Latest / Selling on Giants: The eCommerce Marketplace Podcast / How Amazon Vendors Can Prevent Shortages and Chargebacks with Chris Khoo

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How Amazon Vendors Can Prevent Shortages and Chargebacks with Chris Khoo · Selling on Giants: The eCommerce Marketplace Podcast

0:07
SPEAKER_00: Welcome to this episode of Selling on Giants.
0:10
SPEAKER_00: Today we're diving into a critical issue faced by many Amazon vendors, preventing shortages and chargebacks.
0:17
SPEAKER_00: Our guest, Chris Ku, Director of Sales at CooCommerce, an Amazon vendor software solution designed to help businesses streamline operations and reduce costly errors when handling purchase orders.
0:29
SPEAKER_00: With over a billion dollars in orders managed, Chris has built a platform that empowers businesses to operate more efficiently, save time, and prevent thousands of dollars in chargebacks each month.
0:41
SPEAKER_00: In this episode, we'll explore the root causes of shortages and chargebacks and more importantly, how to prevent them.
0:48
SPEAKER_00: If you're an Amazon vendor looking to reduce costs and improve your efficiency, you won't want to miss this expert insight from one of the leading authorities in the vendor central space.
0:59
SPEAKER_00: Let's dive into the main takeaways from my conversation with Chris.
1:04
SPEAKER_00: In this episode, we tackle one of the most pressing challenges for Amazon vendors: shortages and chargeback.
1:12
SPEAKER_00: Chris shares valuable insights on how to prevent these costly issues, streamline operations, and reduce errors.
1:19
SPEAKER_00: Here are a few key takeaways from our conversation.
1:23
SPEAKER_00: Understanding shortages and chargebacks.
1:26
SPEAKER_00: Chris breaks down the root cause of these issues, explaining what they are and how they directly affect your business's profitability.
1:34
SPEAKER_00: Next, we chatted about the importance of prevention.
1:37
SPEAKER_00: Rather than focusing down on reclaiming funds, Chris emphasizes the importance of addressing the root cause early to prevent shortages and chargebacks from occurring in the first place.
1:48
SPEAKER_00: Next, we talked about self-audits and tracking metrics, learning how to conduct a self-audit, where to check for these issues in vendor central, and the key metrics vendors should be monitoring to stay ahead of the curve.
2:02
SPEAKER_00: Lastly, we talked about staying compliant with Amazon updates.
2:06
SPEAKER_00: Chris also shared his insights on how recent changes in Amazon's palette and labeling requirements impact vendors and what actions are necessary to avoid penalties.
2:17
SPEAKER_00: Let's jump into the full interview with Chris and explore how you can apply these strategies to your own Amazon vendor central operations.
2:27
SPEAKER_00: Hey Chris, welcome to the show.
2:29
SPEAKER_00: Thanks so much for being here.
2:30
SPEAKER_00: We are thrilled to have you to talk about vendor central and some of the key topics or key things that vendors can do to learn and take advantage of to help improve their profitability.
2:40
SPEAKER_00: But to start it off, could you share a little bit about your background and how you got into e-commerce specifically working with Amazon vendors?
2:49
SPEAKER_01: Sure thing.
2:49
SPEAKER_01: It's great to be on here, Will.
2:51
SPEAKER_01: It's great to be chatting with you again.
2:53
SPEAKER_01: My journey into e-commerce actually started when I was much younger.
2:56
SPEAKER_01: I was 11 or 12 when I was selling dropship products just through a website.
3:00
SPEAKER_01: But it wasn't until much later I'd gone to the University of Cambridge, graduated, got myself into sales.
3:06
SPEAKER_01: And it's actually my father's business, who was doing uh running a whole uh e-commerce uh operation.
3:13
SPEAKER_01: And we had customers that were Amazon vendors.
3:16
SPEAKER_01: And I gave up my sales job.
3:18
SPEAKER_01: I was working for a big pharma company, came and joined back in 2019, and I said, I believe that this is the future.
3:23
SPEAKER_01: I think we've got a real opportunity here to help Amazon vendor businesses grow.
3:28
SPEAKER_01: And sure enough, uh, it was shortly after that the COVID lockdown hit.
3:32
SPEAKER_01: Uh, the rates of volume of sales going through Amazon really went up quite a lot.
3:36
SPEAKER_01: And we we knew we were onto something.
3:38
SPEAKER_01: Uh, you know, we were just taking on more business and taking on more clients each month.
3:42
SPEAKER_01: Um, we found we hit a real niche and a real pain point that we're able to solve.
3:46
SPEAKER_01: You know, that order management journey was just really slow.
3:49
SPEAKER_01: And we just gave something which just saved them five, 10, 15 hours a week.
3:53
SPEAKER_01: Um, so we just kind of evolved quite organically.
3:56
SPEAKER_01: And since then we've got much more uh disciplined, grown much faster, expanded across the world.
4:01
SPEAKER_01: Um, and it's just such a great space to be in.
4:03
SPEAKER_01: I love it.
4:04
SPEAKER_00: That's amazing.
4:05
SPEAKER_00: And coming, uh having running an agency and working with vendors at Vendor Central, I will say chargebacks can be painful, the the shortages and uh everything that comes with that.
4:16
SPEAKER_00: It's like you're already selling wholesale, and if not properly uh operating, it's just gonna cost you uh even more money, and then profitability can be really difficult.
4:25
SPEAKER_00: Uh, in terms of your journey.
4:26
SPEAKER_00: So uh it was your father's company, you saw the opportunity, timing is everything with entrepreneurship.
4:32
SPEAKER_00: So it sounds like you timed it really right.
4:34
SPEAKER_00: Uh, what has been like your biggest challenge as a business owner as you've been kind of in the space and learning, learning about vendors and learning how to help them?
4:45
SPEAKER_01: Um the learning side was great.
4:47
SPEAKER_01: I like getting in and understanding all the technical details.
4:50
SPEAKER_01: Uh, when I first joined, I actually read all of Amazon's manuals, I did all of their training.
