The Workable Approach Behind Amazon Returns

Retailers focus on sales. The more sales you make, the more you profit. But not every sale is successful. When a customer isn’t pleased or changes their mind, they return the merchandise, sometimes slightly used, according to the retailer’s return policy.

In total, returns accounted for $816 billion in lost sales for U.S. retailers in 2022. There is potential revenue hidden in those numbers, but many retailers struggle to maximize the opportunities inherent in customer returns.

Amazon, the most visited e-commerce platform in the United States with more than 2 billion combined web visits every year, has a return strategy that can serve as a guide to other businesses wondering how to harness some of the lost revenue that comes with customer returns. Amazon customer service knows how to handle customer returns smoothly and with reasonable profitability.

Amazon Return Policy

Of course, not every customer is satisfied with the Amazon review policy. Some consumers have shared online reviews regarding challenges with getting their returns, as seen with this Amazon shopper:

“...if you return anything it goes into an amazon account. It is not refunded back to the card you used to pay with! … they refused to refund my money to me.”

Another customer took to X, formerly Twitter, to complain that Amazon claims he “returned the wrong product” despite it being checked by the delivery employee, and now he faces problems:

“What kind of fraud is going on in Amazon,..., they are saying, I returned the wrong the product so return couldn't be initiated, Who's responsible ?”

While feedback on review websites and social media tells us that not every return is handled perfectly by the online retailer, the company handles a tremendous amount of returns every day. Presumably, the Amazon return options are effective for most customers. Otherwise, there would be even more disgruntled customers leaving negative online reviews.

The official Amazon return policy states that, “Items shipped from Amazon.com, including Amazon Warehouse, can be returned within 30 days of delivery, with some exceptions.” The Amazon return policy then goes on to note a few exceptions to their policy, including unique return policies by some sellers on the platform, the possibility of a different policy for Amazon Global Store, and an extended return time for certain items.

While the company has found several customer-friendly options for returning Amazon items, including scanning a barcode and dropping unwanted items off to be bulk packaged at UPS stores and retailers like Kohl's, what happens next makes the Amazon return strategy particularly distinctive.

How Does an Amazon Return Work?

Once the customer has returned an item, the Amazon return heads back to the company to be sorted. There are several options for what happens next to these packages:

• Some items purchased through individual Amazon sellers are returned directly to the seller, often traveling for long distances, but will eventually be sorted and repackaged at Amazon warehouses.
• Amazon packages that contain items that can be used or sold again are often sold by the company to warehouses or liquidation retailers.
• If an Amazon return is damaged or there are legal or hygienic concerns, the item is either recycled or used for “energy recovery.” Energy recovery turns these non-recyclable items into usable energy sources through combustion or gas recovery.
• Some returns also wind up being donated.

Reselling Amazon Returns

In some cases, items returned through Amazon customer service make their way back to customers through the official website. Goods are sent back and then sorted by the company into categories like ‘Used-like new’ or ‘Used-acceptable.’ Once graded, they are resold through certain Amazon site segments as refurbished items, warehouse deals, or overstock.

Amazon Returns and Liquidation Centers

Amazon has found it most profitable to not bother putting items back on the shelf. When a customer decides to return on Amazon, the item is sent back to the company. If it is new or in like-new condition, the item may be sent to an Amazon warehouse, where it could be sold at a slight discount.

However, most goods that are sent back accumulate in storerooms and then are bundled into a pallet of return items. These pallets are sold to a liquidation company for a bulk price. From there, the firm will unpack the pallet, sort the things present, and list them on their official website.

In this way, the liquidation company will be effectively buying bulk items – sight unseen – at a discount, then doing the work of sorting the inventory, listing the items, and selling them to customers at a profit.

The Effectiveness of Amazon Return Strategy

With the bulk pallet strategy used for most of the company’s returns, Amazon winds up ahead by not paying for the time, storage space, and human resources needed to sort millions of returned items individually, restock them separately on shelves, and then adjust and maintain the correct inventory numbers.

Amazon accounts for physical stock when the company sells items. After that, the inventory for most items is done digitally through the return codes and software. The company has considerable savings by pushing the human resources, additional physical count, and expenses to liquidation companies. To balance the transactions and make the trade-off of labor and costs appealing to the liquidators, Amazon sells the bulk pallets at a substantially discounted price, often through an auction.

A quick glance at a reviews website will tell you that Amazon doesn’t allow returns for everything customers buy. Certain items like groceries, open software, gift cards, downloads, some jewelry, and health items can’t be returned once purchased. Amazon has a well-designed strategy for satisfying customers and handling returns, but the store does have limits. As you’re designing your own return policy, it’s essential to keep that balance in mind.