How Amazon Returns Work

How Amazon Returns Work

Returns are a major headache for
customers, and they drain companies of millions of dollars in unwanted
inventory and extra labor. Returns create billions of pounds of waste
and entire walls of shame in warehouses around the world. But Amazon is trying to
change all of that. Where Amazon absolutely leads is in trying
to be the easiest, the lowest friction return experience for the
consumer and thereby win customer loyalty and increase customer purchases while
they tackle some of these other big institutional infrastructure
problems around returns. From robots to in-person returns, the
world’s most valuable company is redefining the returns process. And as e-commerce grows, smaller companies
are finding ways to make money off returns. We wanted to find
out how does Amazon process returns? And what’s the company doing to
protect the environment and its bottom line? Returns are by far
the largest challenge to e-commerce, and I think to commerce
in general for both retailers and manufacturers. As more consumer spending
is shifting from in-store to online, it’s really just exacerbating the
size of the returns problem that we all have to deal with. Across
the entire Amazon marketplace, you know, they now sell over
800 million products. So this is a scale that the world
has never had to deal with before. There’s even an annual conference devoted
entirely to solving the problem created by returns, namely inefficient reverse
logistics is a huge loss for companies,. In a traditional brick
and mortar store we might have average return rates of 8 to 10 %. But in e-commerce, it’s totally common to see
20 or 30 % of all purchases get returned. Forrester Research estimates
that e-commerce will see $207 billion worth of returns this year. Amazon is about half of all e-commerce,
so slightly more than $100 billion dollars in returns happen in
North America just with Amazon. So that’s a huge expense. And the returns process
matters to customers. According to data compiled by Invesp,
79% of consumers want free return shipping and 67% check the returns
page before making an online purchase. All this has led to the current
trend of free return shipping, which is now offered by almost
half of retailers. Where the challenges is, is can you do
it in a way where the unit economics don’t kill you? The difference with Amazon is they
have the scale and they’ve trained their investors to accept that in the
beginning they may do things at a loss. What that gives them the flexibility
to do then is to invent. They bring a lot of talent to the
table and they figure out how to optimize and create efficiencies that will
allow them to have the unit economics work to their favor and
ultimately get those margins back. The complicated reverse logistics journey starts
when you decide to return an item. Amazon gives you 30 days from
the day you receive an item to bring it back or put it in the mail. Generally you get 30 days. And generally they give your money
back and even include paying for shipping both ways, right? Which has inspired other companies
to have to follow suit. And with every return, Amazon
wants to know why. 34 % say the size,
fit or color was wrong. 21 % say the item was
damaged, broken or no longer functional. 14 % say the item wasn’t as described, 10
% simply didn’t like it and 9 % changed their minds. Amazon sees on
their scoring system that you’re a customer that abuses
the return policy. It is possible that they’ll charge
you a fee for that out-of-reason return, whereas for a good customer
they might continue to offer that return for free. Whether a return is
free also depends on the method you choose for that return. That menu is
going to vary slightly depending on your geography and the item. A popular thing that they’ll do is you
put it back in the box, you seal the box and we’ll send someone to your
house to pick up the box and they’re going to charge
you for that option. If you live in a place where
there’s literally no other options, they may offer that for free. But in most cases, they’re going to say,
if you bring it to a UPS store, it’s free. But for certain items
where the reverse logistics costs way outweigh the potential value of the
item, if you’re not someone that they’ve identified as a return abuser, they
very likely are going to tell you to just not
worry about the return. The returns process is now so easy
that customers have been caught gaming the system. One man reportedly scammed
Amazon out of $370,000 by sending back boxes of properly weighted dirt
instead of the returned products. Amazon has also banned customers who appear
to be conning the system by making too many returns. In all, return fraud cost to the
retail industry $18 billion in 2017. You have a secret credit score that
says how profitable and how good a customer you are for that retailer. A particularly egregious and common version
of this is there’s a huge spike in TV sales the week before the
Super Bowl, and there’s a huge spike in TV returns the week
after the Super Bowl, right? So increasingly your own behavior can
impact the returns experience that you get. But even those items that
are legitimate returns can create a lot of pressure, specifically
on Amazon workers. For every package you return from
your doorstep, there’s a delivery driver who has to pick it up and get
it started on that journey back to the warehouse. It’s those boots on the
ground that cost Amazon the most. As more of Amazon’s overall volume gets
shifted from UPS and the U.S. Post Office to Amazon’s own delivery
network, they’re also able to handle a lot more of the returns
