Profit Maximization Strategies with Hai Mag

Oleg: Hi everyone, welcome to Navigators. Today, we are talking about profit maximization strategies with Hai. Welcome; good to have you here.

Hai: Thanks for having me, Oleg. Great to meet you again. I'm very excited to talk about how we can maximize profits on Amazon, Walmart, and other marketplaces.

Oleg: Absolutely. Before we start, I would like you to introduce yourself to the people who don't know you yet, about your experience in e-commerce and what inspired you to create Eva. By the way, my daughter's name is Eva, so every time I see you, it's an interesting connection.

Hai: Yeah, you will never forget for sure. I was a corporate officer, a vice president of Oracle, till five years back. But one of the things that I did as a side investment was investing into my current co-founder's Amazon business. That was like a 10-year journey, and he was able to grow the business to eight figures, an Amazon private label business, which was really great. At some point, we came together and started talking about what really made us successful. What was the essence of the success on Amazon? We decided that it was all about crunching the data in the right way, understanding all the data points, and creating algorithms which can help to find the next best action, whether it's replenishment of inventory, a pricing decision, or bid optimization. That was the idea of creating Eva as the mother of profit maximization, using the data and delivering the next best actions to the customers. That's almost like a four-year journey now, and I'm the CEO and co-founder.

Oleg: Okay, nice, very interesting. I also share the same background in computer science. It's always nice to talk to like-minded individuals. I'm super curious to learn all these profit maximization strategies because Amazon, five years ago, used to be a wow place, and now it's getting tougher. We hear a lot from our customers that they feed the Amazon algorithm, but they want to increase profit year over year, and it's getting harder. I'd really like to learn what you have to say about it.

Hai: Absolutely. I'm going to talk about totally different types of things, not just related to data, but we come to that point by also looking at the data. As we had our own business, one of the big things we discovered is how we can make money out of returns. Let me maybe start with that. We had a lot of variations, like selling a t-shirt with sizes, colors. A lot of sellers buy, especially on Prime Day, two of your variations, like large and x-large. It's easy for them to return. They try the large version, it fits fine, and they just return the x-large. It goes back to Amazon, and what data tells us is that the majority of the time, Amazon will dispose of your returns. With one of the brands, we discovered that once we send all the items to our warehouse, 70% of the returns can be sent back to Amazon in new condition. If you let Amazon deal with your returns, a lot of them will be disposed of. One of the things we did, and Eva is not only a software platform but also provides full-service account management, is we have three very large warehouses, one of them in Houston, dedicated to returns management. We inspect all the items and make sure that the ones we can return back in new condition, we return back. There's also like-new condition, which, depending on the brand's preference, might also be sold on Amazon. The rest we use reverse logistics to still make money. If as an Amazon Seller, you can effectively handle your returns, and depending on the product, you can get like, let's say, a 5% return, and you can get 3% of them back to Amazon or back to reverse logistics and still make profits out of them, it can be a good number in terms of profits.

Oleg: Yeah, I absolutely agree. Amazon customers get spoiled year over year. All that you describe, like all the returns, let's try two things, and they also buy a few items from different brands, check it, and send back what they don't like. We even have some complaints like, "Yeah, I get a return, but it's not my product; it's my competitor's product." And yeah, definitely many brands we work with neglect this because it's a lot of hassle and it's complicated.

Hai: So, what's next? We saved, let's say, maybe 5% profit. That's always good to start with. The next thing, really, by the way, associated with what you said, we started to see that there is fraud in the returns too. Now, it depends on the product, very interesting, depends on the category. For example, beauty, apparel, we see more fraud. Like, for example, the customer returns something else, even sometimes a competitor product, or buys a new shoe, sends an old shoe. There is also another thing: a lot of times, these customers forget the return, let's say the timeframe is 30 days or 45 days, and they return after 46 days. Amazon will still compensate them, but you need to open a case as an Amazon Seller to claim the reimbursement for that specific return because it's not done during the timeframe where the consumer should return it. Now, it sounds easy, but if you are an Amazon Seller selling like a million dollars and you're selling thousands of this stuff every month, it will be extremely hard to navigate every single order to understand what's going on with each order.

