Meeting Title: Uttam <> Ben - Discounts-Warranties Date: 2024-02-26 Meeting participants: Ben Iphone, Uttam Kumaran


WEBVTT

1 00:00:08.034 00:00:13.673 Uttam Kumaran: couple of questions that I had was one, what’s the overall impact of warranties? Second.

2 00:00:14.414 00:00:23.004 Uttam Kumaran: question is like which products are having issues with warranties. Third is, how are we measuring warranties right now?

3 00:00:23.074 00:00:26.124 Uttam Kumaran: So basically, what we looked at was

4 00:00:26.144 00:00:37.274 ben iphone : warranty when in our understanding of the someone requests a warranty and they get a replacement. So basically, the cost of the company is the shipping and the cost of goods sold. So not exactly

5 00:00:37.354 00:00:48.753 Uttam Kumaran: the sale price. So basically, we noticed that there’s about like since January first 2022. There’s about like 231 K. Of

6 00:00:48.824 00:00:55.133 Uttam Kumaran: cost of goods sold. related related to replacements for warranties for shopify.

7 00:00:55.334 00:00:56.214 ben iphone : Yeah.

8 00:00:56.504 00:01:05.953 Uttam Kumaran: And this is like about, you know, 2 of the total. And then what we found was basically, there were a couple of skews that were

9 00:01:06.034 00:01:15.883 Uttam Kumaran: the highest accounting. So the 1, 5,200, 300, that their highest claim skews by quantity. But the claim rate is low.

10 00:01:16.064 00:01:21.113 ben iphone : We sell a lot, but the percent of people who have an issue is.

11 00:01:21.124 00:01:32.794 Uttam Kumaran: yeah. The other things that we found is that the the cfts in particular the Cft 32 is the one that has

12 00:01:32.834 00:01:35.243 Uttam Kumaran: like, nearly like a 10%.

13 00:01:35.824 00:01:43.783 ben iphone : It’s yeah. I’ve been talking about this one for years. And Dan kept me. I basically, I said the issue was.

14 00:01:43.874 00:01:47.614 ben iphone : people who are buying it don’t have real pools.

15 00:01:47.784 00:01:52.664 ben iphone : He thought. I was like making a joke calling, or I wasn’t.

16 00:01:52.924 00:02:18.363 ben iphone : and I didn’t have data to back it up, and I knew what was happening was people that have, like Kitty pools like not real pools from Home Depot. The issue is, these are heaters. So they’re saying so, they’re basically saying that they’re buying from Costco like a $200 piece of plastic.

17 00:02:19.124 00:02:25.703 ben iphone : And they’re in. And they’re like, wow! It’s like actually a passable pool. But, like you know what I could, I would like for it to be a little bit warmer.

18 00:02:26.754 00:02:28.844 ben iphone : So they they go and find

19 00:02:29.504 00:02:50.504 ben iphone : a pool gray punk. And I’ve I’ve been. He was like, well, you need to back it up with data. And I was like dude like, I see pictures like I was like, these are not real pools. I was like, we can’t sell these to people like it’s, you know, we’re gonna we’re gonna melt. It’s gonna melt their whole shit like I was like, we can’t do it. Anyway. This is one that I’ve been saying for years to just cut.

20 00:02:50.654 00:02:59.324 Uttam Kumaran: Okay. So the product are you? Gonna so the other, the other thing. Okay.

21 00:02:59.484 00:03:02.004 ben iphone : it’s not expensive. It’s not expensive enough.

22 00:03:02.744 00:03:04.814 Uttam Kumaran: Yeah. The the other thing is like

23 00:03:04.884 00:03:11.034 Uttam Kumaran: the other. The other variables we have here is like changing. The one thing we looked at. The bottom, too, is

24 00:03:11.074 00:03:17.604 Uttam Kumaran: we looked at the distribution of warranty claims meaning, when were people issuing the claims?

25 00:03:18.094 00:03:27.863 Uttam Kumaran: Basically, it’s like, what are the levers you have? You may be able to offer less time on the warranty, or something that we found that most of the people are claiming the warranty within 90 days.