4:54
SPEAKER_01: From that, I actually then went back to the product team and said, hey, we need to change some stuff, we need to fix it up and make it much better.
5:00
SPEAKER_01: Um, but I actually think the biggest challenge is when we go to companies, when we talk with them, trying to help them understand what Amazon requires and what they need to do on the ground and help to convince the uh the higher management often of what needs to happen, the process change that needs to occur.
5:18
SPEAKER_01: There's just often a lot of friction there.
5:20
SPEAKER_01: Because even sometimes you can have people on the ground that know something needs to change, or people that are getting in finance, they can see issues coming back from Amazon and they understand the issues.
5:29
SPEAKER_01: But having the whole business aligned is very important that the company that you're dealing with is not just seeing it as, well, we sell a million dollars, we take$50,000 or$100,000 in fines, where overall we're still profitable.
5:41
SPEAKER_01: It's trying to actually create that narrative of, well, how can we make it better?
5:45
SPEAKER_01: And certain companies have a growth mindset and others just have a conservative mindset.
5:49
SPEAKER_01: Um, and often the challenge is trying to help empower the individual people on the ground to achieve those growth goals successfully.
5:57
SPEAKER_01: I think that's that's a constant uh struggle we come up against.
6:01
SPEAKER_00: That's beautifully said too.
6:02
SPEAKER_00: And finding the decision makers is its own challenge, but like educating throughout the way uh is a big part of any type of service industry.
6:10
SPEAKER_00: So I can totally see how that's a challenge and probably still a challenge to this day.
6:15
SPEAKER_00: So thanks for sharing that.
6:16
SPEAKER_00: That was really insightful.
6:18
SPEAKER_00: On that note, let's jump into the main topic.
6:20
SPEAKER_00: I am pumped to talk about how vendors can prevent shortages and chargebacks.
6:24
SPEAKER_00: So, Chris, before we get too deep into this topic, and for some of our new vendors who might be listening in, uh, can you start by explaining what shortages and chargebacks are and how they can impact your Amazon vendor account?
6:37
SPEAKER_01: Absolutely.
6:38
SPEAKER_01: Um, shortages and chargebacks are the two major classifications of deductions that Amazon will apply to your invoices before they pay you.
6:45
SPEAKER_01: Chargebacks are usually related to compliance issues.
6:48
SPEAKER_01: For example, you delivered the product late, you delivered it, and the item needed some sort of prep requirement, bagging or uh ceiling or something like that.
6:56
SPEAKER_01: Maybe you didn't uh tell Amazon all the correct information and they had to do some sort of extra work to put all that information together.
7:04
SPEAKER_01: And chargebacks usually either are a uh per item fee, maybe 12 cents or 20 cents for the kind of rework charges, or a percentage-based fee.
7:12
SPEAKER_01: If you've cancelled an item too late, they sometimes charge 3%, 9%, depending on the exact specific.
7:19
SPEAKER_01: Shortages, on the other hand, are more to do with when you claim you've shipped them 100 units, but for whatever reason, they say only, let's say 90 of them arrived, and they're only going to pay you for what they think actually arrived.
7:30
SPEAKER_01: Um, it gets very thorny because once it leaves your facility, it's in the truck, goes to Amazon, they receive it.
7:37
SPEAKER_01: You don't have visibility.
7:38
SPEAKER_01: No one here has cameras inside Amazon's receiving center checking.
7:41
SPEAKER_01: Oh, I can see, look, there's a hundred units there.
7:43
SPEAKER_01: And most of the time you did ship exactly 100 units, but those discrepancies lead to them having a claim against you that will go back and forth for a long time between you and them.
7:54
SPEAKER_01: Often there'll be some kind of settlement that happens around that, whether you do that individually on a case-by-case basis or you settle across a number of different cases.
8:02
SPEAKER_01: But it overall, these two issues can contribute to quite a big margin eroding process for an account.
8:09
SPEAKER_01: You know, it's quite typical that uh shards could be maybe one, two, maybe five percent, and shortages could be also anything from uh you know one to ten percent of the revenue of goods shipped in, which, you know, together, if left unchecked, could really just completely eat all your margin on your Amazon business.
8:27
SPEAKER_01: So we're focused on trying to help get to the root cause of all the issues, prevent them wherever possible, um, and then trying to help put scalable solutions in place for companies to continue to operate profitably.
8:38
SPEAKER_00: Beautiful.
8:39
SPEAKER_00: So and that's really well said.
8:40
SPEAKER_00: And I mean, dude, nine, nine to ten percent of your margins due to some of these errors, whether they're on you or Amazon, that's a significant uh amount of money to take off your profits, essentially.
8:52
SPEAKER_00: Based on that, so what are some common, let's let's dive into chargebacks before we talk about shortages.
8:57
SPEAKER_00: What are some of the common root causes of chargebacks?
9:00
SPEAKER_00: I know you mentioned a few of them, but like what specific actions could sellers take to prevent them?
9:05
SPEAKER_00: And what are some things that you've seen like that you were able to systemize to kind of prevent this happening again for some of these vendors?
9:13
SPEAKER_01: Yeah, so the first step when looking at it is just to get all the data in.
9:17
SPEAKER_01: I know that's a very cliche thing to say, you know, bad data in, bad data out, but you can go to Venice Central, you can get your chargeback data very easily for the last 12 months, put it into a big spreadsheet, do a pivot table.
9:28
SPEAKER_01: You can break it down by ASIN, you can break it down by subtype, everything.
9:32
SPEAKER_01: Um, the most common ones that we see, and it won't be a mystery to any of the listeners I know, is P1 time accuracy, cast information compliance, prep, which has several subtypes, and then ASN accuracy.
9:44
SPEAKER_01: Uh, they're the most common ones that we see.
9:47
SPEAKER_01: Um, in terms of what you can do, we would recommend, like I say, a thorough analysis, particularly on the prep side of things.
9:53
SPEAKER_01: You want to look at your supply chain to see whether prep could or should be happening.
9:57
SPEAKER_01: Some brands choose not to do any prep because it's actually more cost efficient for them to take the prep charge with Amazon.
