October 9, 2024
iStock.com/Daria Nipot
Can Amazon’s Return Policy Be Improved Any Further?
Returns are a major issue in the world of retail, both from a consumer’s perspective as well as a seller’s. Many customers are weary of strict return policies, and those same policies can deter them from making purchases. For sellers, it’s a combination of providing customer satisfaction while minimizing profit loss.
One of the biggest e-commerce sellers, Amazon, has been adjusting left and right to try and get the formula right. And recently, it’s the sellers who might have to rethink their business strategies.
This past June, Amazon initiated a returns policy update, introducing a returns processing fee for products with high return rates — excluding apparel and shoes — in order to address operational costs and reduce waste.
The fee only applies to items exceeding specific return rate thresholds for each category, according to Amazon. Sellers are now charged for units returned above this threshold, with fees visible in their accounts between the 7th and 15th day of the third month following the returns. Additionally, per the retailer, “The fee applied per unit is based on the product’s size tier and shipping weight.”
Small sellers who are shipping fewer than 25 units of the product in question a month are exempt from this fee. However, sellers who ship more than that may need to reassess their products’ quality and their customer service in order to avoid increasingly high fees.
For apparel and shoes, Amazon states that “a returns processing fee is applied for each customer-returned unit. No thresholds are applied and fees are charged as returns are made.”
Starting on May 1, 2024, sellers were able to review their return rates and thresholds in the updated FBA Returns dashboard. In March 2023, Amazon launched a tool called “Return Insights” to help sellers understand their returns better.
Furthermore, JungleScout explains that with Fulfillment by Amazon (FBA), Amazon manages fulfillment and customer service for sellers, including processing customer returns. When assessing whether an item qualifies for a return, Amazon follows its own return policy. This means that “as a seller, you have no control over whether a product is accepted as a return, even if it is clearly the buyers’ fault that the product is damaged or defective.”
Just last month, on Amazon’s website, the e-commerce retailer shared an update about how Fulfillment by Amazon offers sellers various options to manage product returns efficiently. Key services include:
- FBA Donations: Sellers can donate unsellable but usable products through a partnership with Good360, supporting communities in need.
- Grade and Resell: Sellers can resell returned items after a comprehensive inspection, helping to extend their life and provide clearer product conditions for buyers.
- Returnless Resolutions: Sellers can issue refunds without requiring the item to be returned, which is beneficial for low-cost items or international sales.
Amazon launched its Returnless Resolutions program in August, and it aims to enhance customer convenience and provide sellers with a cost-effective way to manage returns.
Retail Dive reported at the time that Amazon is among several companies implementing “keep it” return options that eliminate the often costly reverse logistics process altogether, including Walmart Marketplace, which “gives sellers the ability to allow customers to keep their items and receive a full refund.” This approach is especially prevalent for items of lower value.
There are no fees for using this program, allowing businesses to avoid some of Amazon’s increasing returns-related charges.
BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Frank Margolis
Executive Director, Growth Marketing & Business Development, Toshiba Global Commerce Solutions
Neil Saunders
Managing Director, GlobalData
Recent Discussions
Discussion Questions
How do evolving return policies in retail impact sellers’ strategies and their relationships with customers?
What strategies can sellers adopt to balance customer satisfaction with the costs associated with product returns?
How might changes in return practices influence the overall sustainability efforts of the retail industry?
Poll
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Like most things at Amazon, the returns policy is designed to be customer centric. That means it is easy and simple for buyers to return things, and Amazon errs on giving customers the benefit of the doubt. This has been instrumental in building trust and reliability. The most annoying part of the returns process arises when Amazon sends the wrong items (which does happen) and buyers have to make the effort to take the products to a drop off location or ship them back. It’s making the customer do extra work for Amazon’s mistake. But other than letting people keep the items or sending drivers to collect them – both of which are problematic – there’s not really an alternative.
As for sellers, Amazon’s policies are reasonable and are designed to minimize returns and dissatisfaction among customers. If an item has a return rate that is above Amazon’s average, there are reasons for this and it’s reasonable that Amazon requires them to be remedied.
I ordered a mirror from Amazon and received a box of broken glass. Returning it at Whole Foods took a minute or two. I think that’s the gold standard.
Returns will always be a point of friction, but as Cathy said, Amazon’s current model has minimized the pain point as much as possible. Even with multiple customers ahead of you, the entire process has never taken more than 5 minutes once setting foot in the store.
Now if Whole Foods/Amazon wanted to give us a free croissant after making the return, to thank the customer for the effort of coming to the store, that would be the new gold standard!
Hot topic in my world. I bought a new Fire tablet last week. This week they were featured during the Amazon event for almost 1/2 off. Enough that it motivated my lazy self to try to get an adjustment. Shockingly, Amazon insisted that I return the one I just purchased and buy another to get the discount. I have to scratch my head as this is the same company that tells me, from time to time, to just keep my returns.
