When selling on Amazon, one of the most important metrics that you should keep an eye on is your Order Defect Rate. This metric will help you clarify whether your customer-service performance is up to standard.
Today, we will show you how this metric can help you improve your customer service skills and why you should stay on top of your game to get a good evaluation from Amazon.
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What is Order Defect Rate on Amazon?
As mentioned previously, the Order Defect Rate (ODR) is a performance metric that Amazon uses to rate the seller’s customer service standards.
Here’s how Amazon evaluates sellers:
They divide the number of overall orders received within a certain time period by the number negative orders (people who have received a defective product).
This is why the Order Defect Rate is so important! Ensuring that customers have the best service possible on their platform is one of Amazon’s priorities.
Amazon has high standards set for its sellers that you need to keep up if you are to sell there. Providing high-tier customer service for Amazon users is crucial.
Related content: How To Respond To Negative Reviews On Amazon
Order Defect Rate Calculation on Amazon
An order has a “defect” if you can spot one or more of the following negative signals:
Negative feedback Rate
Negative buyer feedback: This is the ratio of the number of negative feedbacks to the total number of feedback on your products.
Amazon calculates a seller’s negative feedback rate (NFR) as follows:
Overall number of orders received during a certain time period in relation to the number of negative orders.
Factors affecting NFR:
- If the exact product a customer wanted is not what they received
- The product is not in good conditions.
- There’s a delay in the delivery of the products
Neutral and Positive Feedback
Any customer feedback that’s 3 stars or less will affect your ODR; this is known as “neutral”
When customers rate the transaction with 4 or 5 stars, you can relax since you’ve received positive feedback! Keep in mind that your seller’s performance represents the percentage of positive ratings from the past 12 months.
A to Z Guarantee Claim
Amazon monitors all the claims made by the buyers on their products.
When a customer submits a complain for not receiving their product on time, they have the right to receive a refund by Amazon under A-to-Z guarantee claim.
The seller’s reputation takes a hit when this happens, and automatically, Amazon flags these as defective. Therefore, the defect rate goes up.
All claims, regardless of status and resolution, fall within this metric.
An A to Z Guarantee claim takes place when:
- The customer didn’t receive the package within the maximum estimated delivery date.
- The product is not as advertised and the customer decides to return it.
- You, as the seller, will not consider a customer’s request for a refund.
Chargeback Rate for Credit Card
Chargebacks occur when the buyer disputes the charges that took effect via credit card.
Basically, a chargeback is when a credit card user complains to their bank about a fraudulent transaction made with that card.
The bank will check on the transaction. If the details given by the user look correct, the bank will refund the cardholder.
Usually, this is the full amount of money spent on the purchase. They will also charge the merchant a fee. Some scam artists posing as customers do this on purpose. They file chargebacks as a way to get products for free.
In this case, sellers have to decide whether they will issue a refund or go through the process.
Why do chargebacks occur?
Chargebacks can happen because of fraudulent claims or because of unsatisfactory service claims. Fraudulent claims means that the buyer claims that they never placed the order. This can happen, for example, if their credit card was stolen. Amazon protects the seller against fraudulent chargebacks.
Service chargebacks are issued when unacceptable service complaints come in. These can involve receiving damaged goods, not receiving a refund for returned goods, or never receiving an order.
The credit card company settles these charges. Amazon determines the chargeback rate by dividing the amount of chargebacks by total the number of orders placed over a specified amount of time.
The amount of refund orders that a seller gives is on Amazon’s records.
Here’s an example…
One way a chargeback can be initiated is when a customer informs their bank of a transaction for which they have been wrongfully charged. After some verification, the bank refunds the money along with added merchant fee.
The responsibility falls on Amazon sellers to determine whether the case is valid. Otherwise, they’ll have to give their defense as to why they won’t issue it.
If the seller takes no action, the ODR will take a hit.
Measuring ODR Metrics
Each defective order only counts as a single order even if multiple defects exists on that particular order.
Because the Order Defect Rate aims to assist sellers in clearing up and finding solutions to problem areas in their customer service, all claims, including withdrawn claims or claims that were not granted, are calculated within the ODR.
If there is a problem that merits a customer’s complaint, this serves as an indication from buyer to seller that something is in need of evaluation and fixing for following transactions.
Rating reports won’t show up instantly since calculating normally takes Amazon about a month to a month-and-a-half due to the fact that registering complaints, chargebacks and feedback may take a few weeks from the order and also because orders may not be fully completed overnight (i.e. from the buying of the product to when customers receive it and leave their review).
This way, the seller’s performance level will be more accurate.
Getting one bad rating doesn’t necessarily harm a seller’s account. However, seller privileges may be revoked if it shows that your performance rating is consistently poor.
In the event that privileges aren’t revoked, a seller’s rating is still on each product listing meaning that a poor rating will not look good on the seller.
These are the ideal numbers you’ll want to uphold:
- Maintain your Order Defect Ratio below 1%.
- Keep late shipment rates below 4%.
- Pre-fulfillment cancel rates should stay below 2.5%.
