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No More Amazon Free Returns? Amazon Charging $1 for Some Returns

Is this the end of free returns on Amazon?

Recently, Amazon has started charging $1 for some returns dropped off at UPS Stores. This continues Amazon's trend in recent weeks of trying to lower return rates, most notably by now noting on some product detail pages when an item has a high rate of returns and seemingly its broader goal of “returning to healthy levels of profitability” (a stated goal of newish CEO Andy Jassy)

Amazon Targeting Returns for Increased Profitability

The $1 charge is only applied to customers when there is no free return option, such as returning an item to a Wholefoods or Kohl's Dropoff point. An Amazon spokesperson said, “If a customer would prefer to return their item at a UPS Store when there is a free option closer to their delivery address, a very small amount of customers may incur a $1 fee.”

Amazon recently began flagging items that have higher than normal rates of returns.
This isn't the first time Amazon this year that Amazon has been trying to, apparently, reduce return rates. Just a couple of weeks ago Amazon began notifying customers on Product Detail Pages of items with high-rates of returns
As sellers know all too well, return rates soared during the height of COVID. Overall retail return rates in the United States in 2021 were 16.6% compared to 10.6% the year prior. Amazon does not disclose its return rates but these numbers are consistent, more or less, with our experience. 
Amazon and UPS have long been ‘frenemies'. 
Amazon has been UPS' largest customers for quite some time. In 2022, UPS accounted for 11.3% of Amazon's revenue. The fact UPS declares this source of revenue in securities filings is some indication of the anxiety UPS shareholders feel towards the significance of Amazon's business with Amazon. 
At the same time, Amazon has steadily been expanding its own in-house delivery network that competes with UPS. 
The move to charge only for UPS dropoff returns while not for other types of returns highlights this somewhat adversarial relationship with Amazon.

Will Amazon Make Other Moves to Curb Returns?

The question now is, will Amazon make other moves to reduce the number of returns it experiences? It has the following options:

The are a couple of approaches that Amazon can take to help fight return rates:
  • Reduce the number of returns due to incomplete, confusing, or misleading product information
  • Increase the cost of returns to customers

The most frictionless way for Amazon to reduce return rates is to institute additional mandatory attribute fields. This is something Amazon has consistently been doing in the past years. Requiring fields like sizing information can potentially help customers make better buying decisions and make it a win-win for everyone.

There's another thing Amazon can do: force sellers to provide more accurate and complete product information by charging sellers more for returns. However, this could be one more paper cut for sellers already struggling with a horde of increased fees and surcharges from Amazon.

The other option would be for Amazon to charge customers more for returns. However, sellers know that when marketplaces are faced with the decision to either charge more to customers or sellers, the customers normally win and the sellers absorb those fees. The fact that Amazon actually passed return costs in this case solely to the customer and not sellers is relatively surprising. 

Regardless, sellers can expect, for better or worse, Amazon to continue to make moves towards reducing return rates across the company as it chases increased profitability. 

Dave Bryant

Dave Bryant has been importing from China for over 10 years and has started numerous product brands. He sold his multi-million dollar ecommerce business in 2016 and create another 7-figure business within 18 months. He's also a former Amazon warehouse employee of one week.

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