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  #31  
Old 07-20-2022, 05:57 AM
sokyroadie sokyroadie is offline
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Thanks for the thoughtful and detailed reply Josh.
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  #32  
Old 07-20-2022, 06:06 AM
Blown Reek Blown Reek is offline
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Quote:
Originally Posted by joshatsilca View Post
I kid you not, people will literally buy a seat bag, put a 3 year old one, or even one of another brand in the package and return it, same with latex tubes, ti cages, etc.
Just wait until you hear about our esteemed colleagues on this forum who purchase entire thousands-dollar bikes from Costco and return those!
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  #33  
Old 07-20-2022, 06:22 AM
NHAero NHAero is offline
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Eye opener for sure, thanks for taking the time to post. Unbelievable

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Originally Posted by joshatsilca View Post
Sorry to be so slow getting back on this, I've been in Africa for a few weeks with zero communication to outside world.. amazing trip, but wow, the digging out of email and everything else has been pretty wild!!

Not sure if anybody else here is in a consumer products business, and if you are please chime in with your experience with both Amazon and consumer returns.

First, selling on Amazon. We tried to avoid Amazon for some years but the reality is that they will not even talk to you about fraud, counterfeit products, trademark infringement, etc unless you are a high level seller. Back in 2015 we had Chinese companies selling 'SILCA' pumps and such on the site using our brand and product names but with pseudo counterfeit merchandise. Amazon would not even discuss this with us and told us the only way to fight it was to be a seller in good standard. Once we became a seller in good standard, they killed all of those products and infringers. In the mean time we also noticed some interesting trends, mainly that small items sell way better on Amazon and let's be honest, who wants to buy an inner tube from us and pay shipping when you can add it to your order of toilet paper and other stuff.. and we get reports of what people have in their carts and the amount of product that gets sold into orders of other daily necessities is really crazy. My sales manager jokes that people hide their big ticket items using their PayPal 'slush fund' and hide their small item purchases in with the toilet paper and laundry detergent, and the data would suggest that both are absolutely true!

Let's start with how Amazon works. There is a ~$50 monthly fee and then they take 12-15% and the seller pays shipping for Prime items. Where this really works in the favor of a company is that Amazon practically ships things for free. So you have noticed that we charge $9.95 for shipping under $100 and free shipping over $100, this has become pretty standard in e-commerce. The reality is that at our size we average around $16 for a small package and $29 per pump to ship. So while it feels crazy as a consumer to pay us $10 to ship a $65 set of hex keys, the reality is that it costs us (from SILCA) $17 to ship those to most of the country and $19-20 to ship to west coast or Florida, so you hate paying $10 in shipping but we're still subsidizing that by another $7-9. Whereas with Amazon, we only pay around $3 to ship that same item because Amazon gets like 96% discounts with the major carriers and then contracts the last mile to other firms. So on average we lose $6-7 per shipment on small items and $16-30 per shipment on larger shipments when we ship from our webstore. While we may only lose $3-10 per shipment when Amazon ships it, so the shipping savings actually helps (sometimes dramatically) offset the Amazon 12-15% commission. So for us, Amazon is a great place to sell small items and 90% of what we sell there are items under $50.

So let's get to refunds, and this is where Amazon has in one sense, completely ruined the market and we're all paying the price, yet you also can't do anything to them as they have unprecedented market power and control. Amazon has created a culture of not only unlimited and unquestioned returns, but that has led to unprecedented fraudulent and other bad behaviors. 7 years ago when we started the new SILCA, we never once had a fraudulent return and our policies were as permissive as possible as we were so focused on the customer experience. Unfortunately, we are now in a place where roughly 20-25% of returns could be considered fraudulent or at best pushing the boundaries of acceptable behavior and we've had to put policies in place to try and mitigate this as it has become a massive expense.

So what do I mean by fraudulent or bad behavior? Nearly half of our Amazon returns (and remember we really only sell small items on Amazon..) will be either some other company's product in our packaging, or will be used, crashed, damaged, etc and are returned to Amazon using one of the 'defective' codes. So not a week goes by where somebody doesn't return a set of Ti bottle cages that have had some 10 year old crappy cage re-attached to our packaging, nearly every latex tube return has a punctured butyl tube in the box!.. and Amazon has refunded the customer already and provided them free return shipping! So the 'customer' has mostly gotten away with this, but where Amazon makes this palatable is that when we receive the fraudulent item back, we document the fraud and Amazon will make us whole, essentially they cover pretty much the entire cost of the fraud. They also tell us that they've instituted a '3 strikes' policy where they will kick people off of the service for doing this 3 times, but that's another story.

