14 Aug Amazon Returns: Hidden Costs and Sustainable Solutions
While the convenience of being able to return an item at no cost has been a perk for Amazon customers, this policy is having detrimental effects on both the economic and environmental fronts.
At Nozama we explore the consequences and high costs of the returns process on Amazon for sellers and how they are looking for solutions through changes in logistics. Let’s go!
Economic Cost
Amazon allows, on many occasions, free returns. This, without a doubt, is an advantage for the consumer and an impulse to make the purchase. However, is it so positive for the seller?
When an order is returned, the online store must bear the cost of processing, the courier and delivery service, and the process of reconditioning or returning it to the factory. These expenses add up quickly, especially when it comes to low-value products that are not profitable for the seller.
In this regard, a study conducted in 2022 by the multinational DHL revealed that sellers suffered losses worth more than $800 billion due to returns. This is a very significant increase from the amount recorded in 2020, indicating a worrying trend and warning that this model is not beneficial for retailers.
Environmental impact
Beyond the economic harm, returns on Amazon also harm the environment. The logistical process of returns, including the transport of returned products and the management of packaging waste, contributes to further environmental pollution.
Not only that, some of the returned products may need to be refurbished before being resold, which may require the unnecessary use of additional resources, such as energy and materials, to make the repairs.
This is especially concerning at a time when the world is struggling with the effects of climate change and the accumulation of waste.
Changes in logistics to save economic and environmental costs
Aware of the large impacts associated with returns, Amazon sellers are looking for ways to optimize logistics and reduce economic losses.
One of the proposed solutions is the design of more efficient and environmentally friendly product flows and cycles. It’s about better sorting returned items and making more informed decisions about their destination: restocking at full or discounted price, repairing, reselling, or recycling them. The recycling option can even include charitable donations to minimize waste.
Another approach being explored is the incorporation of technological advancements to reduce the volume of returned items. For example, virtual fitting rooms can help customers make better decisions before buying.
Additionally, some companies are considering changing their customer return policies. One possibility is to charge for returns that are not made in the physical store, something that has already been implemented by some fashion firms. However, these changes should be implemented with caution, as they could affect the customer experience and their purchasing decisions.
Conclusions
By way of conclusion, returns on Amazon generate high costs for both sellers and the online store itself, while having a negative impact on the environment due to the generation of waste and carbon emissions. Sellers are looking for changes in logistics to save money and reduce their environmental footprint, betting on more efficient product flows and technologies that improve the shopping experience and reduce the number of returns. As e-commerce continues to grow, finding sustainable and cost-effective solutions for returns handling becomes a crucial challenge.