10:04
SPEAKER_01: You just need to make sure you're folding that into your margin calculation.
10:06
SPEAKER_01: That's all I'd say about that.
10:08
SPEAKER_01: But for ones like cost information compliance, there's something going wrong with the labeling.
10:12
SPEAKER_01: Things like ASN accuracy, there's something going wrong with the information going in the ASN.
10:16
SPEAKER_01: Most likely it's the expiry date or it's the carrier tracking reference number not being put in correctly.
10:21
SPEAKER_01: Some of these things are even beyond your control, right?
10:23
SPEAKER_01: It's the carrier that's doing that, or it's the person booking in through carrier central.
10:28
SPEAKER_01: But these little education pieces, you might they might be going under the surface, but it could still be costing$10,000,$20,000 every year.
10:35
SPEAKER_01: And it's very profitable just from you know having a conversation about it.
10:39
SPEAKER_01: So we can go into the specific subtypes in more detail if you like, but when it comes to charges, it's very data-driven, big spreadsheet.
10:46
SPEAKER_01: Have a look at it, have the conversation.
10:48
SPEAKER_01: You might even determine that some specific ASINs are not actually profitable to be supplying in the way that you're currently supplying them, once you factor in all the different charges.
10:57
SPEAKER_01: Uh, you know, and it's it's very easy to get uh a bit too head-driven on well, here's what it costs us to buy and here's what we're selling it for.
11:04
SPEAKER_01: We're making money, but you need to build in all the hidden costs too.
11:07
SPEAKER_00: That's well said, too.
11:09
SPEAKER_00: There are lots of hidden costs, whether you're a vendor or seller on Amazon.
11:12
SPEAKER_00: And uh, I'm always surprised when I meet with brands like how they don't they have like a roundabout our profitability.
11:20
SPEAKER_00: They're not always like, yeah, we make 5% on every every product, for example.
11:24
SPEAKER_00: It's always like, ah, we think we're around this.
11:26
SPEAKER_00: And it's like, wow, uh, not knowing that seems like it's uh it could be crippling, especially if you think you're making money uh and you're actually losing money.
11:35
SPEAKER_00: And we've had uh cases where when we did a fee analysis, we found out they're losing a dollar or two every order, and that completely changes their perspective on that product.
11:46
SPEAKER_00: When you're working with these vendors and you're doing chargebacks, like primarily who are you working with?
11:51
SPEAKER_00: Like who?
11:52
SPEAKER_00: Not that we're doing the blame game, but generally who's the culprit?
11:55
SPEAKER_00: Is it their 3PL?
11:56
SPEAKER_00: Is it their in-house?
11:57
SPEAKER_00: Like, generally, based on your experience, like what are some of the typical things that they're getting wrong?
12:02
SPEAKER_00: Is it always the labels?
12:03
SPEAKER_00: Are they crushing boxes before they put them in and sending them out?
12:08
SPEAKER_01: Um, it really does depend on the particular business.
12:11
SPEAKER_01: You know, some have a 3PL, some have in-house.
12:13
SPEAKER_01: Sometimes it's the warehouse that manages the process, sometimes it's in the admin team, sometimes it's even in the finance team.
12:19
SPEAKER_01: Um, it depends on the specific subtype.
12:22
SPEAKER_01: But most of the time, like you say, we're not going to get into a blame game.
12:26
SPEAKER_01: Um, and it's never nice to go into a company and say, well, you know, in a way, people want to be told what they're doing wrong, but they also don't want to be told that, you know, this person in this department is costing them$50,000 a year.
12:38
SPEAKER_01: That's not a nice, that's not a nice way to approach it.
12:41
SPEAKER_01: We like to think of it more as an educational process where you say, here's the standard and here's where we're falling short.
12:46
SPEAKER_01: When we look to your whole process, we can see that, for example, in the warehouse, box labels are not being applied correctly.
12:53
SPEAKER_01: When they go to make the ASN, the ASN expiry dates for these perishable products are not being added in.
12:58
SPEAKER_01: When they're bagging other products, there's a whole subset of these liquids that are not being bagged correctly.
13:03
SPEAKER_01: This kind of thing.
13:04
SPEAKER_01: Um, you know, when when they're processing the purchase orders, they're being cancelled, but they're being cancelled too late.
13:10
SPEAKER_01: And because of that, you're getting charged 3%.
13:12
SPEAKER_01: And over the last year, all of these issues, so on, cost you, let's say,$200,000.
13:18
SPEAKER_01: And when you then go to and you can do that presentation, um, we did that very recently, actually, for uh you know a business we're pitching to, it becomes very easy to demonstrate.
13:28
SPEAKER_01: Well, here's here's a solution that we have.
13:29
SPEAKER_01: We estimate conservatively we could save you some fraction of that, depending on the specific breakdown of what the charges are.
13:36
SPEAKER_01: And then then they can just say, Well, great, get to work.
13:39
SPEAKER_01: You know, we just want to we just want to make more money.
13:42
SPEAKER_01: You know, and these charges can become quite big.
13:44
SPEAKER_01: You know, if you've got a vendor account doing 10 million a year, it really wouldn't surprise me if their charges are two, three hundred thousand a year.
13:50
SPEAKER_01: That would be very uh and I'm I'm not saying that's acceptable, but it just really wouldn't surprise me.
13:55
SPEAKER_01: And then it's very easy to then go in and say, Well, let's let's look at this process on where we can make it better.
14:01
SPEAKER_00: Yeah, that's well said too.
14:02
SPEAKER_00: And uh especially some of the bigger brands, I could definitely see how it just goes under the radar.
14:07
SPEAKER_00: The fees are incremental.
14:08
SPEAKER_00: So until you put it all together, you don't really notice how much you're bleeding.
14:12
SPEAKER_00: Um that note, this was some really good information on chargebacks, and I'm sure we're gonna talk about it a little more in depth, but I do want to jump over to shortages.
14:19
SPEAKER_00: So, short, how do shortages typically occur?