themselves and the logistics of picking something up at someone’s house and
taking it back to the fulfillment center are actually harder and more
expensive than the logistics of delivering something to the home. Amazon has one big way to relieve
the pressure on its drivers and its bottom line: use you
for the delivery. In July, Amazon expanded its partnership with
Kohl’s to allow items to be returned without a box at any
of Kohl’s 1,100 stores for free. If they have to go to 100
hundred consumers’ houses and collect one box for a return, that’s much more
expensive than having those hundred consumers all go to one Kohl’s. Kohl’s needs traffic. Retail
traffic is down. You’ve got to find a way
to get people in the stores. They’re now getting the Amazon customer
into their store who then has money in their pocket after a return. It’s a great opportunity. So far, Kohl’s says
results are promising. The net impact of the traffic and
sales we’re getting and then considering the support that we’re leveraging. So in terms of the support inside
of our stores, reverse logistics, all of that is expected to be a
positive EBIT contribution for 2019. So we’re early days, but we’re highly encouraged
and we do see this as a profitable venture for the company. If the cost of me handling the return,
which by the way they’re going to help pay for, is lower than getting
another pair of shoes sold to the person walking in, then it’s
ultimately a net gain. In the world of Amazon partnerships, this
Kohl’s deal is almost unique in how favorable it is for both parties. According to data compiled by Invesp, 62
% of customers are more likely to shop online if they can
return an item in store. With Amazon, you can also return items in
person without a box to one of 2,800 Amazon Hub locker locations, which can
often be found at Whole Foods or college campuses. Depending on your location, you can also
return items in person at UPS stores and a growing number of
Amazon Books and Amazon 4-star stores, although this does sometimes
cost a fee. Other retailers are trying to catch
up with Amazon’s in-store return options. Walmart has actually created a
separate return line so that you don’t have to wait in line behind
other people trying to get Walmart service. Target has set up dedicated e-commerce
space in the front of the store. at Nordstrom’s Local stores in
New York and L.A. you can now return items purchased
online from other retailers like Macy’s and Kohl’s. And FedEx announced this month
that consumers can now drop off their online returns at thousands of
Walgreens stores and print their return labels in store too. UPS also unveiled a similar
partnership this month, allowing pre-labeled returns at 1,100 Michaels
stores in the U.S. Amazon and everybody else is constantly
trying to enhance that user experience and figure out how
do you best do that? But you still have
the reverse shipping. You have to pay for
that shipping to go back. You have to deal
with the item itself. How do you file it away? How do you deal with it?
This creates another big challenge. The reality is it often ends up in
a place of limbo, a place that some retailers call the wall of shame. Sometimes we’ve seen it as high as like,
you know, 50, 60 ,000 square feet of just all items that are just
all returns, all mistakes, all the stuff in there. And we’re talking
about thousands of items. We sometimes talk about millions of
dollars in inventory that is just sitting there and it’s just costing them too
much to try to fix that issue that they just push it aside. That’s what happens. It’s at the
wall of shame where L.A.-based startup inVia says its 400
robots deployed in U.S. warehouses are making
a big difference. The robots can be programmed to process
returns in a way that’s custom to the needs of a company. Customers would
approach us and say, what can you do to just fix my wall of shame? That’s what we want the most. So with our robots, as the items come
back we’re actually able to go in and file them away so we’re taking
away that pain point of moving the items back. InVia is now programming
its robots with separate software entirely devoted to returns. For example, after Christmas, there might
be a lot of Christmas returns, which nobody’s probably going to
order til next year. And we’ll go file it
away pretty far away. These robots are meant to offer
competitors an alternative to Amazon’s Kiva robots, which were used by stores
like Walgreens, Staples and The Gap before Amazon bought Kiva in 2012. A major difference: inVia’s robots can handle
small totes up to 40 pounds, often carrying one individual item,
while Amazon’s robots move entire 1000-pound shelves all at once. InVia says this more finite control helps
cut down on one big reason for returns: the warehouse worker accidentally
boxing the wrong item. We only present the
person with one item. If you look at the Kiva case, you have
a big rack with a bunch of items. There’s a guided pointer that points you
but you can still make a mistake. You know, you’re trying to
move these things in seconds. So with our robots, we only
present them with one choice. So there’s a very, very low
probability that they’ll make a mistake. Amazon says its Kiva robots are not
used in areas that handle returns. InVia wouldn’t disclose if it’s been
approached by Amazon about acquiring its robotic return software but did confirm
it’s been in talks with a lot of Amazon’s competitors. So far inVia’s robots are
being used in Rakuten’s U.S. warehouses and smaller companies like
discount e-commerce retailer Hollar. Once returned items are sorted by human or
