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Miami Herald
23-06-2025
- Business
- Miami Herald
Friendly Amazon policy has sneaky costs for shoppers
Amazon (AMZN) changed the retail game forever, and there's no turning back. "The everything store" is often blamed for the so-called "Amazon Effect," or the disruptive effect it has had on the global retail industry. This huge marketplace took the world by the storm by offering the most convenient way of shopping that's ever existed. It created a completely new class of shoppers - online ones. By the end of 2022, there were around 266.7 million online buyers, and by 2025, the number of online shoppers grew to 291.2 million in the U.S. alone, writes Flowspace. Don't miss the move: Subscribe to TheStreet's free daily newsletter It's been 25 years since Amazon marketplace allowed third-party sellers to list their products on the platform. This represented a huge transformation for the company, allowing it to sell to a much wider audience. Amazon continuously innovates and upgrades its offerings and services, which enables it to grow its customer base and account for about 40% of e-commerce sales today. Some of the e-commerce giant's major upgrades and moves include Amazon Prime, 1-click purchases, Kindle, its Whole Foods acquisition, and its easy return policy. These days, however, one of these friendly services is under scrutiny. In 2019, Amazon expanded its easy-to-return policy, enabling returns for millions of items. Previously this service was reserved only for products such as clothing, shoes, and bedding. Even at the time, experts warned that this could be a double-edged sword. Related: Walmart delivers Amazon some really bad news Making product returns too easy, such as making them free, including label-free and box-free, could make the number of returns too much to handle. What's more, free and easy returns for shoppers are making things harder for the small businesses that are operating on the platform. Why? These returns are risky and expensive, which is why some third-party sellers have already left Amazon's Fulfillment program and others are planning to do so, according to CNBC. The core issue is fraudulent returns, which have led to many customers accidentally receiving used products. Shockingly gross examples include used and pooped-in swim diapers and a chiller containing rotten breast milk. More Retail: Huge retail chain suddenly closing hundreds of storesMajor retailer scores huge benefit from Joann bankruptcyHome Depot, Target, Ulta and more strike back at retail crime "I really don't think that consumers understand how many small businesses are on Amazon and how their return habits affect small businesses and families like mine," Rachelle Baron, owner of Beau and Belle Littles, which sells reusable swim diapers, told CNBC. The National Retail Federation reports that in 2024, almost 14% of all U.S. retail returns were fraudulent. In June 2024, Amazon added a new fee for sellers in its fulfillment program. The fee was placed on items that exceeded certain return-rate thresholds. While the fee lowered return rates for U.S. Amazon sellers almost 5%, according to e-commerce group Helium 10, it had other unwanted effects. Related: Amazon gives employees a harsh ultimatum amid layoff fears The new fee might have forced some sellers to raise the bar with their listings and the quality of their products. At the same time, however, it led to higher prices. According to one survey by e-commerce analysis company SmartScout, 65% of sellers confirmed they have increased their prices last year only because of the new fee. Other sellers told the outlet that fraudulent returns forced them to increase their prices. Many vendors are pointing out that their return rates are much higher on Amazon than on other marketplaces such as Walmart or eBay. Sellers also argue that on eBay, for example, they can block specific customers. They also believe Amazon should take more accountability and hold shoppers responsible for fraudulent returns. Amazon, on the other hand, claims it doesn't tolerate fraud. It says it's taking action against scammers by denying refunds and demanding customer identity confirmation. Amazon has been touted as "one of the most influential economic and cultural forces in the world," and as such, it is very likely doing everything in its power to address scam returns. However, with the easy return feature becoming so popular - and with so many odd people in this world (returning pooped diapers, which should arguably warrant a diagnosis) - Amazon may simply have been unprepared for the unintended consequences. Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
CNBC
21-06-2025
- Business
- CNBC
Easy returns cause big trouble for Amazon sellers, but return rates show signs of slowing
Returns on Amazon are free and easy for shoppers, but they're risky and expensive for the small businesses that sell a majority of the goods on the world's biggest e-commerce site. Returns have driven some sellers to exit the popular Fulfillment by Amazon program, while others told CNBC they'd like to leave the platform altogether. At the heart of the problem is a big rise in returns fraud, which has led to customers mistakenly receiving used products when they ordered something new. In two particularly egregious examples involving baby products described to CNBC, Amazon sent customers used diapers and a chiller with someone else's rotten breastmilk inside. "I really don't think that consumers understand how many small businesses are on Amazon and how their return habits affect small businesses and families like mine," said Rachelle Baron, owner of Beau and Belle Littles, which sells reusable swim diapers on Amazon. Baron said her business tanked after a return incident with Amazon. The e-commerce platform shipped soiled swim diapers to customers after the used baby products had been returned to Amazon, Baron said. "There was actually two diapers that were sent out that were poopy," she said. In 2024, nearly 14% of all U.S. retail returns were fraudulent, up from 5% in 2018, according to a report by the National Retail Federation. In total, the report found that returns cost retailers $890 billion in 2024. Amazon started charging sellers in its fulfillment program (FBA) a new fee in June 2024 for items that exceed certain return rate thresholds. Sellers who sign up for FBA rely on Amazon for logistics, including shipping, packing and returns. In September, a couple months after the fee went into effect, e-commerce group Helium 10 saw return rates for U.S. Amazon sellers drop nearly 5%. "It's forcing the seller to have higher quality listings and