14:22
SPEAKER_00: And what processes should a vendor implement to catch these issues before they actually impact the supply chain?
14:29
SPEAKER_00: And what I really want to know, what do you do in the problems on Amazon?
14:33
SPEAKER_01: Yeah, so shortages are a thorny problem because there's several stages to it.
14:38
SPEAKER_01: There's you packing the goods, there's you putting the boxes on the labels in the boxes, putting it into the courier, courier takes its arms and they unbox it and then they put it through their tunnel.
14:47
SPEAKER_01: And uh most small parcel shipments go through the PID tunnel, uh, the product identifier tunnel, PID, and then they get scanned trying to see what barcodes are on it.
14:57
SPEAKER_01: And there are there are actually eight main root causes of shortages.
15:00
SPEAKER_01: We wrote a blog on it.
15:01
SPEAKER_01: I can link to it uh somewhere, I'm sure, after this.
15:04
SPEAKER_01: But um, you know, it can covers things like theft, loss, incorrect labeling, because something goes wrong on Amazon's side.
15:10
SPEAKER_01: But the most common cause is when it is actually something going wrong on the Amazon receive process.
15:16
SPEAKER_01: So their ideal is they take the box in, put it on a conveyor belt.
15:20
SPEAKER_01: They got six cameras on all sides, scan, find all the barcodes, receive it, they know what it is, great.
15:25
SPEAKER_01: If that goes wrong for whatever reason, it has to go over to a problem solver.
15:28
SPEAKER_01: And they have to open up the box and they've got to try and figure out what product it is, who it came from, what order it is on, what ASN it's on, how many units.
15:37
SPEAKER_01: And they're really great at determining which product it is.
15:39
SPEAKER_01: That you know, it's gonna be pretty obvious because it will have the ASIN probably printed on the product itself.
15:44
SPEAKER_01: But the the tricky thing is they'll might match it to the wrong purchase order that it was due on, or they might even match the wrong supplier.
15:51
SPEAKER_01: So vendors will often see this though.
15:53
SPEAKER_01: You could have two open purchase orders, each for 100 units, and one of them goes to 110 and the other one goes to 90, something like this.
16:00
SPEAKER_01: Um, and it one gets a short, so they don't pay that invoice, and then the other one gets an overage, and then of course they're not going to necessarily pay you for the extra 10 because you only invoice them on that one for the 100.
16:10
SPEAKER_01: And it might even out in time, you know, those 10 get reassigned back to the other 90 and so on.
16:15
SPEAKER_01: But the the items might eventually get they can get mismatched.
16:19
SPEAKER_01: Um, sometimes they even have to count the physical units in the box, they have to take them out and say, okay, I've got 24 there, or so on.
16:25
SPEAKER_01: And you know, it's very strange if you're shipping pure case packs, if you're if you've got defects just of one or two units, you know the whole case didn't go missing, right?
16:34
SPEAKER_01: Five cases of 20, they only received 98.
16:37
SPEAKER_01: Well, clearly they got five boxes, but how do they only get 98?
16:40
SPEAKER_01: Well, it's because they had to open them up and count them, and maybe they just misscanned two out of the hundred units, that kind of thing.
16:47
SPEAKER_01: But as a vendor, the only thing you can really do about that is to ensure that it doesn't go to the human process.
16:53
SPEAKER_01: So you want to make sure you put the right, we call it the license plate label on the carton so that when it goes through the tunnel, it gets received very smoothly.
17:00
SPEAKER_01: That's the that's my big, big headline takeaway that I would give to people.
17:04
SPEAKER_01: You want to make that as smooth as possible for them.
17:07
SPEAKER_00: Beautiful.
17:08
SPEAKER_00: And yeah, I mean, that's really interesting too, because we've seen that on the back end where I mean you hit them the head 98 and it's 100, and you're like, dude, they they come in packs of 100.
17:16
SPEAKER_00: There's no way you're able to claim 98.
17:18
SPEAKER_00: And it's really interesting that, like, it sounds like a lot of the errors that happen inside of Amazon is like when the human comes in.
17:25
SPEAKER_00: So the machine didn't work, and then it's a person, John, who I'm sure is under a tremendous amount of pressure, because we've all seen what it's like working in some of those fulfillment centers.
17:34
SPEAKER_00: They got to count 100 units in three seconds, and they're, of course, they're miscounting.
17:39
SPEAKER_00: And then you as the vendor uh not sending enough, so you're being dinged there, and then having an overage here, which would all equate to chargebacks, right?
17:47
SPEAKER_00: If you have an overage, they're gonna say, hey, you ship too much and they're gonna hit you with another fee, correct?
17:53
SPEAKER_01: Yeah, I mean, I got a lot of sympathy for the people on the Amazon receive process who have to sort through, and there's a whole jumble of stuff.
18:00
SPEAKER_01: I mean, one of the places I actually encourage people to look is you won't necessarily see that something went wrong on the pit tunnel.
18:08
SPEAKER_01: You won't necessarily see that.
18:09
SPEAKER_01: But if you go over to the chargebacks tab and you look for the cost information compliance defects, they actually give you the scanned images of the box as it got received.
18:17
SPEAKER_01: Not all that's what they give you, and you can see the pictures, all six sides, you can see them going through.
18:23
SPEAKER_01: And either you can see that your box label got crumpled, it got covered up, or it was missing altogether, and you can go, oh, I can see why that box went wrong.
18:31
SPEAKER_01: And now they'll give you the chargeback for the label being incorrect, it's 12 cents or 15 cents.
18:36
SPEAKER_01: But that's not really where the cost is.
18:38
SPEAKER_01: The cost is they then had to open that box up and find the items individually, and each of your could be worth however many dollars.
18:45
SPEAKER_01: So it's 12 cents is going to become you know irrelevant in that scheme of things.
18:49
SPEAKER_01: Um, so that's where one place I encourage people to look is to be familiar and to actually understand Amazon.
18:55
SPEAKER_01: If they had their way, they would just put everything through the tube and it would get scanned perfectly in a perfect world.