26 00:03:27.934 00:03:31.883 Uttam Kumaran: and the rest the highest rests are usually within

27 00:03:32.524 00:03:37.173 Uttam Kumaran: 180 to 365. So half a year to a year later.

28 00:03:37.284 00:03:41.553 Uttam Kumaran: 50% are within 90 days. So

29 00:03:42.564 00:03:48.664 Uttam Kumaran: I guess it doesn’t make much sense, because there people are claiming it well within the warranty time.

30 00:03:48.824 00:03:59.674 Uttam Kumaran: But you’re right in that that product, and maybe I can pull up a couple of his Zendesk things when we look into it for that product. But the replacement rate is really high, and then again, for those

31 00:03:59.834 00:04:10.764 Uttam Kumaran: like for last year was about 64,000 in cogs that we lost, and that’s not including any shipping costs. And that’s also not including Amazon. So I assume it’s linear for Amazon.

32 00:04:10.854 00:04:31.914 ben iphone : It’s a it’s, you know, Amazon. We sell. We move less heat pumps by a large mark. It’s a huge difference. But this is the $100,000 skew loss when I see that I don’t even, and Dan will argue. You know we’re not doing a good enough job with with messaging and content. While that’s true. This is a big loser.

33 00:04:32.354 00:04:33.794 Uttam Kumaran: Yeah, okay?

34 00:04:34.434 00:04:40.123 Uttam Kumaran: And it and it’s it’s about 3 times or 4 times higher.

35 00:04:40.514 00:04:45.114 Uttam Kumaran: like, in terms of like the the odds that it gets.

36 00:04:45.174 00:05:01.724 Uttam Kumaran: it gets claim for refund. I mean, 10% of the time. Like, 10% of the of the yeah. So that may be something that maybe I can. This data now exists here. The other thing that I wanted to talk about was

37 00:05:03.034 00:05:08.154 Uttam Kumaran: like. Otherwise the claim rates seem like pretty normal, like. I don’t know whether we have

38 00:05:08.424 00:05:18.463 Uttam Kumaran: any like goals around warranties, or if there’s any other things anecdotally that you knew about warranties in the last year or so, or you thought about going into this year that we should like look at. But

39 00:05:18.594 00:05:24.093 Uttam Kumaran: basically, we have now a baseline of the warranty rate. And we can start to measure against that.

40 00:05:26.534 00:05:27.334 ben iphone : Yeah.

41 00:05:28.544 00:05:29.384 ben iphone : Yeah.

42 00:05:29.604 00:05:37.403 ben iphone : So my thought is we, we’re pretty aware of the issues that exist with the Bt Vera line.

43 00:05:37.614 00:05:39.094 ben iphone : Those are motors.

44 00:05:39.714 00:05:44.503 ben iphone : We know the issue, the factories. Where of the issue we just have a lot to sell through.

45 00:05:56.964 00:06:02.853 ben iphone : It is the heat pumps, I’ve been saying for years we should not have

46 00:06:03.334 00:06:06.013 ben iphone : 6 or 7 different skews. We should

47 00:06:06.594 00:06:10.734 ben iphone : condense to 4 big key sizes so that

48 00:06:11.114 00:06:14.294 ben iphone : we can buy deeper in them.

49 00:06:14.414 00:06:22.134 ben iphone : And then we did. We did do it with the black and decker heat pumps. The black and decker heat pumps are basically the same. The 2 key differences are.

50 00:06:22.374 00:06:34.834 ben iphone : we only have 4 or 5 skews instead of like 8, and the shell is different. We don’t have the 32 in black and Decker. So

51 00:06:35.924 00:06:47.383 ben iphone : as we face out the Cft line, this will go away. I can just shut that off right now. this is really good.

52 00:06:47.864 00:06:59.044 ben iphone : I actually think it’d be interesting for you to go over this with Cody, because he knows qualitatively what is what is going on with everything I do I do to some degree, but he knows

53 00:07:00.114 00:07:01.483 ben iphone : to the, to the

54 00:07:01.534 00:07:06.443 ben iphone : it’s part. You guys should do this together, and I think we probably need a recommendation.