Now, this comes into the reimbursements. Amazon is doing a fair number of mistakes, which is normal. On the seller side, it's about inventory-related issues most of the time. On the vendor side, it's more related to invoices and payments. Up to 3 to 4% of the revenue can be claimed back from Amazon because of these customer return cases, damage, warehouses, inbound shipments, etc. This is called the Amazon reimbursement service. What we are trying to do as Eva is we are trying to lower down the cost of delivering a service like that. For example, with us, we take a commission of 13% to get the reimbursements back. If you think about a seller doing a million dollars a year and recovering thirty thousand dollars out of it, that's all great. To recover that thirty thousand dollars, then the seller can pay roughly four thousand dollars instead of eight thousand dollars. So, it's a double saving possibility here.

Oleg: Okay, awesome. You're talking about super important stuff that really stacks up month by month, day by day. Usually, other people talk more about sexy optimization, let's do some tricks and PPC, whatever. Okay, I like it, and I totally agree with you. I had this call with a very big brand a few weeks ago, and they mentioned like, "Yeah, we get this reimbursement service, it was nice, but when we get the how much they charge for it," and actually, this is more or less, yeah, it's not rocket science. I believe eighty percent of the cases, it's very just, you know, you just repeat the appeals and do the tickets and everything.

Hai: Absolutely. So, like to pay 25% for a service like that is absolutely ridiculous. That was one of the reasons we thought, why do people try to charge such an amount of money? As you said, most of it is now a commodity service, but it takes a lot of time. I wouldn't do it on my own, give it to somebody, but with a reasonable commission. It makes sense, right? You recover your reimbursements, and you pay the minimum amount of money for that.

By the way, another option if the sellers want, "Hey, but what if this, let's say, the Eva service is not able to get 5% of the reimbursements?" My recommendation as an Amazon Seller, what I would do, get two reimbursement companies. Get the first one, like get Eva, to do the first hours, 90 days later, get another one to do the secondary. So, nobody complains strategy, right? So, everybody wins. So that will be reimbursements, a good amount of money that can come back to your account in a painless way, without dealing with VAs or anything. Because I know that some of the sellers are like, "Okay, I can even save more!"

Hai: AI is now a commodity service, but it takes a lot of time. I wouldn't do it on my own, give it to somebody but with a reasonable commission. It makes sense, right? You recover your reimbursements. Another option for sellers is to use two reimbursement companies. For example, get Eva to do the first, then 90 days later, get another one for secondary checks. This strategy ensures everyone wins. Reimbursements can bring a good amount of money back to your account in a painless way, without dealing with VAs or anything. I always tell Amazon sellers it's not just about growth; it's about profitable growth. Bringing the traffic is the job of the advertisers, which is super important. The problem then becomes conversion. Can you convert? One thing I see with conversion is the question of the price. Once the advertising does its job and the consumer is on your listing, it's about the listing, the price, the reviews, and ratings. We recommend using a dynamic pricing or, for private labels and brands, a dynamic promotion system rather than a static price. This involves adjusting promotions based on demand, inventory levels, and category conversions. You can do this manually or use an algorithm like Eva for dynamic discounting.

Oleg: Price management is one of our know-hows. We use it a lot, and sometimes it's not easy to convince brands, especially those with a lot of presence outside of Amazon. You need to be dynamic in pricing; it's one of the fastest tools to manage conversion.

Hai: Absolutely. If your conversion is 10 and you can make it 11, you can reduce the ACoS by ten percent. The numbers are significant. Every seller should check their conversion rate against the category average. If there's a discrepancy, there's something wrong. The problem might be with the conversion, not with advertising. Price is typically the issue. E-commerce is like a stock exchange; prices are changing every day with shipments, logistics, labor, and inflation. Maximizing profit by using pricing changes will impact a lot, including the success of advertising.

Oleg: I agree. Our time is coming to an end, but before we close, could you share any insights about AI and how you use it for your business or for your Eva customers?

Hai: AI is like replacing your mediocre employees. It's not replacing the outliers, the most creative guys. AI will never suggest starting a company because it's risky; it would tell us to keep our jobs and try to be one percent better the next day. AI only knows the context you give to it. The more you feed it, the better you get. I see the use cases in pricing, inventory management, and advertising. With tools like ChatGPT, listing creation, optimization, and content creation for blogs and
Amazon posts are becoming almost like a piece of cake. In a year, I'm not sure what a content manager will do other than managing ChatGPT or similar tools. The future is amazing in that regard.

Oleg: Thank you very much. It was a pleasure talking to you.

Hai: Thank you, Oleg. Thanks for having me.