19:01
SPEAKER_01: And they can't do that.
19:02
SPEAKER_01: So they have to sort through a big jungle of stuff.
19:05
SPEAKER_01: Yeah.
19:05
SPEAKER_01: Um, so yeah, definitely.
19:07
SPEAKER_01: You wanna you wanna smoothly get that scanned in as best as possible.
19:11
SPEAKER_00: And I'm sure overall, like as much as we complain about Amazon and they they're able to keep you in business for these inefficiencies, they skip billions of products funneled through their fulfillment centers.
19:21
SPEAKER_00: So uh if you look at percentage-wise, it's probably a really small percentage that actually get flagged and need to go through this process.
19:28
SPEAKER_00: So that's totally understandable.
19:31
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20:08
SPEAKER_00: For for some of our vendors that are listening that it's resonating with or they're having a hard time understanding if what their chargebacks are or if they're getting hit with shortage, uh, how would how would they do a self-audit?
20:20
SPEAKER_00: Like how would you recommend getting started to start analyzing to figure out where are these discrepancies and and how can I identify them?
20:29
SPEAKER_01: Yeah, so um it's at well, several stages.
20:32
SPEAKER_01: One, if they want to do it completely themselves, you can go to the um operational performance dashboard, you can see your own charges, you can export all that information out for many years.
20:42
SPEAKER_01: Um the shortages is a bit more complicated to do the analysis on, but the most basic way is to pull out your remittance information, break it down by invoice, you have to do some work in Excel.
20:52
SPEAKER_01: You can then reconcile which invoices were paid, how much was left over, what the deductions were, and so on, and then you can pull that together.
20:59
SPEAKER_01: You'll need to take a reasonable period of time for that to be significant, uh, just because of the way the payment reconciliation process works.
21:07
SPEAKER_01: It's actually something that we provide as a service, as a like initial first step for companies, uh, not to get too ahead of myself, but if companies are struggling with this, it's our first step is we say, hey, let us come in and do an audit and we'll just tell you the lay of the land.
21:21
SPEAKER_01: We don't charge anything for that.
21:23
SPEAKER_01: That's our promo or gift to uh you know Belovic's listeners is to help to do that initial audit for them.
21:29
SPEAKER_01: Um and we can compile that information and come back to them and say, Well, you know, your revenue was$8 million, your charges were$250,000.
21:37
SPEAKER_01: Here's the breakdown and so on.
21:39
SPEAKER_00: Damn.
21:40
SPEAKER_00: Well, for anybody listening, CooCommerce uh is inside the show notes.
21:44
SPEAKER_00: So be sure to check those out below.
21:46
SPEAKER_00: Follow up with Chris, you heard him?
21:48
SPEAKER_00: Free audit.
21:48
SPEAKER_00: So let's let's get Chris and his team real busy uh so you guys can get some of those back.
21:53
SPEAKER_00: And to his point, too, uh accounting is like uh it's like my kryptonite.
21:57
SPEAKER_00: So having to analyze all these.
22:00
SPEAKER_00: uh accounting forms and stuff would make me go cross-eyed.
22:03
SPEAKER_00: So I'd much rather leverage a service than do it myself, that's for sure.
22:08
SPEAKER_00: But jumping back in, so uh we're we're talking a bit about shortage chargeback.
22:11
SPEAKER_00: Are there any baseline metrics that you use that like I'm a we're all about KPIs and metrics.
22:17
SPEAKER_00: So outside of the chargebacks, is there any other indicators that might be on the platform that you guys use to help inform yourself for you know establishing either baseline data or anything you would track regularly as a vendor?
22:32
SPEAKER_01: I mean they did recently revamp a lot of their reports.
22:34
SPEAKER_01: They added a whole set of new metrics and graphs to Vendor Central, which is quite interesting to look at things like PO on time acceptance and PO acceptance rate that can be some of the metrics that people like to track.
22:46
SPEAKER_01: I know that on the marketing side people like to track you know NetPM and all the different other tacos and ROAS and all the other different metrics they like to track.
22:56
SPEAKER_01: Maybe I'm just much more operational but I like to look at the you know the sell in rather than just the sellout that sell out is always going to be king.
23:04
SPEAKER_01: But yeah we mainly look at those metrics.
23:06
SPEAKER_01: We mainly look at what are the charges, what are the shortages, what's the revenue, what's the process and where could it where could it be done better?
23:13
SPEAKER_01: That's mainly where we start.
23:15
SPEAKER_00: Beautiful and sounds like very operational so not surprising there.
23:20
SPEAKER_00: When it comes to labeling packaging and palette requirements what are some of the most common mistakes that you find vendors making uh as they're getting ready to send these orders over to an Amazon fulfillment center there are so many ways you can go wrong with labeling the top ones are the biggest mistake is to not label your boxes.
23:39
SPEAKER_01: That sounds obvious but a lot of people don't do it.
23:42
SPEAKER_01: Even if you're on the palette vendor program you might want to consider labeling each individual carton.
23:47
SPEAKER_01: I was actually chatting to a supply chain expert recently uh she used to do many many years of uh working in big big FMCG companies and they had the palette program but she said when they went to Amazon they found that even though the palettes were going into a different palette receive area when that got full they would get broken down and they would get sent to the small parcel receive area instead.
24:07
SPEAKER_01: And because they weren't labeling at the box level guess what everything got manually received shortage weight rate went through the roof and there was no way of knowing oh how busy is a particular fulfillment center going to be on a particular day.
24:20
SPEAKER_01: Yeah you don't know.
24:21
SPEAKER_01: So it was a bit like playing roulette.
24:24
SPEAKER_01: Now maybe you would say the operational cost is worth it.
24:28
SPEAKER_01: I don't know that's one to evaluate internally so my number one is make sure you label your boxes.
24:33
SPEAKER_01: Number two is if you're dealing with perishable products you have to be putting the expire date in the batch or the lock information into that ASN.
24:40
SPEAKER_01: Very very common that we see that go wrong.
24:42
SPEAKER_01: And thirdly if you're using pen and paper to track and record all this information it's gonna be having issues.
