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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.

Norman Bunn

100 Comments

  1. Amazon has the best returns. You get your money back as soon as it's scanned @ UPS sometimes.

  2. BEWARE of third party sellers on amazon. They sell used products as new and have restocking fees and no free shipping.

  3. 😭 poor amazon having all these returns while not paying taxes and crushing every other business

  4. I bought an external DVD player that was for my laptop. It would vibrate so bad that it would shake itself off of my desk. The return was easy but Amazon has blocked me from posting reviews because I mentioned what the DVD player would do. Now I buy at Best Buy whenever I can. I rarely use Amazon any more.

  5. I pay $120 yearly for Prime, of course I want zero-cost return. Stop saying it is FREE return.

  6. I'd concur that the over whelming vast majority of the returns are due to the increase in third party seller's which for a fee, list and sell their items via Amazon. The biggest issue is offering items they don't actually have and promising a date of delivery that can't be met. Which causes Cancellation's, which are included in the return figures; Thus the actual return figures are actually less and more in line with the norm of 10%.

  7. THE TRUTH is amazon bans people who returns after a certain amount. This is how the have the lowest return rate

  8. In theUK Amazon use the worst delivery company's out there and the boxes are the worst quality ever .

  9. Well people return more that was bought online is because you dont always get what you ordered. So you get more garage online.That comes from garbage products or false advertising.

  10. electronics have the Biggest return rates, computer parts, mobile phones laptops, tablets, i've seen a part of a amazon warehouse where it had 2 football pitches of returns it was like a aladdin's cave

  11. Wait… Amazon wants to be carbon neutral by 2040?!? OK, by then we'll be kayaking down Manhattan already.

  12. Almost everything they've shown here isn't available in my country. It feels weird to know how much is out there compared to what is possible at home.

  13. I actually hate Amazons return policy, it means we are bringing up a generation and the following generations of buyers with no accountability for their actions, no penalty, if there is a genuine fault with the product then fair enough, but not people who just want to 'try' things with no intention of keeping it, or just to 'review it' then send it back, use it for a weekend party/game etc. I think it is a policy the makes an already me first human race even the more poorer in the future. I buy things from Amazon and I think I have returned 2 items in over 10 years.

  14. I in Canada, still restrict my Amazon purchases on items where size matters because the only options we have for in store returns are UPS and Amazon, which are way out of my way. If high density giants like Loblaws or Metro did the same partnership deal as Khols and Whole foods, I would definitely increase my online purchases.

  15. Seems an odd double edged sword that customers get annoyed by a lot of waste with e-shippers like amazon when it's them buying individual items, wanting very low prices, getting one day shipping, and doing returns that causes the waste in the first place.

  16. Did anyone know TJ Maxx bought returns and sold them to customers? That’s news to me.

  17. Does seller gets his money or returning item bacK? 🙂 that's why I do not sell on AM.

  18. ofc I'm not paying to return something… it just incentive not to bother returning it and companies know it.

  19. Showing a flex driver with no uniform and no prime van? Lol. Instead of a full time DA that wears the uniform and drives a correct van (unless the flex drivers are the only ones doing returns)

  20. No consumer should care how much it costs Amazon for returns. They're a trillion dollar company.

  21. I dont understand if buy it get in box if dont send it back u got the box so you throw it out so it dont matter if they get the box and throw it out its same amount of waste if they do it or we do it.

  22. ummm why dont they donate? would help the world
    ridiculous how much they waste

  23. … because Amazon deliveries don't! Badum Shah!

    Don't steal my idea, but you could send me the right items the first time, and then deliver those items without smashing the box in and ruining half or more of the things inside. Maybe add packing material to protect the items inside the box. I'm just brainstorming, but are these innovative ideas being done anywhere else? Maybe an opportunity there, but seriously Amazon, ordering is kind of a gamble. And that's crazy.

    And of course people want free returns. 1/3 people don't want to pay even more money after you delivered the wrong item or damaged the right one.

  24. anybody who buys clothes online is a moron. you NEED to go and try it on before buying it.

  25. Let me save you all time: you return the item for whatever reason, the seller rarely sees the item ever again and can't resell it.

  26. Amazon should pay taxes. Enough is enough.

    Thank god I never purchased anything from amazon.

    Whole Foods (Jeff ) should provide health benefits to his employees.

  27. It is NOT the world's most valuable company, not by a long shot by the date this video was uploaded, nor today either (go look at the market cap of AMZN vs AAPL vs MSFT for starters).

  28. I made an Amazon return to Kohl's and received a Kohl's 25% off coupon good for 7 days from the return date. I didn't buy anything that day but it did make me want to use their return method again.
    As Amazon gets even more successful it's possible that Kohl's will do nothing but Amazon returns, and the retail aspect of the business will disappear.

  29. A bunch of online products are trash. Thats the risk of buying online without seeing the product. Thats why I would never buy without return ability.

  30. Wonder if its a trend – but i have been cutting down Amazon shopping for a while now. More expensive; concerned about the carbon footprint of all the driving & boxes; and Amazon in general is disastrous for retail & private businesses.

