Amazon Returns Surge Amid Fraud Concerns and Seller Challenges

Amazon Returns Surge Amid Fraud Concerns and Seller Challenges

The retail return landscape in the United States has gone through dramatic changes over the past several years. By 2024, it’s predicted that close to 14% of all retail returns will be identified as fraudulent. That’s a huge jump from just 5% in 2018. This spike in fraudulent returns has raised concerns among retailers, particularly those utilizing platforms like Amazon, where the return process is intricate and labor-intensive.

With the ongoing challenges posed by returns, experts and small business owners are expressing their frustrations over the impacts on profitability and operational efficiency. For Kristin Langenfeld, these were not merely theoretical challenges, as she started GoodBuy Gear to help address them. After her journeys, she was committed to finding high-quality, second-hand baby products. At her multi-channel warehouse in Malvern, Pennsylvania, Langenfeld gave a look inside the highly detailed process that goes into returns management. Each piece is personally examined by a team of at least four employees for an average of 15 minutes.

Amazon’s return policies have evolved over the years, with the company introducing new measures to address the growing volume of returns. In 2020, Amazon added two more return management solutions to sellers’ toolkits. Since 2019, its FBA Donations program has allowed sellers using Fulfillment by Amazon to donate eligible overstocked and returned items to local charities. Amazon says these efforts have helped create a second life for more than 300 million products each year.

None of this can discount the dangerous environmental cost of returns. In 2024, returns resulted in an estimated 29 million metric tons of carbon emissions. At the same time, a staggering 9.8 billion pounds of mostly healthy returned products ended up in landfills. This shocking statistic highlights the urgent demand from consumers that retailers need to reevaluate their return policy.

Small business owners like Mike Jelliff of Professional Music Technology, who sell high-quality professional music gear on Amazon. They are currently getting hit hard by high return rates. Further, Jelliff has shared that he experiences three times as many returns on Amazon as on eBay and Walmart. He said that although he cannot legally disclose his return rate, it has cut to the bone his ability to be profitable. Lorie Corlett, a fellow seller, echoed this sentiment, stating, “We’re running at about just over 1% net profit on Amazon, totally due to fraud and return abuse.”

In many ways, the stakes couldn’t have been higher for Ceres Chill founder Lisa Myers. She had a scary experience when a returned item included another woman’s spoiling breast milk. Myers remarked, “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.” Not only are these types of incidents dangerous and sometimes deadly, but they underscore the need for robust quality control in the returns process.

Thanks to higher return rates from online shopping, sellers are taking a hit on their profit margins. In return, industry professionals are encouraging them to focus on quality. Zoe Lu remarked, “It’s forcing the seller to have higher quality listings and higher quality products.” This sentiment resonates with Langenfeld’s mission at GoodBuy Gear: “I hope the change that we’re able to make as a country is that we stop making crap.”

The problems for sellers go beyond the returns problem. Jelliff noted that on eBay, for example, sellers are given the option to block individual customers from being able to buy from them again. “On Amazon,” he stated, “that customer is still allowed to repurchase from us.” Prior to implementation of this policy, this policy has made sellers feel that they lacked accountability based on repeat offenders in return abuse.

In view of all these difficulties, Langenfeld’s warehouse is a testament to the extreme efforts companies are implementing to avoid hazards related to returns. She touched on the need for a strong single database to monitor products, product variations, common failure modes and recalls. “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,” she explained.

Even with these strides many sellers continue to be frustrated by the lack of accountability from Amazon to address the fraudulent returns. As Lorie Corlett said during this session, “it’s really Amazon who’s responsible at the end of the day. If Amazon were to hold them accountable, people would not be able to get away with this anymore.” This call for greater responsibility from the platform echoes sentiments shared by other small business owners struggling with similar challenges.

The impacts of increasing return rates go beyond just being an inconvenience for retailers. They’re a serious financial liability, too. A recent report from Appriss found that returns will cost U.S. retailers nearly $890 billion in just 2024. This fiscal impossibility leads us to ask how the private sector can keep up with this rapidly changing environment and continue making customers happy in the process.

Langenfeld’s experience, though, offers a glimpse of the systemic issues now eroding small businesses and Goliath e-commerce empires like Amazon alike. She noted that within her warehouse, signs taped to the floor indicated items destined for disposal: “Taped on the floor were signs that said ‘incinerate,’ ‘destroy.’” Such measures highlight the extreme lengths that sellers have to go to in order to handle the burden of returns.

As the retail landscape continues to evolve with mounting pressures from fraudulent returns and operational challenges, stakeholders are left to contemplate solutions that prioritize quality and sustainability. Producers throughout the industry are stepping up to the plate. They try to invest in the right things and bring consumers innovative new offerings that are worth their time and money.

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