So what has this meant for SILCA? Well, starting a few years ago we also started receiving wrong, used, damaged items back within our 30 day return policy. I kid you not, people will literally buy a seat bag, put a 3 year old one, or even one of another brand in the package and return it, same with latex tubes, ti cages, etc. We've had people return chain wax having replaced the wax with other substances, chain lube is replaced with milk, t-shirts with unimaginable pit stains, people will buy a pump, take replacement parts from it and send it back with 4-5 parts missing!! As a result, we are unable to resell pretty much anything that is returned, AND we spend hours every week opening, inspecting, trying to determine why somebody may have sent a product back and what they may have done to it, some of it gets donated to a local junior team, but most of it has to be thrown out.

And this isn't just us, you might have noticed articles post holiday season this year about how companies like Kohl's and Target are drowning in return volume, much of it fraudulent. Companies like REI and LL Bean have also completely revamped their 'no questions asked' policies to be much more like what we have in place now.

Note, everything we are talking about here is NOT about Warranty service.. I sincerely believe we've built a phenomenal customer service team to handle real issues: Martha and Travis. These two get Christmas cards from customers who've had warranty problems or the like or whom they've helped trouble shoot a repair, and I think that most anybody who's had a warranty or real problem with a SILCA product has come out of that feeling pretty good. Our customer service software uses an AI to measure sentiment and tells me that our positive sentiment is 97+% for customer service interactions, that's more than 20% higher than average for sporting goods industry customer service where pretty much anybody contacting you is initially doing so because of a problem, and when there is a legitimate problem we do whatever it takes to make it right. Of course, there will always be some percentage of people for whom we can't make it right and in those cases it just isn't the right product/customer fit and we strive to be as fair as possible when both parties part ways. However, this whole topic is NOT about warranty items, it's about customers wanting to return items for unspecified reasons.

The policy of returning for store credit has been extremely successful in reducing fraudulent returns and also gives us some recourse if the return is fraudulent as it is easy to cancel store credit if the return is fraudulent, this policy has almost eliminated the most common form of this behavior where somebody buys a new version of an old, worn out thing, and then returns the old worn out thing, though we still have quite a few folks who think we must be so big that nobody will notice that tools are removed from the T-Ratchet kit or that Synergetic is not used motor oil

We are one of the few companies that has a warm body answering the phone when you call.. no phone tree, no 'press 4' for customer service, or hold music.. you call, we answer, and same with email, no bots, or pre-canned responses, you will get a real live person using their real name responding to your request. If you have a real issue, or real reason for returning an item, especially if you are a prior customer known to us (90+% of fraud comes from first or second time buyers, usually where the second purchase is identical to first occurring past the warranty period) then we are really more than happy to work with you. We had a known customer order a Richard Sachs pump last year who lost their job 2 weeks later.. they absolutely got a full refund! They also re-bought that pump a few months ago once they were comfortable in their new job. if you want to work with us, we're thrilled to work with you! Sadly, we also have to build in a little insulation to protect ourselves from those who are out to abuse the system.

I hope this helps shed a little light. I'll also say that this is not just us.. fraudulent orders and returns are a massive and growing problem in all forms of commerce in most all channels. Many of these same bad actors are also the folks railing against companies online in reviews or forums when the companies take action against them. We have an online retailer where a customer returned a very high end bike with many of the components replaced with lesser variants.. when they refused to refund the full value of the original purchase the fraudster went after them through the credit card company, the BBB, online in forums, in comment sections of reviews of the bike and brand in question, calling out the retailer by name in product reviews, etc..
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  #34  
Old 07-20-2022, 06:51 AM
joshatsilca joshatsilca is offline
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Quote:
Originally Posted by ryker View Post
One reason for issuing refunds in the form of gift cards is increasing credit card fees. A merchant pays 3-5% for the privilege of accepting credit cards and these fees are not refunded to the merchant when a customer returns an item. If you are a merchant not subject to this policy, enjoy it while it lasts.
In my 10k word response I neglected to mention this, not to mention some of the flat fees that some card types can charge..this is another advantage of the Amazon ecosystem, the CC fee is in their 12-15% cut AND they don't penalize the seller those fees if there is a return (because they aren't subject to those fees in the first place). It is notable that very large companies do not pay these fees but small-medium business pretty much universally do. So, if you buy something with your Platinum AMEX for $100 the retailer gets $95. If you return it, you get $100, and the retailer actually has to contribute another $5 so that AMEX retains it's original fee.. some branded cards even charge additional fees for return 'processing' so could be as much as an additional 2%.