55 00:07:06.714 00:07:10.864 ben iphone : It’s nothing we don’t know. He’s already put forward a few proposals tests. But

56 00:07:10.964 00:07:15.853 ben iphone : if you guys put this together, and he’ll add a little muscle to it. It’d be really clear

57 00:07:16.194 00:07:26.024 ben iphone : what to do. So I would. Why don’t you just message him and say, let’s I like, I got some great insights. Let’s have a call today. I want to speak because I think actually, he’ll be excited to see

58 00:07:26.084 00:07:32.704 Uttam Kumaran: this in color. You know what I mean. Yeah, okay, I’ll do that. Yeah, that’d be great. I’m sure he knows. Like all the Zendesk.

59 00:07:32.964 00:07:37.394 ben iphone : Oh, that’s exactly this is what we’re seeing our last. So then, the other.

60 00:07:37.414 00:07:46.563 Uttam Kumaran: the other thing is on the, on the actual, like accounting side, meaning like how we all these warnings are coming in as 100 discount sales.

61 00:07:47.354 00:07:51.123 ben iphone : which is like a huge issue. Well, it’s it’s also

62 00:07:52.444 00:08:01.014 ben iphone : it’s inaccurate. which is a which is already bad. And it also gives a false sense of loss.

63 00:08:01.414 00:08:09.534 ben iphone : It’s not like it’s opportunity cost. So like, yes, if we didn’t have to do a warranty claim and give somebody something for free.

64 00:08:10.314 00:08:27.194 Uttam Kumaran: Had we held it and sold it full price we would have. So that’s where it’s like exactly as a week. We don’t. I don’t have the insight into where that product could have gone. But you’re right. Is that that product, instead of getting sold full price, is now getting shipped as a replacement.

65 00:08:27.314 00:08:38.584 Uttam Kumaran: And so I don’t know what percentage of the supply is earmarked for replacements versus full sales. But you’re certainly right. Is that like

66 00:08:39.024 00:08:43.614 Uttam Kumaran: this is evening to those getting sold at. So there is like, yeah, exactly like.

67 00:08:43.974 00:08:50.043 Uttam Kumaran: it’s not fully optimized. We’re los. We’re not making what we could have on that product. The other thing is.

68 00:08:50.184 00:09:02.993 Uttam Kumaran: discounts now is are very high. And this is where this originally came. Because I was like discounts. We’re we’re doing a lot of discounts this year. But then it’s actually from a lot of these warranties. And then, second is the number of orders per day

69 00:09:03.074 00:09:04.313 Uttam Kumaran: is also high.

70 00:09:05.014 00:09:13.524 Uttam Kumaran: Right. So gross sales is high meaning like we think there’s a ton of orders coming in. But a lot of those orders are 100 discount, so they don’t make it to the bottom line.

71 00:09:13.874 00:09:21.744 Uttam Kumaran: but the top line will still recognize that as. oh, these seapuns are getting ordered. These are the total sales amounts

72 00:09:21.894 00:09:27.513 Uttam Kumaran: so our like, our top line, is getting inflated. So this suggestion

73 00:09:27.664 00:09:28.923 Uttam Kumaran: I have is.

74 00:09:29.014 00:09:31.834 Uttam Kumaran: I want to book those as

75 00:09:31.884 00:09:37.633 Uttam Kumaran: refunds on the original order. meaning they never come in as sales.

76 00:09:37.684 00:09:51.994 Uttam Kumaran: So this this won’t require cause. We can actually do the link back. So we know for a given customer when a hundred percent discount item is given. I can link it back to the original order because Cody and team are putting it into the discount reason.

77 00:09:52.634 00:09:56.694 Uttam Kumaran: But basically, I wanna exclude this from sales.

78 00:09:57.774 00:10:09.543 Uttam Kumaran: But I guess that’s a question like it’s it’s going to be quite. It’ll change, or it’ll diverge our reporting from shopify. And again, we’ll do this on the Amazon side, too. So

79 00:10:09.954 00:10:19.774 Uttam Kumaran: this is like a. This is like us making reporting changes due to the process. Do you kind of see what I mean, because it’s not booked as a refund. We’re not giving cash back.

