Amazon Dealing With a 'Massive Returns Problem:' Report
The retail industry was hammered by a record number of returns in 2021, and a new report suggests that Amazon likely lost billions of dollars in returns over the course of the year, meaning the company is likely looking for ways to trim the cost of returns.
A National Retail Foundation survey determined that retailers had a record $761 billion in merchandise returned last year. For Amazon, which did $469 billion in net sales last year, the average rate of return may have been around 21%, according to CNBC.
A large number of returns don't actually get returned; they just get sent to a landfill because it's cheaper than trying to restock the item, according to the report. Amazon was quoted as saying that it does not send items to landfills, but rather burns them to produce energy in what it calls "energy recovery" as a last resort. They are also "working towards a goal of zero product disposal" at some undefined future date. Lately, Amazon has worked out a deal with nonprofits to donate returned items as a way to cut down on return costs.
Amazon could start charging for returns as a way to cut down on them, but the retailer is unlikely to do that, the report noted. Shoppers have become used to fast, free, easy returns, and to get rid of them would take away a major competitive advantage Amazon has.
Returns are very costly for Amazon (and any retailer). Amazon spent $152 billion on logistics in 2021, and returns are a significant part of those costs, the MSNBC report stated. As a result, the company is keen to find ways to cut these costs.
Returns are tough on Amazon sellers, who often grapple with how to cut the cost and the amount of returns. Many sellers say it's just the cost of doing business and it means they have to raise the prices of their products to compensate for it.
"You can specify no returns but it doesn’t matter," said one user on the Reddit forum r/AmazonSeller. "Customers just claim defective/damaged. Price your listings accordingly to [account for] being force[d] to take back stuff just because."
The comment was in response to a question posed by another seller, asking if Amazon was telling customers they can return any product if they determine they don't want it rather than show that there is an issue with the item.
"I imagine Amazon still has a headstrong attitude and makes Sellers accept returns not caring what the customer does [or] even caring about the Seller taking an illegitimate hit," the user stated.
Another user said the only recourse for a seller was if a customer claimed the item was damaged or they returned the wrong item, you could file a claim with images proving it is an illegitimate return. However, this is not common.
"95% of our returns are never returned and Amazon just gives us the money back in 90 days," the user said.
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