24:48
SPEAKER_01: You know so many times we talk to companies and they have some with a piece of paper, they're ticking it off then they go back to a computer they key it all in and then they get a bunch of labels and go back to the boxes and put the labels on the box and I say great you're labeling the box but the bad news is you've got 80 cartons here and you're having to play mix and match with okay I've got box 46 and you know it's a jar of 12 pinkles and where's my where's my box?
25:11
SPEAKER_01: Oh it's there.
25:12
SPEAKER_01: And you can just feel that's going to go wrong.
25:14
SPEAKER_01: So you know what we recommend is put a system in where you can just take the product put the label straight on the product and it's done you know put the license plate on it.
25:22
SPEAKER_01: And um that's that's really where we see a lot of the operational problems occurring.
25:27
SPEAKER_00: Man that's a really good point too.
25:28
SPEAKER_00: And like we mentioned with Amazon having the like the the fail points where we get these charge backs is like a human going in and doing something manually and just making mistakes it's the human condition.
25:38
SPEAKER_01: So if you are a vendor and you're having your fulfillment center with uh an old-fashioned checklist it uh while it is costly it could be worth the investment to um level up your technology in order to uh alleviate some of these mistakes and also make it smoother on your team to save time so there's lots of uh benefits to having a system in place on that note I know in the services industry communication is key it's super important um so in your world of logistics like what role does communication play with logistics partners and internal teams in preventing shortages and how can vendors improve communications to minimize some of the errors that occur yeah communication is really critical both within the organization and also from your organization to your trading partners so specifically we're looking at your communication over to Amazon most of the time that's going to take the form of an EDI connection specifically in this case the 856 ASN that communication message absolutely critical to make sure that's right and validated obviously we can help with that as being you know an EDI service provider.
26:45
SPEAKER_01: But then also the internal communication I think is very critical too we touched on it earlier that often one department is experiencing the pain and another part is doing the process which is causing the pain and then another part is trying to you know scratch their head figure out what's going on here.
27:00
SPEAKER_01: And having those discussions internally in a very non-judgmental just how can we make this better kind of way it does take a mindset change sometimes internally.
27:10
SPEAKER_01: So but that's in addition to ripping all your information out and putting in an Excel spreadsheet my second recommendation internally would be have a discussion amongst yourselves you know get the head of supply chain get the head of the warehouse head of e-commerce head of finance maybe even get the IT person and spend half an hour saying is there something we should be looking at because I've just found a$250,000 problem on our balance sheet that I think we can do something about.
27:35
SPEAKER_01: And then it's going to be more than that.
27:37
SPEAKER_01: You're not going to solve it in half an hour.
27:39
SPEAKER_01: But having the ability to have that conversation absolutely cross call.
27:44
SPEAKER_00: Beautiful well said too and you sound like I'm sure in your role sometimes you play mediator a bit that sounds like there's lots of different people involved and you know a big thing we talk about on the advertising side is like you can't sell products that aren't available.
27:56
SPEAKER_00: So uh having your operations on point having inventory available and in stock efficiently plays a big role.
28:03
SPEAKER_00: My uh my last question for you before we talk a little bit about kucommerce and like what you guys do great.
28:09
SPEAKER_00: Are there any acceptable level of chargebacks or shortages?
28:13
SPEAKER_00: Is there anything that um that you would just say is like you know it's okay to have a 12% this is just the nature of the beast or working with kucommerce and being a vendor in general like you should strive to have zero shortages and zero chargebacks in a perfect world of course um that's that's a thorny question.
28:36
SPEAKER_01: I think it's a good question though in some ways my answer is yep you always aim for perfection zero percent is the goal get it all down and reduce it and eliminate it um if I put my pragmatic head on I more take a view uh and say and I'll I'll give an example you know we worked with one vendor we they were experiencing 300 000 a year in shortages and chargebacks we then worked with them we saw that number drop down to 25000 now am I unhappy they're still losing 2500 in shortages yes am I happy that we are able to save them 275 every year yes like that's that's a win in my book and it was a win for them too so in a way it's more about saying at what level are we comfortable and they weren't happy at 300 but they were happy at 25 for the scale of their sales volume.
29:25
SPEAKER_01: And it's a similar thing with charges um I've actually heard some people say all chargebacks from Amazon are always justified um but shortages there's a bit more wiggle remote some people don't completely subscribe to that way of thinking the their reasoning is that charges are because you just did something wrong.
29:41
SPEAKER_01: You canceled something late didn't bag it didn't process the order correctly you actually are just clearly at fault.
29:47
SPEAKER_01: And obviously Amazon waives some of those charges.
29:50
SPEAKER_01: So to some extent you'll be able to get away with some level of defects regardless of what the financial implications are for that.
29:57
SPEAKER_01: I would suggest that you want everything probably to be under 1%.
30:01
SPEAKER_01: That would be where I would aim um 2% might be okay.
30:04
SPEAKER_01: But once we see people start to creep over 3% on any kind of metric we think that there's probably some sort of structural problem that he's addressing.
30:13
SPEAKER_01: Interesting.
30:14
SPEAKER_00: Great baseline data.
30:15
SPEAKER_00: So shoot for over 1% for our listeners 2% getting in the yellow zone if you're above 3% give Chris and his team a call so they can do an audit for you guys and help you guys figure out what systematic issue is causing you to erode your profit margins.
30:30
SPEAKER_00: And we know as vendors who sell your margins are a little thinner than they are if you were on seller or selling direct to consumer on your website.
30:39
SPEAKER_00: Chris this was really great.
30:40
SPEAKER_00: Now I want to talk a bit about KuCommerce to kind of like what you guys do really great.
30:45
SPEAKER_01: So can you give us an overview of KuCommerce specifically how you address some of these challenges with vendors as they face shortages and chargebacks sure so in a nutshell is a SaaS application web-based helps you manage process all of your POs, ASNs, routing collection instructions, carrier integrations, labels, invoices the whole journey to Amazon vendor in one place.