Amazon will suspend or close your store if you reaching these number or go higher.
The Importance of Improving Your ODR on Amazon
Amazon considers Order Defect Rate the most when deciding on whether a seller should be promoted or demoted. Additionally, sellers with the lowest order defect rate have a higher likelihood to win the buy box.
Your Rankings on Amazon
As mentioned before, it’s crucial that you keep your order defect rate below 1%.
Otherwise you’ll end up losing the buy box (products listed with Fulfillment by Amazon are exempted), but you’ll lose all the products you are responsible for shipping.
All the payments you are holding will be transformed into refunds for the customers.
In the worst case scenario your account will be suspended and you will lose your status as a seller on Amazon.
Amazon gives sellers a timeframe of 17 days to fix the problem areas affecting your ODR. You must come up with and respond with a plan of action.
Identify the areas where customers are not satisfied with their experience.
Review negative feedback and A-to-z claims and try to evaluate if problematic patterns exist within them. Within the reviews and feedback you may find issues that are similar. This allows you to zoom into what is causing the problem and make a plan accordingly.
The way your business is viewed by your target market is something you need to be vigilantly monitoring.
A bad customer experience and subsequent high ODR can be avoided by identifying problems early and fixing those issues as soon as possible.
A subpar experience can lead to a subpar rating that other customers will see. This leads to less customers feeling comfortable buying your products. This is why it is so important to keep your audience in mind.
How to Improve Your Order Defect Rate on Amazon
It’s not enough to simply be aware of ODR but a seller must invest time and effort towards Amazon Order Defect Rate Improvement.
Below are four ways you can improve your ODR:
Respond to all negative feedback and A-to-z claims
We know that both negative feedback and A-to-z claims impact your order defect rating greatly. Responding to these claims is one step you can take to bring your ODR down.
Finding out the reason the claim was filed is the first order of business.
Whether it be cancellations, late shipments, miscommunication, expectations that weren’t met, etc., understanding the issues that each customer had causing them to leave a negative review or make a claim is of utmost importance. Providing assistance or a solution to the issue at hand may even change their feedback.
The busyness of the holiday season poses risks even for the most reliable of Amazon businesses whose order defect rates could go up because of late shipments. Many sellers have found themselves suspended in January due to poor performance in December.
Amazon’s holiday mode can assist in preventing this. This mode allows sellers custom quantities for the holiday months so they don’t oversell or get overwhelmed with orders.
Sellers may also choose to pull their listings as the holiday season approaches. A designated cutoff date can be set where you can ship the product to customers by the holidays. Products can then be set as invisible after this date until sellers decide to make them visible again after the holiday season is over.
Some sellers may not be too keen on pulling their products, however this is a wise long-term decision if they cannot accommodate the holiday rush. Your account will be safer this way with the risks of being removed from the platform as a seller mitigated.
Provide high-quality products
The better the quality of an item, the less likely the item is to have a defect. When selling on Amazon the mindset should be quality, not quantity.
Review your listings
Another way to improve ODR is to review your listings. Ensure that all the necessary information is there and being provided for customers. Ensure that all the given info (pictures, sizes, descriptions, etc.) is true. An honest seller wouldn’t want to trick their customers knowingly with falsified information or unknowingly with confusing and unclear descriptions.
Honesty will be your best policy. It breeds trust between you as the seller and the consumer. Satisfied consumers don’t tend to leave negative feedback or find the need to file A-to-z claims.
The process of monitoring your listings is a continuous one that doesn’t stop the first time you find a problem area and decide to fix it. There will always be more ways that you can improve your performance as a seller. You can invest in better packaging, shipping times, and other aspects that will assist in bringing down your ODR in the long-term.
Provide perfect packaging
Earlier, we mentioned how improving the quality of your packaging material could benefit your business.
Partnered with that is also the way the products are packed, since products that arrive damaged are mostly caused improper packaging. You can refer to the Amazon Product Packaging Guidelines for assistance in this area. By doing so this is directly improving your Order Defect Rate.
Ship On Time
Shipping and delivering your products on time is probably the most important tip for ODR improvement.
Reduce the handling time for products and get it to customers’ hands as soon as possible. Getting it to them even before the estimated time is a plus.
Alternatively, if you choose Fulfilment by Amazon (FBA), that shifts the responsibility of the delivery and handling of your products to Amazon. This makes the risks of higher ODR due to mismanaged shipping and delivery virtually nonexistent.
Where can I keep track of my ODR?
You can navigate to your Customer Metrics page where you can create a report with all the statistics that you need. Each report includes your Order Defect Rate.
Your Order Defect Rate is something that needs continuous monitoring and improvement if you want to be a successful seller on Amazon.
A good seller doesn’t solely look at how much product is being sold but also ensures the quality of products and the customer service that they provide.
Consider the big three things Amazon looks at: negative feedback, A-to-z claims, and chargebacks, and see what you can do to remedy the issues present that cause these.
The amount of effort and care you put will be a big factor in determining how high or low your Order Defect Rate goes, and ultimately the longevity and success of your business on Amazon.