Not related to our original topic but this gets way worse for fraudulent purchases.. stolen CC# type stuff. The current trend/scheme in CC fraud is that they steal the card info and choose an shell delivery address in the card zip code to use as a shipping base. Then buy a bunch of stuff, send it to the address and steal it from the porch when it arrives. The person who lives there often has no idea the stuff is missing as they never ordered it (and often they've scoped our the home of an individual who travels or works long hours, etc). The fraud detection from the CC company is reported as low as the shipping zip matches billing zip (it really is that primitive) and it generally takes about a month for the card holder to notice and then call and cancel and by that time the scheme has moved on. The CC companies are impossible here as they won't even verify addresses if you call them.. and why would they, the make more in fees for fraud than they do in legit transactions! (this happens to us about 4-5 per month at various price points)

So: scammer buys an ultimate pump for $500 on stolen card. We get $475 after CC fees and fully subsidize the $30-50 shipping for a 30" long, 8lb item. Item delivers, photo of delivery taken by FedEx driver on porch. Then the item is stolen..

3 weeks later the original card holder realizes the fraud and reports. They get $500 from the CC company. The CC company contacts us to see if we want to dispute this claim. We have the receipt showing low risk of fraud (as predicted by the CC company!!), the shipping receipt with tracking, and the proof of delivery (with photo) from the driver and enter it into their dispute system. They then almost immediately deny this because the address is NOT the address of the card holder, nor is it associated with any prior purchasing behavior (which they knew all along but won't verify even if we call them).

But here's where it gets good: they then bill us for the original CC fee of $25 that they just had to refund to the CC holder, AND they bill another 2% for 'claims processing of fraudulent order' AND they bill another $25 straight fee for filing a rejected dispute.

So, in the end we (or any other e-commerce retailer, and everybody is struggling here) have:
1. Lost the entire value of the original item
2. Lost the subsidized shipping and packaging/labor expenses (boxes, tape, labor, etc)
3. Had to cover the original 5% CC fee
4. Had to cover the 2% claims fee
5. Had to cover the $25 lost dispute fee

So why doesn't the CC company care to try and help companies end this type of fraud? (and I've spent hours on the phone arguing with them over this when trying to determine if an order is real or not.. first time customer buys 2 Ultimate pumps, I'd kill to know if the shipping address matches the billing address of the card as the companies only tell us if the zip code matches).

In this case of this Ultimate pump fraud (had 1 last month) the CC company will make $60 in fees from the sale being fraudulent compared to $25 from it being legit, while looking like a hero to the CC holder.. and internally they were able to know this was in fact fraud in less than a second when the computer verified that the ship to address was not related or known to the card holder's previous purchasing behavior.

All the while, the company (us in this case) has lost all of the original revenue from the sale, paid $60 in fees, lost the entire value of the product plus shipping materials, labor and the shipping expenses. Spent an hour collecting all of the order history, tracking, delivery confirmation info, photo, etc and painstakingly compiling it into the automated form provided by the CC company and so on. We will have to sell 2 more ultimate pumps just to break even on the lost value and expenses from this 1 fraudulent sale.

Leverage of these fees and penalties has sadly become another tool used by the fraudulent returners of items.. in the above I mentioned the bike returned with replaced components.. in addition to the retailer losing the value of those items plus the original 5% CC fee, they have to chose to risk losing the entire value of the sale plus additional fees in the dispute process, and the fraudsters know this. So if the retailer won't refund the full original amount or tries to dispute, then the fraudster goes to the card company to cancel the whole transaction, original retailer gets hammered with fees AND has to provide proof of 'not fraud' which is nearly impossible unless you have videos of you building, packing and shipping the bike as well as those showing you unboxing what came back (I know at least 2 big retailers who are now doing this to give you an idea of how big the problem is..)
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  #35  
Old 07-20-2022, 07:33 AM
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superbowlpats superbowlpats is offline
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Thanks Josh! eyeopening for sure.
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  #36  
Old 07-20-2022, 07:39 AM
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Black Dog Black Dog is offline
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Wow. That is some amazing insight that has been provided. I am shocked at the lack of regulation in the credit card industry around these issues and in regards to how merchants are coerced.
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  #37  
Old 07-20-2022, 07:58 AM
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AngryScientist AngryScientist is offline
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Wow!

Thanks so much to Josh for typing all this up this morning. I have learned a lot and had no idea such things were taking place regularly.