robot, it can still be a major problem to find the best use or them. This can lead to a huge surplus
of inventory, wasted fuel emissions and unnecessary packaging to handle it. In a nutshell, returns are
hard on the planet. As much as five billion pounds of waste
gets thrown away as a result of these returns that can’t be resold. So to put that in perspective, that’s
250,000 garbage trucks full of goods that people bought, half of which from
Amazon, and then ultimately had to be thrown away because
it couldn’t be resold. The environmentally unfriendly disposal of
unsold and returned inventory has made big news. Burberry famously
revealed last year that it incinerated 28.6 million pounds of unsold and returned
products, a practice it’s since stopped. Earlier this year it was
reported that a single Amazon facility sent 293,000 products to a garbage
dump in just nine months. And after a documentary found Amazon
destroyed three million products in France last year, the country vowed
to outlaw the destruction of unsold consumer products by 2023. That, of course, is
an ecological disaster. What’s super interesting, of course,
is consumers are increasingly sensitive to that. Even when destroying the product is
the best economic option, retailers are having to pivot away from
that because consumers don’t like doing business with these
ecologically unfriendly companies. In response, Amazon launched a
program called Fulfilled by Amazon Donations. Starting September 1st, donations
became the default option for all sellers when they choose how to
dispose of their unsold or unwanted products stored in Amazon
warehouses in the U.S. and the U.K. And that’s entirely
a result of customer sentiment pivoting away from Amazon. According to Narvar’s 2019 consumer report,
52 % of shoppers said they would go in-store to return items
if it helped reduce the environmental cost of returns. Amazon also has a program called
Amazon Warehouse, which sells renewed goods at a discounted rate. Another big tool Amazon has to help
cut down on wasted inventory: a massive amount of data
on customer behavior. They can look at information about you
and and other folks like you, and they can then have, you know,
their technology can make predictions that says, hey, this product, there’s gonna
be others that want it. There’s demand for it. So if we get it
back and we get it back in the region where it was shipped, we actually
think we’re going to be able to ship it to a buyer in that same spot. But then there’s all that packaging
waste created by returns, which Amazon is trying to reduce. Kohl’s and
the Amazon pickup locations generally are using poly bags and other kinds of
containers when they aggregate all of these returns together to
dramatically use less packaging. Amazon has also replaced many
cardboard boxes with more lightweight plastic mailers, although these mailers
aren’t recyclable in curbside bins. It claims the plastic mailers have
reduced packaging waste by 16 % and eliminated the need for more than
305 million shipping boxes in just 2017. And last month, CEO Jeff Bezos
pledged to make Amazon carbon neutral by 2040. While Amazon works to cut down the
waste and high cost of returns, there’s a whole other side to it: a
growing market for companies and individuals that make money off returns. It’s sort of a new business that
kind of started from this e-commerce that nobody ever thought of. One example is a
company called Happy Returns. It has 700 return centers at malls
and inside stores where customers can come return items from about
30 popular online stores. Happy Returns gets paid by its
retail partners to aggregate all its returns. Saving money on that
last-mile delivery person who would otherwise need to
make multiple stops. It claims to save e-commerce retailers 20
to 30 % on shipping costs. The store or mall also pays Happy
Returns a fee, hoping the concierge service will bring shoppers
into its stores. There’s also a market of third-party
companies that buy returns in bulk, repackage them, sometimes with added accessories,
and resell them for a profit. So you can go to some
of these third-party companies and and buy things that have been returned, kind
of almost like a salvage process. And the really fascinating thing is some
of that ends up back on the Amazon marketplace. There’s also a
growing number of companies specializing only in
reverse logistics. GENCO, for example, was bought and
rebranded as FedEx Supply Chain. It helps liquidate returned inventory by
sending it to smaller markets like Brazil. It finds a market or
place for donation for products that won’t sell in the U.S. Think: the Super Bowl champions
t-shirt of the losing team. And of course there are
discount retailers like T.J. Maxx that buy returned and unsold merchandise
in bulk and then market it up and sell it to consumers. So we should absolutely be paying
attention to the returns market. And there’s significant economic opportunities
for companies that are able to help retailers with this problem. Meanwhile, Amazon itself is still working
to make returns more profitable by making the process easier and
keeping its customers coming back. Amazon is definitely not perfect at
this whole returns process and there are places where other retailers might
be more ecological or do something better. But on the whole, Amazon is driving
a lot of the innovation in the returns market. So more so than
reducing their costs, they’re saying let’s make it really easy and hassle-free for
customers to return and that will make customers trust us more and more
confident that they can buy from us instead of one of our competitors.