31:10
SPEAKER_01: If you use it you don't need to go to Amazon to manage your purchase orders you don't need to go there to make routing to make shipments to make labels to send invoices you just all manage it within our platform and we do it fully integrated into your ERP as well.
31:22
SPEAKER_01: So if you use NetSuite, SAP, some other internal ERP, we have many many connections.
31:28
SPEAKER_01: We also integrate all the information into that too.
31:31
SPEAKER_01: So we're really trying to help people that either do it manually so they've got someone on Monday morning and Wednesday morning just smashing through lots of orders or they're incurring large amounts of chargeback and operational defects on the shipment side.
31:44
SPEAKER_01: For example on the shipment side they could have someone like we mentioned earlier physical sheet of paper ticking it all off that process we just get rid of that we can put our software in you can have a barcode scanner on some tablet at the same time hit printer scan the box print the label on it goes.
32:01
SPEAKER_01: And it sounds very simple but when you're doing thousands of boxes every single week it it may it really really does add up.
32:08
SPEAKER_01: And you need to think of it not in terms of you know the label costs two cents to print but more in terms of that product that box contains$50 a product and I put a you know 3% chance that it goes completely missing when I send it to Amazon.
32:21
SPEAKER_01: If I use the correct labels that chance is going to go down quite a lot and I'm gonna get paid a lot more money.
32:26
SPEAKER_01: And you know it's it's a much um much more process driven approach that we take.
32:31
SPEAKER_01: We kind of come in, we say here's the gold standard but tell us how you work and we want to make sure we fit into that workflow smoothly.
32:38
SPEAKER_01: So that's a nutshell what we do um I can go into much more detail as much as you want on any particular topic.
32:44
SPEAKER_00: Well you guys sound like I'm all about software as a solution and it sounds like you guys are pretty custom like it do you find that every vendor is different and you know if if you just let's put let's role play let's pretend I'm a vendor like what does the first what does onboarding look like?
32:59
SPEAKER_00: What does the first 90 days of being a KuCommerce customer look like if if a vendor who's listening says hey this resonates I want to save some money what would it look like to work with Chris and his team yeah I mean we we understand every business is unique.
33:15
SPEAKER_01: We want to be uh working with you as an individual we're not some giant faceless corporation where you're gonna get at just interacting with an AI chapter all the time.
33:23
SPEAKER_01: But at the end of the day Amazon is a machine that operates very uniformly across the world and we understand how it works best.
33:30
SPEAKER_01: The question is how do we take that requirement and implement it best on the ground for you in your particular company whether it's with your 3PL, with your on-site premises, with a mixture of the two, with your remote team based in some other location there's going to be some quirks uh that come into that equation.
33:46
SPEAKER_01: So to your question in terms of what the first nine days look like, we do all the connections to Amazon, we do all the connections to your ERP as well.
33:52
SPEAKER_01: And then we actually take you through that process of saying well here's a purchase order let's process it in the new method and people very quickly see that it's much faster to process it on our system.
34:03
SPEAKER_01: And we don't go 0 to 100 in one day we tend to do a bit of a staged approach where we say let's take all the orders going to one location or let's just take this one order and check everything works.
34:13
SPEAKER_01: We want to check the label printers work, check the people are happy maybe train up one or two people in their warehouse team that kind of thing.
34:19
SPEAKER_01: And then we do that maybe for about two or three weeks and once people have got their hands around it they suddenly realize that they don't want to do it the old way anymore.
34:27
SPEAKER_01: They don't want to be doing you know they they they they feel comfortable to begin with saying you know let's just we we're familiar with the old way of doing it the new way let's try that and then after two or three weeks they say we never want to do the old way again we don't know how we did it for three years.
34:40
SPEAKER_01: Why did we not do this sooner that's that's usually the conversation I have about week five or six of the implementation.
34:46
SPEAKER_01: And then we just kind of obviously we've got support and you know we'll continue to talk to people they get new staff they open a new facility they expand new marketplace uh this kind of thing but generally speaking that's our process taking some on the job.
34:59
SPEAKER_00: That's beautiful does the vendors have a dedicated project manager do once they're onboarded do they uh interact with support and as like as needed I'm assuming once they understand the system and they're in the flow and the sequence it's kind of runs itself but I'm just curious what uh what the service portion looks like on your end.
35:19
SPEAKER_01: Yeah we welcome people to call us email us uh raise tickets whatever it is that they uh feel comfortable with depending on where they are and what particular issue it is they're facing um most of the time people can uh fix the problem themselves through our self-help guides or the uh video guides we've got available to help diagnose and fix some of the more common issues um sometimes they're issues that are beyond our control you know maybe a carrier their inspiration goes down or uh Amazon's self are experiencing a little bit of a hiccup so some things are kind of beyond our control but yeah we give everyone a dedicated account manager we want to make sure that you feel listened to and heard and seen at the end of the phone um and we've got we support both uh you know UK US uh regional support um it's really a case of making sure that people we understand that this is a big part of people's business um you know if you're doing 10 million to Amazon or 50 million to Amazon we've got some people doing 100 million to Amazon every year they need systems that are reliable and they need them to be operationally uh on it all the time so we put a lot of investment into that and uh we'd be glad to support anyone whatever size they are no it's beautiful uh boutique we can relate as a a marketing agency we strive to be premium quality and sounds like you guys do too that was really amazing thanks for sharing about co-commerce my last question for you before I jump on to the future e-commerce what's what's your your case study or your a client that you guys took on that you're most proud of like what is some of the uh a big accomplishment that you could share in the form of a client that you helped tremendously wow I got so many that just popped into my head all at once well the headline we're going out with at the minute we took a um it was a um how do we call them they're a healthcare brand um and we chopped their shortage rate by 90% so uh we can't go into the exact figures of the before and after but their shortage rate went from you know 11% all the way down to 1.8%.
37:15
SPEAKER_01: So that was a huge reduction for them that translates into hundreds of thousands of dollars saving for them.
