With Amazon’s Great Indian Festival ongoing, people are ordering online products like never before. Estimates show that the Great Indian Festival is expected to break all the previous records for this year. But with these stupendous sales comes the increasing rate of return of products. How does amazon deal with them?
Amazon sells returned inventory to e-commerce liquidation websites, like Liquidation.com and Direct Liquidation. Those sites sell them to pretty much anyone who will buy them — from hustling e-commerce entrepreneurs who think they can buy low and sell high to treasure hunters hoping for one great find.
On these websites, shopping for liquidated returns is similar to shopping for daily items from Amazon — but with a considerable discount, and orders come in oversized pallets. You can choose the product category, but you can’t decide what products are in a pallet. Liquidation platforms buy returns from Amazon and repackage things. So yeah, it might be the case that one can have a lot of defective items in the pallet. And the worst part? They can do nothing with that.
According to a report by Optora, the tech company that helps major retailers manage their returns.
5 billion pounds of returned items end up in the trash heap.
Not only are these returns environmentally unfriendly, but they are costing retailers a fortune.
Each year, consumers return about $380 billion worth of goods — $90 billion of which are processed during the holiday.
Only half of returns make it back onto shelves. The rest, due to circumstances such as damages or opened boxes, take a different path (such as liquidation).
It’s a long and expensive process for retailers. Besides, people tend to order irrationally, use the product for a day or two, and then return the product. This is call return fraud and has increased by 23% worldwide. So what has amazon done to reduce the return frauds?
As per Amazon’s new policy,
If you return an item using the return label provided in the Returns Center and the reason for return isn’t a result of an Amazon.com error, the cost of return shipping will be deducted from your refund. You’ll be charged a single flat fee for each return shipment, plus a smaller fee for each item in that shipment.
Another thing that Amazon did to reduce the return shipping costs was that people could choose a drop-off location that supports label-free, box-free returns. All you have to do is to take the product to the drop-off location. Besides, Amazon has the right to ban your account if you are returning too frequently.
But what does Amazon lose out of it? To understand this, we must look at how humongous its operations are.
An article by ReveelGroup explains this handsomely
Liquidity Services, one liquidation company to which Amazon sells, has made sales totaling $626.4 million in the last fiscal year. The company spent just $33.7 million on Amazon liquidation inventory. They have nearly 3.4 million registered buyers.
Those numbers suggest that Amazon is liquidating billions of dollars worth of inventory every year. That means Amazon is making enough sales to turn a handsome profit even when many items are returned and refunded. The e-commerce giant doesn’t need to try to re-list these items, although a handful of used products do end up on Amazon Warehouse, a discounted sales arm of Amazon.
Bottom line?
Retail sellers are the ones who are affected the most because of returns. We, as consumers, should take appropriate measures while ordering any product.
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Interesting Facts about Returns
- Consumers worldwide buy and then return totals a staggering $642.6 billion annually.
- Returns account for an estimated 4.4% of $14.5 trillion in global retail sales, IHL said. Clothing retailers see an average of 10% of their sales returned, the highest among retail segments. Electronics, books, and other hard-goods retailers follow, with an average of 8.8% returns.
3. Only 48% of what’s returned can be resold at full price, according to a Gartner survey of 300 retailers. Most of those surveyed expect returns will grow as they increase online sales and increasingly offer free returns along with free shipping.
4. Forrester Research estimates 25% of items bought online are returned, with $207 billion in returned commerce goods expected this year. Amazon was dumping millions of pounds of this unused inventory, but last month the company started donating some of it to charities in the U.S. and U.K.
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