100 Replies to “How Amazon Returns Work

  1. The Kohl's return thing is sweet. I hate mailing stuff, much better to take it in person. That warehouse of returns would be an epic find in the apocalypse. Each box a mysterious treasure. I negatively reviewed some items on amazon and was offered a refund without need for return by multiple sellers if I deleted the review. They went first, so it was left for me to follow my word or not, they had all the risk. I'm honest in reviews, not going to abuse it. But it taught me to not completely trust amazon reviews because there are methods to manipulate them.

  2. Consumerism at its worse generating an ecological disaster.
    As convenient as amazon is, i don’t manage, as stupid as it is, not to dislike the brand.

  3. returns seems to be a waste of time energy and resources. try to figure out the main reasons why the returns happen and minimize the problem. I think because the item is not tangible that is why there is high return rate and maybe because when it is bought there is lag time before it arrives and the person can loose interest because we buy on emotion. those are the problems with online sales and returns. To fix it, virtual online shopping can help out a lot and maybe get the % down to 15% returns , closer to the retail stats. Virtual shopping , combined with 3D printing of the item or same day delivery. Amazon will have both figured out within the next 3-5 years. Should invest into amazons stock that puppy will continue to grow ! Jeff is taking over the world lol

  4. i bought a cell phone cable that was less than $5 that wasn't compatible. upon the return request, they suggested i keep it and wrote off the return.

  5. The high prices at Kohls are the reason people buy things from online sellers like amazon. I'm probably more likely to buy something at the ups store when shipping a return than pay more for something at Kohls when I know it's less expensive elsewhere. Keep dreaming Kohls. Or lower your ridiculous prices and stay in business.

  6. Spare a thought for people who buy from Amazon outside of the US. We have to pay for our Amazon returns postage ourselves! (unless the product is faulty).

  7. Timing is creepy that this video aired. I just returned an auto part I bought on Amazon this past Tuesday. Goddamn big data!

  8. Good to see Amazon has bought shares in CNBC's parent company so it gets to have free adverts pushing the Amazon Koolade on as if its "real news". It makes me happy to know the US is facing institutional decay, societal division and mental rot across its young generations. Apple and Amazon are the rope by which the US will hang itself. The Chinese elite love it.