Easy returns are a critical differentiator, IMO, for digital retail. It’s one point where Brick and Mortar retailers have a clear advantage.
Amazon continues to find ways to keep costs down, and managing returns is an important part of that strategy. While Amazon’s return policy is easy and liberal, if the manufacturer/seller of that product has a high return rate, then it makes sense for the manufacturer/seller to cover the cost of returns.
Nordstrom is famous for its easy and liberal return policy. They have contracts in place that require the different product lines to stand behind their merchandise and take responsibility for anything that is returned. That continues to work.
Some customers abuse the system. This has been addressed in the past. Sometimes, a company has to inform the customer that they have chosen to no longer do business with them.
Putting more pressure on sellers to sell quality products is good for consumers and the Amazon brand. As Amazon has grown, the appearance of less than stellar products has become more common. Making it costly to sell frequently returned, poor quality product is a good measure for self policing.
This policy is a competitive differentiator for Amazon and if it evolves at all it will become even more seamless and customer centric, not less. I mean, you can go to Whole Foods now and drop your unwanted whatever off…Even if they are losing some margin here it is worth it because I bet competitors lose even more.
I agree, Returns couldn’t be easier for the customer, there is a reason people keep coming back to Amazon, it just makes their life easier. However for the seller, most businesses feel they have to sell on Amazon to be competitive. That gives Amazon the ability to run the business that works for them, making up the rules and passing along the extra costs, as needed.
It could be argued that Amazon’s returns process is almost too easy – potentially making consumers less careful in their choices.
It remains a huge competitive advantage – few retailers can match the friction free approach. Where it tends to be let down is the third parties involved – in the past 6 months I have faced challenges with printers during in-store drop-off but also some providers who only take returns 3 days each week during specific hours. This creates the need for additional thought on behalf of the consumer.
Perhaps Amazon don’t mind this challenge for consumers as it may drive more careful purchase decisions.
Anecdotally, what I do hear as concerns of consumers is what happens to returns – there have been some media reports of product being disposed of via landfill. From a sustainability perspective, some may feel that Amazon could do well to be fully transparent about how returns are processed – when they are resold or not. This would help consumers with sustainability concerns to make appropriate decisions.
Amazon’s new return fees put pressure on sellers to reduce return rates, but it also makes them responsible for issues that are sometimes out of their hands. For smaller sellers, this is tough, as they don’t have the same resources as big players. Sellers need to focus on reducing returns by being transparent with product details and offering better customer support.
On the sustainability side, return policies like Amazon’s “keep it” program may help reduce waste, but the retail industry still needs to prioritize quality over volume to truly make a difference and not affect margins. Retailers need to be more aggressive in rethinking the entire returns process if they want real environmental impact.
Deeply embedded in Amazon’s heritage is a sense of customer obsession. As the organization has diversified its product offering, the definition of customer has expanded but I can’t help but wonder if there is a more nuanced approach Amazon can take in its return policy. Dissect the problem statement from a seller’s perspective – how can I maximize margin on Amazon’s platform? The Returns Insight tool and FBA Returns dashboard are steps in the right direction but the tool is a retrospective in past activity. Another layer of sophistication, and customer obsession, would be to start the error analysis earlier in the process. For example, I’d like to think that Amazon can bring its AI muscle to bare to deliver category-level insights into why items are being returned and offer tailored recommendations to improve product descriptions and customer education. In doing so, Amazon would arm sellers with better data in their decision process as to whether they should sell items given the inherent risk profile. Another customer obsession action could include creation of a “Second Chance” marketplace on the Amazon platform that engages additional stakeholders. For example, sellers would have another opportunity to returned merchandise, albeit at (potentially) a different price point and with different terms. Local repair shops could be matched to address product deficiencies before being re-listed. On a macro level, these actions could reduce the risk-free, carefree, throwaway culture that is not only harming sellers but is creating enormous waste that plagues local and faraway communities.
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Like most things at Amazon, the returns policy is designed to be customer centric. That means it is easy and simple for buyers to return things, and Amazon errs on giving customers the benefit of the doubt. This has been instrumental in building trust and reliability. The most annoying part of the returns process arises when Amazon sends the wrong items (which does happen) and buyers have to make the effort to take the products to a drop off location or ship them back. It’s making the customer do extra work for Amazon’s mistake. But other than letting people keep the items or sending drivers to collect them – both of which are problematic – there’s not really an alternative.
As for sellers, Amazon’s policies are reasonable and are designed to minimize returns and dissatisfaction among customers. If an item has a return rate that is above Amazon’s average, there are reasons for this and it’s reasonable that Amazon requires them to be remedied.