80 00:10:19.804 00:10:23.814 Uttam Kumaran: but it’s replacement that’s coming through the system. So it probably goes to the fulfillment.

81 00:10:24.844 00:10:26.734 Uttam Kumaran: But it’s like.

82 00:10:27.084 00:10:29.464 ben iphone : well, the process change

83 00:10:31.264 00:10:32.354 ben iphone : is fine.

84 00:10:32.964 00:10:40.223 ben iphone : It’s it’s incorrect as it is, it’s it’s convenient. It’s convenient. And that’s what the customer service team is used to.

85 00:10:43.854 00:10:46.654 ben iphone : But we have inaccuracies, and we don’t know where we’re at.

86 00:10:48.444 00:10:57.584 ben iphone : Talk to Cody about it. Just tell them basically, we just have like inaccurate reporting, and we don’t. We need to know what’s going on. And would there be

87 00:10:57.904 00:11:03.334 ben iphone : but cause he cause it’s gonna be hit up to him to make the team

88 00:11:03.824 00:11:04.964 ben iphone : okay.

89 00:11:05.194 00:11:16.723 ben iphone : a new. I would rather not make a change on our side. But no, no, we’re not. It needs to come from the people pushing the button, of course. Yeah,

90 00:11:18.474 00:11:21.423 Uttam Kumaran: like, I would rather it be booked as like a

91 00:11:22.314 00:11:30.413 Uttam Kumaran: yeah, I mean, I don’t. Even. There has to be some way of doing it on the original order, and not considering it as a brand new order.

92 00:11:30.764 00:11:33.924 Uttam Kumaran: So let me talk to him about that maybe

93 00:11:35.184 00:11:38.064 Uttam Kumaran: ideally, it’s a change of process change. But

94 00:11:38.324 00:11:43.724 Uttam Kumaran: okay, so let me get with him on

95 00:11:44.354 00:11:55.653 Uttam Kumaran: this walk them through. And then we could come up with a recommendation for the Cft line and kind of see his thoughts. And then. should I just I could just shoot you and know, or should I just shoot the whole group and

96 00:11:56.104 00:11:57.323 Uttam Kumaran: Dan, and know.

97 00:11:58.684 00:12:05.194 ben iphone : or I can just text you and be like, this is what II think. Get with Cody. First, let’s see where we’re at.

98 00:12:05.314 00:12:09.564 ben iphone : II already had Chuck. Remove the 32.

99 00:12:10.104 00:12:16.193 ben iphone : I’ve been saying this for years, but I do want you to plaster this one in an email to the group.

100 00:12:16.564 00:12:30.643 ben iphone : I think Cody’s meet or none that would. I want them to just have eyes on it and see if guys can add a more context around it. But I think that this is a fantastic email for the group. But maybe I help you with it. First.

101 00:12:31.984 00:12:37.393 ben iphone : yeah, let’s talk about that towards the end of the day, and we’ll we’ll figure it out. But I think that this is how it’s done, because

102 00:12:37.424 00:12:39.823 ben iphone : I basically on feel.

103 00:12:39.934 00:12:46.343 ben iphone : know all, all, all of the I already for 2, 3 years. And Dan basically patting your desk like.

104 00:12:47.344 00:13:09.434 ben iphone : I’m glad you feel all these things, but like you can’t just cut skews off, and I was like, I can. I was like, I know, I understood what he was saying. But when you live inside of the data, sometimes you don’t know. It’s so. That’s why I’m hoping that like we can just start chopping these trees down. And like, we’re gonna chop these fucking trees down. Yeah, we’re gonna chop them.

105 00:13:09.484 00:13:26.374 Uttam Kumaran: So the next thing we’re going to go to is to disk. So this started out of looking at discounts and refunds. So we’re gonna move on to like broader discounts. So this started with, I was like, what are all these 100 discounts. And we’re like all these, the warranties. Okay, let’s let’s let’s nail warranty down.

106 00:13:26.474 00:13:28.304 Uttam Kumaran: Then we’re gonna go into

107 00:13:28.324 00:13:35.404 Uttam Kumaran: looking at bundles. And then the discounts, and then like Aov, and then kind of looking at impact of pricing.

