A survey by the National Retail Federation found a record $761 billion in merchandise returned to retailers in 2021. That amount exceeds what the United States spent on national defense in 2021, which was $741 billion.
Amazon declined to share its overall returns numbers, but in 2021, the National Retail Federation estimates 16.6% of all merchandise sold during the holiday season was returned, more than 56% over the previous year. For online purchases, the the average rate of return was even higher, at almost 21%from 18% in 2020. With $469 billion net sales revenue last year, Amazon’s return numbers are probably staggering.
Returns in the US generate 16 million metric tons of carbon emissions during their complicated reverse journey and up to 5.8 billion pounds of landfill waste each year, according to return solutions provider Optor.
“We’re talking about billions, billions and billions of [dollars of] waste that is a byproduct of crazed consumerism,” said Mark Cohen, director of retail studies at Columbia Business School and former CEO of Sears Canada.
“Reverse logistics will always be unpleasant because the merchandise, in most cases, cannot be resold as it was originally,” Cohen said. “The most convenient way is to a dumpster, to a landfill.”
Amazon has told CNBC that it doesn’t send items to landfills, relying instead on “energy recovery” as a last resort.
“Energy recovery means you burn something to produce heat, to produce energy. And you rationalize the disposal of goods as a conversion from one form of matter to another,” Cohen said. “To the extent that they’re doing it, I don’t think they’re fully disclosing it.”
Amazon has said it is “working toward a goal of zero product removal,” though it has not set a target date for reaching that goal.
“We encourage a second life on all products we receive,” said Cherris Armour, director of returns for Amazon in North America in an exclusive interview with CNBC.
“And that comes in the form of the sale of most of the items that we receive. They are resold as new and used, or they go back to the vendor or supplier, or we donate them,” Armor said.
Energy recovery, Armor added, is only for “items that we cannot recover or are not recyclable” due to legal or hygienic reasons or product damage.
Armor joined Amazon 12 years ago, starting as a night shift operations manager at a distribution center in Indianapolis. She said the goal of zero product disposal was something they talked about at Amazon for many years.
Cherris Armour, director of reverse logistics for Amazon in North America, poses with two other Amazon employees at a fulfillment center in Phoenix, Arizona, in November 2021.
Researchers have found that consumers love easy returns.
A highly cited 2018 survey of 1,300 online shoppers found that 96% would return to a retailer if they had a good return experience, and 69% would be discouraged from buying if they knew they would have to pay for return shipping. In 2019, Amazon free and easy returns extended to millions of items.
“Amazon has really been a game changer in the world of reverse logistics because of how easy their returns are,” said Zac Rogers, who ran returns for an Amazon subsidiary called Quidsi from 2010 to 2012 before becoming a professor. supply chain management assistant at Colorado State University.
“So now you have your more traditional retailers like Walmart or Goal kind of implementing similar policies because that’s a very important part of how you compete on the retail side,” he said. “It creates brand loyalty, makes you more likely to sign up for [Amazon’s] Prime, and Prime is really what drives that company’s flywheel.”
Amazon now allows returns at 18,000 locations, including the option to leave items without a box or tag at Kohl’s, UPS and something Whole-grain foods stories. There is a try before you buy Prime member program designed to make apparel returns even easier, with return labels already included in the box. On the easy-returns end, Amazon is increasingly allowing customers to keep some “returned” items while also refunding them.
“If I tell you to keep the product, instead of counting the cost and carbon effect of removing it, it makes me look better as a company, right?” said Tony Sciarrotta, executive director of the Reverse Logistics Association. “Let people keep it and then it doesn’t count against us. But now you, as a consumer, what do I do with this, right?”
Amazon now has to solve the problem of what to do with returns on the back end.
Amazon spent almost $152 billion in logistics in 2021 — almost a third of all net sales. That represents an increase of $119 billion in 2020. Returns take these costs into account, so anything Amazon can do to reduce those costs will help the company’s bottom line.
“They will do it for their own interests, although they will express it in the name of saving the planet,” Cohen said. “But at the end of the day, their action is going to be based on the economics of what we’re seeing.”
To that end, in 2019, Amazon launched a donation program that allows US sellers to automatically donate surplus and returned products to a network of 100,000 local charities through a partnership with a nonprofit network. . good360. The organization works with some 400 companies, including giants such as walmart, CVS Y Nikebut says Amazon is its biggest corporate donor.
Good360 says it coordinates with local charities for direct pickups at more than 230 Amazon locations, helping Amazon save on transportation costs as gas prices drop. historical highs. Nonprofits pay Good360 a fee to help cover freight costs.
They also agree to certain rules before gaining access to Amazon donations.
“They’re not going to resell those items, put them on online auction sites, take them to local flea markets or that kind of thing. So protecting the brand integrity of our donors is really core to what Good360 does.” Shari said. Rudolph, Director of Development and CMO of Good360.
There are also potential tax deductions that can come with donating to a nonprofit organization.
“There are some programs that are available,” Rudolph said. “I don’t have any visibility into what the Amazon team is leveraging, if anything.”
Good360 Program Operations Manager Regina Freeman handles Amazon returns in Baltimore, Maryland in September 2020
Photograph by Jim Halling
There is also a boom in the secondary market that makes it easy to make money on second-hand items. Between increasing pressure from younger shoppers who want sustainable shopping optionsand a supply chain delay causing a shortage of new products, Colorado State’s Rogers estimated the size of the 2021 secondary market at $688 billion, up from $649 billion in 2020.
As second-hand items became a potential source of income, Amazon launched two new programs to take back returns in 2020. It now offers sellers the yield settlement optionsending them to important third-party liquidators such as Liquidity Services to auction them on the secondary market.
Also in 2020, Amazon began offering select sellers a rating and reselling option for returns. With this option, Amazon evaluates the returned item as new, very good, good, or fair, and then resells it in special sections of its site. there is warehouse deals for used goods, amazon revamped for refurbished items, amazon store by overstocking and an irony daily deals site called Wow! that sells $10″shit bag.” Amazon even offers customers gift cards for trade in your used Amazon devicesthat you can try to reform and resell.
“We expect these programs to help give more than 300 million units a year a second life,” Amazon’s Armor said.
That’s just smart business, explained Rogers, the former Quidsi employee.
“Let’s assume a 20% rate of return, which is $93.8 billion in profit. If instead of getting pennies on the dollar from a scrap dealer, you could get maybe 30 cents on the dollar from targeted strategic disposition, that lifts us up.” to $28 billion,” Rogers said.
“At $28 billion, having Woot or Amazon Outlet, now that makes a lot more sense because we’re really starting to get a return on our investment,” he said. “Back when we were on a small scale, it was like, ‘This is garbage, get rid of it.’ Now as we get bigger, they’re scaling to the point of monetizing those returns, it would actually be irresponsible not to.”
But reverse logistics experts say the best way to reduce waste and lower the expense of returns is to prevent them from happening in the first place and then create disincentives for returning goods.
“The industry at large would bow to Amazon in a heartbeat if Amazon started charging for returns because it would give them air cover to do the same thing,” Cohen said.