I ordered a mirror from Amazon and received a box of broken glass. Returning it at Whole Foods took a minute or two. I think that’s the gold standard.
Returns will always be a point of friction, but as Cathy said, Amazon’s current model has minimized the pain point as much as possible. Even with multiple customers ahead of you, the entire process has never taken more than 5 minutes once setting foot in the store.
Now if Whole Foods/Amazon wanted to give us a free croissant after making the return, to thank the customer for the effort of coming to the store, that would be the new gold standard!
Hot topic in my world. I bought a new Fire tablet last week. This week they were featured during the Amazon event for almost 1/2 off. Enough that it motivated my lazy self to try to get an adjustment. Shockingly, Amazon insisted that I return the one I just purchased and buy another to get the discount. I have to scratch my head as this is the same company that tells me, from time to time, to just keep my returns.
Easy returns are a critical differentiator, IMO, for digital retail. It’s one point where Brick and Mortar retailers have a clear advantage.
Amazon continues to find ways to keep costs down, and managing returns is an important part of that strategy. While Amazon’s return policy is easy and liberal, if the manufacturer/seller of that product has a high return rate, then it makes sense for the manufacturer/seller to cover the cost of returns.
Nordstrom is famous for its easy and liberal return policy. They have contracts in place that require the different product lines to stand behind their merchandise and take responsibility for anything that is returned. That continues to work.
Some customers abuse the system. This has been addressed in the past. Sometimes, a company has to inform the customer that they have chosen to no longer do business with them.
Putting more pressure on sellers to sell quality products is good for consumers and the Amazon brand. As Amazon has grown, the appearance of less than stellar products has become more common. Making it costly to sell frequently returned, poor quality product is a good measure for self policing.
This policy is a competitive differentiator for Amazon and if it evolves at all it will become even more seamless and customer centric, not less. I mean, you can go to Whole Foods now and drop your unwanted whatever off…Even if they are losing some margin here it is worth it because I bet competitors lose even more.
I agree, Returns couldn’t be easier for the customer, there is a reason people keep coming back to Amazon, it just makes their life easier. However for the seller, most businesses feel they have to sell on Amazon to be competitive. That gives Amazon the ability to run the business that works for them, making up the rules and passing along the extra costs, as needed.
It could be argued that Amazon’s returns process is almost too easy – potentially making consumers less careful in their choices.
It remains a huge competitive advantage – few retailers can match the friction free approach. Where it tends to be let down is the third parties involved – in the past 6 months I have faced challenges with printers during in-store drop-off but also some providers who only take returns 3 days each week during specific hours. This creates the need for additional thought on behalf of the consumer.
Perhaps Amazon don’t mind this challenge for consumers as it may drive more careful purchase decisions.
Anecdotally, what I do hear as concerns of consumers is what happens to returns – there have been some media reports of product being disposed of via landfill. From a sustainability perspective, some may feel that Amazon could do well to be fully transparent about how returns are processed – when they are resold or not. This would help consumers with sustainability concerns to make appropriate decisions.
Amazon’s new return fees put pressure on sellers to reduce return rates, but it also makes them responsible for issues that are sometimes out of their hands. For smaller sellers, this is tough, as they don’t have the same resources as big players. Sellers need to focus on reducing returns by being transparent with product details and offering better customer support.
On the sustainability side, return policies like Amazon’s “keep it” program may help reduce waste, but the retail industry still needs to prioritize quality over volume to truly make a difference and not affect margins. Retailers need to be more aggressive in rethinking the entire returns process if they want real environmental impact.
Deeply embedded in Amazon’s heritage is a sense of customer obsession. As the organization has diversified its product offering, the definition of customer has expanded but I can’t help but wonder if there is a more nuanced approach Amazon can take in its return policy. Dissect the problem statement from a seller’s perspective – how can I maximize margin on Amazon’s platform? The Returns Insight tool and FBA Returns dashboard are steps in the right direction but the tool is a retrospective in past activity. Another layer of sophistication, and customer obsession, would be to start the error analysis earlier in the process. For example, I’d like to think that Amazon can bring its AI muscle to bare to deliver category-level insights into why items are being returned and offer tailored recommendations to improve product descriptions and customer education. In doing so, Amazon would arm sellers with better data in their decision process as to whether they should sell items given the inherent risk profile. Another customer obsession action could include creation of a “Second Chance” marketplace on the Amazon platform that engages additional stakeholders. For example, sellers would have another opportunity to returned merchandise, albeit at (potentially) a different price point and with different terms. Local repair shops could be matched to address product deficiencies before being re-listed. On a macro level, these actions could reduce the risk-free, carefree, throwaway culture that is not only harming sellers but is creating enormous waste that plagues local and faraway communities.