108 00:13:35.674 00:13:38.714 Uttam Kumaran: so that’ll be

109 00:13:39.564 00:13:41.383 Uttam Kumaran: that’ll be basically like this week.

110 00:13:41.744 00:13:42.704 Uttam Kumaran: Okay.

111 00:13:43.014 00:13:49.163 Uttam Kumaran: the only reason we didn’t. We didn’t do any analysis on Amazon, because basically, it would have taken a little bit more time.

112 00:13:49.564 00:13:59.654 Uttam Kumaran: III estimated that like it’s probably linear. You mentioned that, like, we don’t sell as much cfts, but I assume the warranty rates are the rate of failures

113 00:13:59.944 00:14:03.663 ben iphone : are probably on a one to one basis. So we kind of

114 00:14:04.174 00:14:16.513 ben iphone : the the thing is we don’t sell many there. Our Amazon team has. I’ve made them monthly make a report since November, and we’re we’ve turned it around there. So we’re like, actually profitable

115 00:14:16.604 00:14:23.674 ben iphone : there. And a lot of it is, we did the same exercise where I just said, Show me marketing. Show me sales returns.

116 00:14:24.204 00:14:44.263 ben iphone : and there was like 3 skews that lost $50,000 more, and I said, Just cut them, just cut them, and that like literally, without making any other improvements. And we did. It makes a world of difference. So we did kind of the same exercise. We can put our fingers around that and see if there’s additional layer we can go. I can give you their research once it’s time. But

117 00:14:44.824 00:14:56.454 ben iphone : okay, okay, you’re right. It’s basically the same. You know, we sell, a lot of total numbers will be different. But on a one on a product to product basis. I assume the rates of warranty claims.

118 00:14:56.484 00:14:57.594 ben iphone : and then

119 00:14:58.084 00:15:06.183 Uttam Kumaran: I’m able to. But the other thing is the Amazon warranty. Claims are coming through. Shopify. You see what I mean, cause they’re like

120 00:15:06.764 00:15:14.284 Uttam Kumaran: they’re booking a hundred percent discounts for those Amazon orders. And so so bad I was like, I kinda like

121 00:15:14.474 00:15:19.044 ben iphone : almost threw up. And then I was like, Okay, we’re gonna have to. Well, I kind of get

122 00:15:19.814 00:15:21.544 ben iphone : the thing is, it’s like

123 00:15:23.774 00:15:26.204 ben iphone : it’s like water falling down a hill.

124 00:15:26.424 00:15:34.383 Uttam Kumaran: It’s going to find the easiest route. Yes, yeah, which is fine. Yeah. Process, wise. But it’s like, yeah.

125 00:15:34.424 00:15:43.233 ben iphone : we so like, II try to make the team solve problems in relatively, independently, cause I don’t micromage anybody which you’ve seen.

126 00:15:43.794 00:15:51.774 ben iphone : The thing is, sometimes you need to like. Look at it. Be like all right. I’m glad that you found a solution. But this is wrong.

127 00:15:51.954 00:16:03.943 ben iphone : and then let’s clean it up. So I I’m I’ve heard that they they have autonomy, and then we say like, Hey, is it better? Let’s let’s let’s tighten up so in that this whole year is about the tightening up.

128 00:16:04.664 00:16:08.254 Uttam Kumaran: and then the other thing is, I talked to finally talk to Unis folks.

129 00:16:08.634 00:16:14.244 Uttam Kumaran: They’re getting me data every Sunday or Monday morning on

130 00:16:15.224 00:16:17.033 Uttam Kumaran: the products they’ve shipped

131 00:16:17.274 00:16:23.153 Uttam Kumaran: so kind of like a long conversation with Michael about like figuring stuff out. But basically.

132 00:16:23.344 00:16:24.774 Uttam Kumaran: I told him, like, Look

133 00:16:25.074 00:16:35.473 Uttam Kumaran: in a nice way, I’m like, I’m just trying to make sure that on a per pound basis I need to compare you to all of our other providers, and if you guys are cheaper, then we could probably do more.

