How Independent 3rd Party Resellers on Sites Like Amazon’s Marketplace Are Putting Your Brand’s Equity at Risk

Background Information:

 

Are you concerned about how your items are showing up on sites like Amazon Marketplace and being resold for less than what it costs you to produce the item in the first place? Two of the leading manufacturers of infant formula in the United States prevent this from happening by being active in managing their returns from retailers by utilizing two of our services (Returns and Financial Management Services) to secure their respective reverse supply chains.

 

About Our Clients:

 

Both companies referenced in this study are global leaders in the development, manufacturing and marketing of products that deliver nutritional benefits and care to infants and children globally.  With hundreds of items in distribution, both companies rely heavily on the trust of millions of parents and healthcare providers to perpetuate the good name and quality that their brands have come to represent for decades.

 

Our Clients’ Challenge:

 

Due to the extreme sensitive nature of their items, it is paramount that their respective reverse supply chains provide the security needed to prevent their items from leaking into the secondary and tertiary markets.  As a manufacturer, when you are transacting with retailers, certain options exist with regards to how you will handle the aspect of returns.  You may choose to put a retailer on a “Swell” or “ARP” (adjustable rate program) returns policy that pays the retailer an allowance up front in place of accepting returns on the back end.  With this option, you might also direct the retailer to donate or destroy your product to prevent something undesirable from happening with your product beyond that point.

Another option is to accept returns after issuing a credit for the product in question.  This option also requires that you cover some aspect of the cost to the retailer for the processing and handling the removal of your product from the supply chain.

Unfortunately, the consumer goods manufacturer – retailer reverse supply chain often leaves manufacturers with more questions than answers when it comes to ensuring the exact and final disposition of their items.

When you are a manufacturer of infant formula that depends upon the trust of parents and healthcare providers the world over, you can’t afford to leave your reverse logistics processing open ended and unsecured.  You require the confirmation that your product was indeed destroyed per your instructions to prevent your product from showing up in some corner bodega six months expired, or at a flea market with the safety seal compromised or at an illicit drug lab where the powder is used to cut illegal street drugs.  Manufacturers who care about their brand’s integrity do not need more questions than answers when it comes to how their product is being handled in the reverse supply chain.

 

How DRS Returns and Financial Management Services Benefits These Two Clients:

 

Due to the risks associated with “leaving their returns to chance”, both manufacturers choose to be extremely engaged and proactive with the management of their respective reverse supply chains.  By utilizing DRS Returns Management Services, they have visibility to the exact quantities of their returns down to the item – retailer combination.  100% of this product is then destroyed by DRS.

In conjunction with this physical processing, DRS will also process and audit for accuracy the claims submitted by the retailers that are associated with the products being returned by way of our Financial Management Services.  DRS will then combine the data from each side of the transaction (physical processing and invoice processing and auditing) to validate the quantities received to the quantities claimed.  This enables the manufacturer to only pay on the validated amount.  The benefits from this include:

  • Only having to pay for accurate, actual amounts void of any discrepancies (quantities, pricing, fees, etc.)
  • Changing the behavior of the retailer and their returns processors that will stop some of the practices that lead to extra expense associated with unmanaged reverse logistics (i.e. using returns as an inventory correction
  • Eliminating the likelihood of post audits
  • Securing the reverse logistics process, keeping your items out of the secondary and tertiary markets AND OUT OF THE HANDS OF 3rd PARTY RESELLERS ON SITES LIKE AMAZON MARKETPLACE AND eBay

 

The Results Speak for Themselves:

 

Check Amazon Marketplace or eBay for either of these two infant formula manufacturers’ products, you will be hard pressed to find any being sold through unauthorized resellers.  There is, however a third infant formula manufacturer who’s approach to returns management is different.  They decided a few years ago to change their returns policy to an ARP program.  To refresh your memory, an ARP is a “no returns” allowance based program that allows retailers to control the disposition of your product.  Search Amazon Marketplace or eBay for this manufacturer’s product and it is prominently displayed at costs well below what it retails for in the primary market.

Is there a correlation here?  Yes, there is.  Controlling your reverse supply chain, specifically the disposition of your items will limit the available supply of your items being resold on line without your permission.  Not securing your reverse supply chain and determining the ultimate disposition for your items is one of the primary sources behind your product getting on line in this highly problematic way.

You can protect your brands’ equity, mitigate this specific online risk and protect your company’s bottom line all by choosing to be proactive in the managing of your reverse supply chain.

 

About DRS Product Returns:

 

Celebrating 26 years in 2017, DRS is a leading provider of Product Return, Remarketing, Financial and Supply Chain based Reverse Logistics solutions to the CPG industry.  We provide our clients with the tools and strategies to secure their reverse supply chains to prevent any unneeded loss of profitability and to mitigate all risk associated with the return of your products.

 

About the Author:

 

Jim Schumacher joined DRS in 2012.  As part of the executive management team, Jim currently leads a team of industry experts who are passionate about helping their clients to save millions of dollars each year through more effective oversight of their unsaleables management programs.