Makes me realize just how much the deck is stacked against small to medium businesses. It's so sad that fraud and bad actors are so common and an accepted part of doing business for places like amazon and the CC companies. Crazy really.

Who knew there were that many scumbags on the planet.
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  #38  
Old 07-20-2022, 08:02 AM
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Quote:
Originally Posted by AngryScientist View Post
Wow!

Thanks so much to Josh for typing all this up this morning. I have learned a lot and had no idea such things were taking place regularly.

Makes me realize just how much the deck is stacked against small to medium businesses. It's so sad that fraud and bad actors are so common and an accepted part of doing business for places like amazon and the CC companies. Crazy really.

Who knew there were that many scumbags on the planet.
Are you talking about Amazon, the CC companies, the people doing fraudulent returns or all of the above?
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  #39  
Old 07-20-2022, 08:09 AM
merckx merckx is offline
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I have been aware of these issues with Amazon. I don't purchase anything from them, but my wife.....
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  #40  
Old 07-20-2022, 08:13 AM
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AngryScientist AngryScientist is offline
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Quote:
Originally Posted by Black Dog View Post
Are you talking about Amazon, the CC companies, the people doing fraudulent returns or all of the above?
You know, that's a good question.

Generally speaking, I think most people who work for a living just want to do a good job, make a decent paycheck and live a nice life. The people who are showing up for work, doing their jobs and following the rules are certainly not the scumbags of the world.

It gets a little trickier at the upper management level. By the time you get up there you're caught up in the corporate machine and driven my profit profit profit and it becomes harder to do the ethical thing when the choice comes; so when it comes to dictating policies on fraud and returns for small businesses, and essentially letting crooks get away with theft, that's a blurry line on the scumbag meter. Those guys are just trying to make their bosses and stakeholders happy and keep making a paycheck.

The real scumbags are the ones stealing packages off porches, returning chain lube containers with milk in them and otherwise taking advantage of an imperfect system.

The other question is who the hell does this? What kind of a sick sociopath actually orders a bottle of chain lube, and processes a return with an empty bottle? Does someone really need that super secret lube that bad to do something like that? I suppose some people can hide their crazy, but I cant think of anyone I've ever met who might fall into that category, but maybe i'm being naive
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  #41  
Old 07-20-2022, 08:25 AM
sg8357 sg8357 is offline
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Josh's post is too good to lose.

Anyone know someone at Cycling Independent ?


Now we have Amazon Trolls to go with our internet Trolls.

Last edited by sg8357; 07-20-2022 at 08:33 AM.
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  #42  
Old 07-20-2022, 09:11 AM
PQJ PQJ is offline
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Originally Posted by sg8357 View Post
Josh's post is too good to lose.
Every time he posts l like the brand a little bit more. Call me a fanboy. Whatevs. Silca rocks.
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  #43  
Old 07-20-2022, 09:39 AM
El Chaba El Chaba is offline
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It’s easy to go deep in the weeds on this stuff for some it would seem. I have only ordered pump parts from Silca, and they are easy people with whom to do business…I really don’t care what the policy is, I am sure if there is an issue that they will make a fair attempt at putting things right.
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  #44  
Old 07-20-2022, 09:43 AM
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awesome insight!

So, if i read Josh's post correctly, they actually like being an Amazon retailer? I say that as it seems to financially work out better in the end for them, I think?

Maybe I missed something though..

I can get what Josh is saying about scumbags bringing back severely used items.. when I worked part time at the Performance store in San Diego, I had a guy try and return a set of tires that were clearly used for a several hundred miles (prob 1000+), maybe had 30% use left on them.. I asked my manager what I should do as the complaint was "they didn't work for me".. the manager said take them back and give a full refund. I did and then asked my manager why we would do such a thing? His response was that that set of tires cost the company less than the possible loss of customers/reputation if that customer went online/etc and badmouthed the store and cost future sales. While frustrating, I can understand his point.. I can also see and support 100% Silca's store credit return policy.. just amazing what folks will do to try and game the system..
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  #45  
Old 07-20-2022, 10:51 AM
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Pegoready Pegoready is online now
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Thanks for the reply Josh.

SUPER interesting look into what a small company goes through and how the Amazonization of the buying process affects businesses.

They force you into bed with them by not taking action with counterfeiters until you sell with them. But then, they seem to give you a lot of benefits like easily making you whole on fraud. What an insane system of waste and deceit.

Your reply should be widely distributed as a case study, and would turn into a cool article for a site like Cycling Tips.
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