  31. 🗣I’m still waiting for my seven dollars return and it’s been a month‼️‼️

  32. Kohl's + Amazon Prime credit card means you can buy anything and return them to try them out without any risk. It makes me so much more likely to just order something on Amazon that I might like.

  33. Why doesn't Amazon start an open box store? Seems like it would be a lot better than just tossing them or pallette auctioning them.

  34. How stupid, replacing Environment friendly, recyclable Cardboard with plastic?!? Serious!?!?🤦‍♂️

  35. Why dont amazon donate a lot of returns that they cant resale to homeless shelter, or non profit thrift stores such as Salvation or Goodwill? in order to help others out, and to keep it out of the landfills.

  36. Why dont you shut down the hole enter net and make people get off thier ASSS walk to the store, this is why the world so FAT!!!!!!!

  37. The quality of items on Amazon is going way down because the manufacturers are scamming Amazon customers. They know most people don't have time to return crap or they wouldn't buy it online. Then the quality goes as low as they can possibly get away with. I'm about to return my 3rd PC monitor to Amazon because they all look like trash compared to an older one that was half the price.

  38. A headache for customers? Give me a break. Try operating a business with people who abuse returns.

  39. In Germany it is very easy to return anything bought online. Sadly, Amazon has been caught destroying products which have been returned since repackaging them is more costly.
    This is totally insane, towards the workers, towards the product and the environment. Please try to buy only what you need. 🙁

  40. I really would have like to watch this video, but I am not a fan of watching people talk over music. CNBC should become professional.

  41. Maybe recession will be good for the environment. There is so much waste in the world!

  42. Hurdles for returning items should be increasing not decreasing.
    Consumers need to think before they buy

  43. Return fraud. I beg your pardon. To return something from an online purchase is a customer right. And recenty the articles are hardly described in any language, not english and not the other language where I live in. It 'S more a guessing game on what the Asin is about.

  44. Very insightful video but let’s keep it real at (11:52) customers don’t care about ecological issues when buying and returning products. Most customers don’t know what “ecology” even means. I thought the Kohl strategy was pretty smart, killing two birds with one stone: making it easy for Amazon to return products while Kohl gets added revenue – never seen a more mutually beneficial situation in my life. I absolutely Amazon’s return policy and most of their products that seem to be scams but it’s good to know this information.

  45. None of these options really work for me except for pickup. The closest UPS is like 20 miles away, and that is all; there are no Kohl's or drop boxes.

  46. One day you can just throw your returns out of your window. Some drone will pick it up.

    Is it Raku ten or Ra kuten?

  47. Jeff 2040 is too far away. Surely with your access to innovation you can do better.

  48. So CNBC "news" nowadays is just an ad for a big company? Where are the actual journalists that invest amazons abysmal business practices?

  49. Interesting… I've been buying things online for years. I've returned 2 things, because one thing was broken and the other was missing too many parts. There have been plenty of things that I didn't like but im not about to waste my time going through the return process. It's easier to just sell it to someone for a few dollars less than what I paid. Im guessing im not the typical shoppers.

  50. This video makes it sound like Amazon is eating the cost of all these returns. You know Amazon is pushing all the return costs they possibly can back on their suppliers, even products that were damaged in shipping due to Amazon's lousy packaging.

  51. Amazon's Supply Chain has been compromised by Chinese Knockoffs ! I don't buy from them anymore. 800-million products – they now sell China's crap on the global market !

  52. I received a CD in a broken box once, I asked for a replacement and Amazon never asked for a return… So I have two copies of the same album now for the price of one.

  53. Why not give away the stuff they can't sell for free instead of just throwing it away??

  54. Why the hell are they just throwing everything away and destroying everything and making the planet worse when everything could be donated to other countries or even just to shelters around the U.S. Cnbc really be out here complaining about making the planet worse but they doing nothing about it. smh

  55. What about those annoying youtubers that buy amazon returns just to make videos

  56. returns are a major headache for customers??? How about a major headache for sellers?

    Buyer gets free return label at sellers expense, ups or usps picks up the package at the sellers expense, buyer gets money back fopr a used item they changed their mind about.. such a headache for the buyer…

  57. What they didn't tell you here is that majority of returns get sold in bins to an auction company who auction it off to people who resell it.

  58. Dear People of the world! Please be more careful and considerate when shopping online , choose your goods carefully to avoid unnecessary returns! Thank you: EARTH.

  59. I was once refunded and told not to worry about returning a furniture item which cost over $1,000.

  60. Half the stuff that gets bought as salvage is unsalable so it gets trashed even if there is a market for it.

  61. Poor amazon. These returns have lowered amazons profit to 150 billion per year. That’s just unacceptable.

  62. If Amazon and other America corporations would do quality control checks on a new products they would save millions of dollars in returns, Amazon has the easiest and best return policy. I only return defective merchandise; it makes me mad to see products that are faulty and could easily be fixed at the factory level, why don't they give people like my self-seller information so we can alert the factories as to their faults rather that needlessly spend money on faulty products???

  63. Amazon don't care about returns. They force their distributors to take the whole lot back, no questions asked, or they don't buy from them.

  64. thanks fkr your thought s but unfortunlre you are now lall lw to send it homoe

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