  9. Essentially, Amazon has become the FREE RENTAL marketplace and this is actually hurting a lot of sellers in the long run. While customers are able to get ALL their money back, sellers will have to eat up fees that weren't mentioned, storage fee, selling on the platform fee, ads, etc…

    Lots of SCAM abuse is going on with their lax-return policy and this opens up to many doors for both competitors and customers to abuse the system to their heart's content. Even though they do ban bad actors, there's still ways around it (VPN for example), and there's absolutely no protections against sellers whatsoever.

  10. IDK why but I loved this mini doc. Fascinating. Especially since I'm a huge fan and user of amazon and their returns. Loved it. Thanks.

  11. I can't believe there's 4% on "Intended to return when purchased."
    Return-abusers make things more expensive for all of us.

  12. Just to clarify some things. The return percentages are wrong. Consumers always mark defective or not as described on returns so they can avoid paying return shipping. At the same time amazon is successful is because it’s easy to game the system. Sellers frequently take losses so consumers can continue to shop and game the system where they can. In the end consumers are happy they get freebies here and there. Amazon takes no loss. And sellers are left with the headaches, but amazon is so big they have no choice.

  13. 53% of items on Amazon are by third parties sellers Amazon charges sellers 15% of the cost of an item to return it instead of a flat fee. Amazon also doesn't give us a donation receipt for donated items.

  14. I only spent 30$ this year on amazon I got 10 shirts hair Gell and deodorant for it. Idk why people spend so much money on amazon. I spend all my $$ on stocks etfs and real estate.

  15. Returning Amazon purchases at UPS store has been the easiest return process I've ever done. In and out in literally less than a minute.

  16. CNBC you got to change the title of the video. I thought amazon was giving back the work that employees did back to them and I was like wow how

  17. i have goten a refund for stuff on amazon one was a battery for a motorcycle the did not fit it, did not have to ship it back and got the money back for it.

  18. I wish Amazon would keep using cardboard boxes, those padded envelopes barely protect the items that I order. I have reduced my Amazon shopping and started buying from local stores like Best Buy, Target, and Walmart instead (in person) so that I can buy the items without physical damage because the Amazon products that are shipped to me in padded envelopes arrive damaged most of the time.

  19. Okay so give it away instead of throwing it out. Oh right, they only want to make money so they would rather throw away rather than donating it 👌🏽

  20. He's lying he did not buy $4,000 worth of Amazon returns for four hundred bucks he's lying everybody that says that is for crap okay so don't believe it

  21. well for me I have medical issues and my UPS driver does come to my house to pick up my packages when I returned them so it doesn't have a problem and it was just nice.

    I don't return a lot of items I have returned more than normal because the item has been actually not good and has been broken so that's why but most of the time I know what I'm buying so you know.

    and honestly if I get a package in the mail or a box I actually keep that box just in case I have to return something in the future you know and I just hang onto it until I'm ready, even the bags which I return you know a great because the bags are really good to put stuff in

    honestly I like the bags better when the items are shipped because it takes up less waste and you know it's cost efficient as well and you can put a lot of items in these bags rather than a box so honestly like the Amazon bags better I mean they're protective and I've never had a problem with him to be honest so I like him a lot better and I think so does my driver because they're you know just toss them on the porch and that's it.

  22. I just did my first Amazon return at a Kolhs and I got a 25% off entire purchase for Kohls. I spent over $100 because of this $27.80 return.

  23. I have returned a few things because 'new' items either had stains or scratches but that has never detirred me because of Amazon's hassle free system and I continue to buy from them because of it. Funny huh.

    You would think, the source is untrustworthy or unreliable but nope, I feel it's great regardless 😀

  24. I used to sell used video games on amazon until I saw how dishonest some amazon buyers were. Since they were used they had 30 days to return them. So they basically used me as a free game rental service. Most people think that just because it’s an Amazon Prime item Amazon is taking the hit. but FBA sellers are the ones taking the hit and many are small sellers like me.

