Easy returns cause big trouble for Amazon sellers, but return rates show signs of slowing

Amazon’s hassle-free return policy is a major draw for consumers, but it presents significant challenges for the small businesses that comprise a large portion of the marketplace. Many sellers have expressed frustrations over rising return rates, with some choosing to exit Amazon’s Fulfillment by Amazon (FBA) program entirely due to the financial strain. The surge in return fraud has become a critical issue, resulting in incidents where customers have received used or contaminated items. Rachelle Baron, who runs Beau and Belle Littles, shared a troubling experience where her reusable swim diapers were reshipped to customers after being returned in unsanitary conditions. "There were actually two diapers that were sent out that were poopy," she recounted, highlighting the impact of such incidents on her business. According to a report from the National Retail Federation, nearly 14% of all retail returns in the U.S. were fraudulent in 2024, a significant jump from 5% in 2018. This rise in returns has cost retailers an estimated $890 billion this year alone. In response, Amazon has implemented new fees for sellers whose return rates exceed set thresholds, which has prompted some sellers to reconsider their pricing strategies. Helium 10, an e-commerce analytics group, reported a nearly 5% drop in return rates for U.S. sellers following the introduction of these fees. Zoe Lu, the General Manager of Helium 10, noted that these measures are forcing sellers to improve the quality of their listings and products. Additionally, Amazon began labeling frequently returned items with warnings, which may also have contributed to the decrease in return rates. However, the new fees are also leading to increased prices for consumers. A survey from SmartScout indicated that 65% of sellers have raised prices in 2024 due to changes in Amazon’s fee structure and the costs associated with return fraud. Mike Jelliff, who sells musical equipment through his brand GeekStands, reported that his return rate on Amazon is three times higher than on other platforms. He has taken measures to combat fraud by installing surveillance cameras in his warehouse to document every step of the return process. Jelliff has created a blacklist of repeat offenders, emphasizing that Amazon’s policies often allow problematic customers to continue making purchases. Despite the challenges, Amazon claims to have a zero-tolerance policy for fraudulent returns and actively takes steps against scammers, including denying refunds and verifying customer identities. However, many sellers feel that more accountability is needed from the platform. The issues surrounding returns have prompted some sellers, like Lisa Myers of Ceres Chill, to leave the FBA program altogether. Myers experienced a particularly disturbing situation where a product was sent to a customer containing someone else's spoiled milk. "To have something dangerous, like somebody else's bodily fluids, in your kitchen is unacceptable," she said, explaining her decision to outsource returns to a specialist company. GoodBuy Gear, which specializes in reselling baby products, has seen significant growth as sellers look for alternatives to Amazon's handling of returns. Founder Kristin Langenfeld noted that her business has expanded by 50% year-over-year, underscoring the demand for more reliable return solutions. As the returns crisis continues, it has raised environmental concerns as well. An estimated 29 million metric tons of carbon emissions resulted from returns in 2024, with a staggering 9.8 billion pounds ending up in landfills. Amazon has faced scrutiny for its disposal practices but has stated a commitment to reducing product waste. The company is exploring options for reselling or donating returned items to minimize environmental impact. While Amazon has introduced various initiatives to improve its returns process, the experience of many sellers underscores the complexities and challenges that come with the platform’s return policies. As businesses navigate these turbulent waters, the focus remains on finding solutions that prioritize both consumer satisfaction and seller sustainability.