppliers to replace defective customer returns. 

**Bonus email template we use below.** 

How Our Brand Does It

I’ll share how we do it with our home storage brand. 

Assuming a 4% return rate, of which 2% is defective, it can add up to a big savings annually. 

Let’s do some math for fun: 

On $1,000,000 in sales, that’s $20,000 in product you’re recouping.

That’s a nice drop in the bucket. 

The Brand – Factory Dynamic Explained

In the brand – supplier relationship: 

➡️ You are responsible for designing, marketing, and selling the product. 

➡️ Your supplier is responsible for ensuring consistent quality

So, it’s perfectly fair, and almost expected, that you request replacements in your next POs.

Our Standard Operating Procedure (SOP)

Here’s our own SOP in a nutshell: 

➡️ Someone on our team checks the “Voice of the Customer” and Inventory reports twice a month. 

➡️ Defect-related customer returns are highlighted and pulled into a shared spreadsheet. 

➡️ When it comes time to put in a new PO, this list is submitted with the PO to our factory. 

➡️ The factory adds the defective units to our new order quantity, at their cost. 

➡️ An added bonus is this creates a valuable check-in opportunity to continually improve our products. 

Note: we *only include* returns due to actual product defects. Our suppliers shouldn’t be responsible for returns caused by customer preferences (e.g., size issues) or issues in transit, like damaged delivery boxes.

Here’s the Email Template We Use

A few notes: 

➡️ The best timing is from your second PO on. 

➡️ For best results, follow this email up with a video meeting. 

➡️ For even better results, speak with them in person about this during a visit! 

➡️ Personalize the email to reflect your brand’s situation. 

The Email: 

Subject: Request for Integration of Defective Product Returns into New Purchase Orders 

Hi, 

I am writing to discuss a mutually beneficial arrangement regarding our ongoing product orders.

As you know, at [Brand Name] we are dedicated to providing high-quality products to our customers. However, like any business, we face customer returns due to product defects. We’ve been analyzing our return rates and have noticed a pattern that we believe can be addressed proactively, benefiting both our operations.

Based on our sales data, we have an estimated return rate of [X]%, [X%] of which is due to direct product defects. This equates to a significant value when considering our annual sales volume.

Our proposal is simple and aims to streamline the handling of these defective returns while ensuring quality standards:

Regular Analysis: Our team will conduct bi-monthly reviews of customer feedback and inventory reports. We will also collect as much photographic or video evidence of product defects as possible to help highlight areas for improvement.

Shared Documentation: We will compile all defect-related customer returns into a shared spreadsheet, which we will share with you for transparency and tracking.

Integration into New Orders: When placing new purchase orders (POs), we will include the list of defective units. We kindly request these units be added to our new order quantity at no additional cost to us.

Quality Improvement Opportunity: This process also serves as a valuable checkpoint for us to discuss any potential improvements or modifications to the product, ensuring a continual enhancement of quality and customer satisfaction.

It’s important to note that we only seek replacements for returns caused by actual product defects. We do not expect you to be responsible for returns due to customer preferences or external shipping damages.

We believe this approach will strengthen our relationship with you and allow us to continue aggressively marketing and selling our products.

We look forward to your thoughts on this proposal and hope to integrate this process into our next PO. Your commitment to quality has always been appreciated, and we believe this step will further enhance our collaboration.

Thank you for your consideration.

Warm regards,

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