  25. They resale returns as new.

    I've received two items in the last 3 months that were definitely used but I paid prices for new. One was a textbook that had a price difference between new and used of about $50 USD. The text book had a few pages with writing in it, dog eared pages, worn edges, and the front cover had the "name and year" card filled out. The other item was a video game and it came not sealed and the code inside had been claimed. It was bagged in a plastic bag and I looked up the code that said return, but in quality high enough for resale.

    Amazon gave me a 10% discount on the game, but wanted me to return the book. I just kept the book.

  26. My sister returns about 2-4 pallets worth of product every year. The reason I know this is because of my job. I work in unloading and recieving at a retail store. I know how many boxes by size can fit on your standard pallet. The product was mostly boots, shoes, clothes, cosmetics, and small appliances.
    I kind of understand why someone would buy 4 pairs of the same shoe to see what fits the best. But honestly why don't people just go to the store and measure their foot. Also if the expensive coat you just bought doesn't fit perfectly then just workout so you slim down a bit.
    Sorry for rambling about my sister but she is such a "KAREN" if you know what I mean.

  27. IMO Amazon needs to be stricter on return fraud (including for example all the people who buy pool gear, use it during the summer and return it used after the summer is over or the people who buy video games and return empty cases or the people who buy a new water filter and return their used one)

  28. Now what about those Ebay sellers who claim buyers purchase jewelry and return shoelaces, to scam the ebay sellers? Do an ebay return video!

  29. Carbon neutral by 2040… sure ok. That's so far in the future that it likely won't matter or it will be pushed back again.

  30. I no doubt that a good amount of those returns are entire,y fraudulent and more so because it can very much be easily abused compared to an in store return. With so much money in returns, it’s a system where their is room for people to try and game the system.

  31. In spite of this paid advertisement for Amazon, the 'big step' they've taken to change returns is IMMEDIATELY reselling returned items to the next person in line to purchase. I recently bought a battery charger that looked like it had been dropped down a flight of stairs. I returned it and left a review, only to find that the exact same damage was reported on the exact same item, with photos included. It's the exact same one I had bought. It was listed OVER AND OVER AGAIN. HOW is this supposed to increase consumer confidence, again?

  32. I just bought a belt hole puncher from Amazon for $15. I got it at 10am punched 3 holes in my belt and literally had it returned at UPS by 10:30! Is that return abuse 🤔

  33. I hate returning things to the post office because of the lines so being able to return amazon items to kohl’s is so much easier.

  34. Being able to return items to Kohls has had a chilling effect on my Amazon shopping. I am buying more Amazon items but ONLY if I know it can be returned to Kohls, otherwise I will skip the item. Sadly, my Kohls doesn't get much of my business because they refuse to maintain enough staff to make the lines move with any degree of speed. But I do think about buying things at Kohls more now than before since I have more reason to visit the store.

  35. I just wanna say that I’d return less items if clothing companies actually provided measurements for the darned garments! A “small” in one store is not a “small” in another. 🙄

  36. why cant amazon sell those returned goods at a discount? better than sitting there unsold in the warehouse no? im sure some people would be willing to buy them.

  37. Those sorting robots are absolutely crippling for people seeking warehouse work. That's a perfectly good job that a human could do that instead gets replaced by a motherboard on wheels to save a company money

  38. These items are best crushed in a garbage truck. Most,of it is going to get compacted anyway. Revenuers should be shouldering some of these returns since they are collecting the taxes.

  39. This video talks about returns being a problem for amazon. So what if they lose some money. They are still making hundred of billions.
    I thought they were going to discuss the returned products being a problem to the environment or something. Geez!

  40. I worked in reverse logistics for a few years and most of the items that were returned that didn't pass testing or had cosmetic damage because of customer abuse sat around on warehouse racks for years collecting dust until they were obsolete. More than half of the products worked fine. The items would be tested, and if they passed all rigorous tests and were in good cosmetic shape (or could be made to be) then they would be referbed to customers as RMA exchanges. Such a waste

  41. I always thought they just put item in a new box or packaging and put it back on sale when there is nothing wrong with the item, would have never thought they just throw them out 🤯

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