higher quality products," said Helium 10 General Manager Zoe Lu. Amazon has also started adding a warning label to some "frequently returned items," which could be contributing to the dip. However, the new fee may also be leading to rising prices. One survey by e-commerce analysis company SmartScout found that 65% of sellers said they raised prices in 2024 directly because of Amazon fee changes. Other sellers told CNBC returns fraud is the reason they've raised prices. In total, CNBC talked to seven Amazon sellers to find out how they're handling the rising cost of returns. "We're running at about just over 1% net profit on Amazon, totally due to fraud and return abuse," said Lorie Corlett, who sells Sterling Spectrum protective cases for hot wheels. She said her return rate is 4% on Amazon and only 1% on other marketplaces like Walmart. "It's really Amazon that's accountable at the end of the day. People would stop doing it if Amazon held them accountable." Amazon told CNBC it has no tolerance for fraudulent returns and that it takes action against some scammers. Those measures include denying refunds and requiring customer identity verification. Mike Jelliff sells professional music gear through his GeekStands brand on Amazon and eight other marketplaces. He said his return rate on Amazon is three times higher than the average he sees elsewhere. "On eBay, we're allowed to block specific customers out," Jelliff said. "But on Amazon, that customer is still allowed to repurchase from us." Jelliff showed CNBC the system of about 40 cameras he's installed in his Tyler, Texas, warehouse to track every outgoing item, incoming return and unboxing. He uses the images when filing appeals with Amazon, including when customers request refunds claiming they never receive an item. He keeps a blacklist of repeat offenders who commit this kind of fraud and those who return used and damaged items, which become a total loss for him. Amazon has made some improvements to its returns process, said Jelliff, who doesn't rely on FBA. This includes Amazon allowing small businesses to make multiple appeals when fighting a fraudulent return. Amazon has also let Jelliff opt-out of automatic return labels for items above $100 starting in 2023, and his return rate has been dropping since. Figuring out which returns are fraudulent and which are ready for re-sale is labor-intensive and item specific, experts said. That creates plenty of room for error. "Because it's such a large operation, things are missed," said Lu of Helium 10. "I think they're probably missed on the margins, but these stories are very impactful because it is such a reckoning for the brand." Ceres Chill founder Lisa Myers, who once relied on Amazon to handle returns for her business as part of FBA, has one of these stories. In 2023, Amazon sent one of Ceres Chill's products to a customer with someone else's rotten breastmilk inside, said Myers, adding that the customer wrote a review saying, "she will never forget that smell." "To have something, and I don't mean to be dramatic, but dangerous, somebody else's bodily fluids in your kitchen rotting in something that you had intended to use for your child is unacceptable," Myers said. "That's the moment I broke down crying and just sat down and thought, I have no idea how this could have happened." Myers said she left FBA after the incident, leaving behind benefits like having her products labeled with Amazon's Prime badge. "It hurts our business to not participate in Fulfilled by Amazon," Myers said. "It's just we're not willing to, we will never put profit over the safety and, frankly, mental health of our customers." Instead, Myers outsources all her returns to baby resell specialist Goodbuy Gear, which is on track to re-sell 200,000 returned baby products this year. Kristin Langenfeld started GoodBuy Gear when she was a new mom struggling to find a good quality, used jogging stroller. "We've spent the last nine years building out a database that has all of the products and the variations, the common issues, the recalls," Langenfeld said. "For some of these, there's 40 points that we inspect on the item itself, and it's really complicated." Langenfeld showed CNBC the process at her warehouse in Malvern, Pennsylvania, where each item is inspected for about 15 minutes and is typically handled by at least four employees. The resource intensive process is paying off. She says 33 new sellers signed up in 2024, three times more than the previous year. And with business growing 50% year-over-year, she's upgrading to a bigger warehouse in Columbus, Ohio. She was inspired to handle returns after visiting a major retailer's returns warehouse five years ago. "Taped on the floor were signs that said 'incinerate,' 'destroy,'" she said. Returns generated an estimated 29 million metric tons of carbon emissions in 2024, and 9.8 billion pounds of returns ended up in landfills, according to reverse logistics software provider Optoro. Amazon has faced criticism for destroying millions of pounds of unused products. In 2022, Amazon told CNBC it was "working towards a goal of zero product disposal," but wouldn't give a timeline for that ambition. Three years later, that goal is still in the works, with Amazon telling CNBC in a statement, "The vast majority of returns are resold as new or used, returned to selling partners, liquidated, or donated." In 2020, Amazon added two new options for sellers to re-home returns. "Grade and Resell" allows all U.S. FBA sellers to have Amazon rate the return and mark it as "used" before re-selling it. FBA Liquidation allows sellers to recoup some losses by offloading palettes of goods for re-sale on the secondary market through liquidation partners like Liquidity Services. There's also an FBA Donations program that's been around since 2019, allowing sellers to automatically offer eligible overstock and returns to charity groups through the non-profit Good360. Amazon told CNBC these seller programs give a second life to more than 300 million items a year. For shoppers wanting to keep returns from incineration or landfills, Amazon also has options. Amazon Resale has used and open-box goods, Amazon Renewed sells refurbished items and Amazon Outlet sells overstock. Daily deal site Woot!, bought by Amazon for $110 million in 2010, also sells scratched and dented items. Customers can also trade in certain electronics, like Amazon devices, phones and tablets, for Amazon gift cards or send them to the company's certified recycler. "I hope the change that we're able to make as a country is that we stop making crap," Langenfeld said. "We should make high quality products that are meant for resale."