37:20
SPEAKER_01: And we had another company outdoor sports company we saw a reduction of 83% just because we were able to do the comparison before and after that's 12 months before 12 months after these were long-term case studies we really wanted to make sure we weren't just seeing a blip on the graph and jumping to some fake conclusion.
37:38
SPEAKER_01: And they internally came to us and said you know we we used to have people in finance that were doing this as a full-time job.
37:45
SPEAKER_01: Now they just have to go in and look at it you know once a week just occasionally pick up the bits that fell out the end of the machine.
37:51
SPEAKER_01: So that for us is a real win.
37:53
SPEAKER_01: And when people come back and say you know we're we're loving it we don't know how we did it before that's just so uh relatable to people.
38:00
SPEAKER_01: So big shortage claim rate we can come in there.
38:02
SPEAKER_01: We're not going to get it to zero.
38:04
SPEAKER_01: I'm not one of those people that likes to promise the world and you know sell you you'll never have any problems again.
38:09
SPEAKER_01: No, I'm not that kind of person.
38:11
SPEAKER_01: But we like to take a very process driven approach and do the best we can and hopefully save companies a lot of money.
38:17
SPEAKER_00: I hope you guys integrate pretty well with the team and that's some uh fantastic savings.
38:22
SPEAKER_00: So that's amazing.
38:23
SPEAKER_00: Well we have uh a tradition on this show as we wrap up we like to talk about the future of e-commerce and get your perspective on some of the latest digital trends and specifically how they're going to affect vendors in uh chargebacks and shortages.
38:36
SPEAKER_00: So if you can pull out your crystal ball uh Chris you with your extensive experience in helping vendors optimize with operations where do you see the biggest changes coming for e-commerce especially in how businesses manage logistics and supply chains to prevent shortages and chargebacks sure um well you might have heard that Amazon has recently launched their new pallet label requirements uh they actually launched them back in June and July this year of 24 and what they're asking people to do is assign specific boxes to specific pallets now that you could do this before it was optional but now it's become mandatory.
39:13
SPEAKER_01: So what Amazon is clearly leaning towards is they want to be able to receive goods at a much faster scale at a bigger uh you know bigger approach um but it's gonna be more work for the vendors on the ground so we're gonna see an increase in the technology requirement and the warehouse requirement on the vendor the burden's going to go up Amazon is trying to decrease the burden on their side they're trying to make that smoother and the overall aim is to inbound goods faster and Amazon's mantra you know happy customer everyone wins that they're always trying to be relentlessly customer century.
39:43
SPEAKER_01: On the logistics side I do think we're gonna see a rise of the 2D barcode um it's not really such a big thing yet on the vendor side FBA labels obviously have been you know 2D for a while you can do them as well um but mostly on the on the vendor side there's only kind of quite limited support for the the 2D labels so I think that could be a if you if I was looking three to five years out I think that's one of the things I would see on the rise.
40:08
SPEAKER_01: And we see we see little hints of that all over the place.
40:10
SPEAKER_01: Just the other day they asked for RFID enabled uh seals when going on the back of trucks.
40:16
SPEAKER_01: So just a small change.
40:17
SPEAKER_01: You know you used to be able to have just a crimped one and you would write the seal number down.
40:20
SPEAKER_01: Now they want it to be an RFID tag.
40:22
SPEAKER_01: You know I wouldn't be surprised if they end up putting RFID tags on pallets next.
40:26
SPEAKER_01: Probably putting them on cartons depends how cheap you can get your tags.
40:30
SPEAKER_01: But it's these kind of tools that I I can feel that Amazon is trying to make that as smooth as possible on their side.
40:35
SPEAKER_01: But what that's going to mean is the vendors have to be more technologically enhanced on their dispatch team because you can't just expect that you're gonna do things the way they've always been done and then Amazon's going to continue to receive your goods effectively.
40:47
SPEAKER_01: You're gonna need to go with the times and upscale and upscale with the technology required to do that as well.
40:52
SPEAKER_01: So I think that will be my call outs of what I see as the change on that logistics and supply chain front.
40:59
SPEAKER_00: That is a man there's a couple of gems in there too and for any of our vendors listening if you're still using pad and paper your days are numbered we're gonna have to level up your tech games.
41:07
SPEAKER_00: Chris that was super insightful.
41:09
SPEAKER_00: So hey thanks Chris for for sharing your valuable insights and expertise with us today.
41:14
SPEAKER_00: It's been a pleasure having you on the show before we wrap up could you let our listeners know where they may be able to find you and if there's anything else you'd like to share about coocommerce or any upcoming projects that you guys are working on.
41:27
SPEAKER_01: Sure you can reach us on our website that's cookommerce.com we're also on LinkedIn or on Twitter just at coocommerce and we'd be grateful to hear from you.
41:36
SPEAKER_01: As I mentioned earlier just a little shout out to Bellovic's listeners if you want us to come in and do an audit to look at your current shortages and chargebacks do the analysis for you we can do that absolutely free and we'll come back to you with a report saying here's the current lay of the land here's what we think is going wrong and here are our recommendations.
41:53
SPEAKER_01: And um yeah it's a kind of a no commitment we just want to come in and look at it.
41:57
SPEAKER_01: If you think shortages and chargebacks are something which is affecting you we'd be really glad to come in and have a look at it for you.
42:03
SPEAKER_00: Beautiful thanks Chris all our listeners know in the show notes we'll have all the links below and feel free to mention to Chris that you heard us on selling on giants or from Belovix and uh and he'll be sure to do that on it for you.
42:15
SPEAKER_00: Chris, thanks again for being on the show.
42:17
SPEAKER_00: We appreciate your time and your insights great to be able to speak to you soon.
42:23
SPEAKER_00: That wraps up today's conversation with Chris Ku on how vendors can prevent shortages and chargebacks.
42:30
SPEAKER_00: I hope you found some valuable insights to help optimize your vendor central operations.
42:36
SPEAKER_00: Make sure to like follow and subscribe whenever you're tuning in so you don't miss out on future episodes packed with actionable strategies for your e commerce business.
42:46
SPEAKER_00: Until next time stay classy people