134 00:16:35.634 00:16:51.624 Uttam Kumaran: Also, I want to find out. Like, if you guys aren’t cheaper than I need to be able to say that and so I was like, look, we’re not. We’re losing shipping data. And all these things are going through you now. I need that a minimum. And then he showed me some of the analysis they did with like center of gravity and stuff like that.

135 00:16:51.884 00:16:58.323 Uttam Kumaran: I was like the whole. Their whole thing is like, can they bring more of our packages to a cheaper zone

136 00:16:59.414 00:17:25.543 Uttam Kumaran: somewhere in the middle of the country versus like us shipping out of just Jacksonville there. So I was like, Look, I’m happy to look into and do another what they call center of gravity, which is like if they can. If a 90% of their customers are now within zone, 4 versus us, their zone. 6. And that means there’s a DC. Somewhere in the middle of the country. They can try that. So I was like, I’m basically I’m happy to do that with you. Let’s like, get this initial thing going. And then I can share a little bit of our order volume, and then

137 00:17:25.854 00:17:27.903 Uttam Kumaran: you can tell me like, Hey, if if

138 00:17:27.924 00:17:37.554 Uttam Kumaran: if we open another like virtual DC, here. 90% are people move from Zone 6 to Zone 4. This is the rate. And they told me they basically charge

139 00:17:37.664 00:17:44.504 Uttam Kumaran: ups rates plus like some premium. So I was like, that’s all fine. I just I really need to apples Apple. Just figure out

140 00:17:44.574 00:17:49.894 Uttam Kumaran: if you guys are cheaper or not. and if they are, then it seems like a kind of a no brainer. So

141 00:17:50.144 00:17:52.534 Uttam Kumaran: things are moving

142 00:17:52.694 00:17:54.443 Uttam Kumaran: forward there. Finally.

143 00:17:54.614 00:17:56.474 ben iphone : Alright, alright.

144 00:17:57.584 00:18:00.784 ben iphone : I mean we. It’s it’s important to figure it out. II just

145 00:18:01.284 00:18:17.323 ben iphone : it’s like.

146 00:18:17.654 00:18:29.793 Uttam Kumaran: why don’t? Why don’t you just give me the raw per parcel shipping costs? And I’m gonna compare and like, if it’s great, then it’s great like, I don’t know. It took us like a month just a month to get to that point.

147 00:18:29.924 00:18:31.314 Uttam Kumaran: So

148 00:18:31.434 00:18:36.123 Uttam Kumaran: and he asked me a lot of questions are like, Yeah, I don’t. I can’t make any decisions, or even like

149 00:18:36.204 00:18:41.804 Uttam Kumaran: encourage any decisions unless I see that it’s cheaper because it doesn’t matter otherwise. So

150 00:18:42.124 00:18:45.154 ben iphone : 100% 100%

151 00:18:45.474 00:18:50.593 ben iphone : 100% alright. Well, hope alright. So sounds like things are moving.

152 00:18:50.794 00:19:02.704 ben iphone : get with Cody. He just emailed me about something else. So he’s around. You can email message him on the back. Then we’ll get an email out today. This is really good updates. I do think.

153 00:19:03.214 00:19:18.944 ben iphone : float to Cody that the the negative impact that their process is having on reporting. You can say Ben and Dan, you know they acknowledge that it’s incorrect, and it’s skewing performance and profitability numbers, and

154 00:19:19.054 00:19:23.254 ben iphone : he might have a better idea you might have a better idea, but at least he’ll feel

155 00:19:23.504 00:19:30.533 Uttam Kumaran: part of it. I don’t want him to feel like we’re just like, no, no, me, neither. I yeah. And I get I would. I prefer not to

156 00:19:30.564 00:19:32.664 Uttam Kumaran: mold the reporting to like.

157 00:19:32.684 00:19:42.154 Uttam Kumaran: deal with process cause. Then there’s now 3 systems. So it’s like, let’s just find out what the what’s actually like. The

158 00:19:42.834 00:19:47.393 Uttam Kumaran: like. What’s the typical market process for doing something like this. So, okay.

159 00:19:48.264 00:19:50.104 ben iphone : sounds good. Okay.

160 00:19:50.334 00:19:54.064 ben iphone : alright, sir. I’ll talk to you.