Where Online Returns Really End Up And What Amazon Is Doing About It

Sending back an online order has never been easier. It’s often free for the customer, with some retailers even allowing customers to keep the item while offering a full refund.

Amazon returns can be dropped off at Kohl’s, UPS or Whole Foods without boxing it up or even printing a label.

But there’s a darker side to the record number of returns flooding warehouses after the holidays.

“From all those returns, there’s now nearly 6 billion pounds of landfill waste generated a year and 16 million metric tons of carbon dioxide emissions as well,” said Tobin Moore, CEO of returns solution provider Optoro. “That’s the equivalent of the waste produced by 3.3 million Americans in a year.”

Moore says online purchases are at least three times more likely to be returned than items bought in a store. In 2021, a record $761 billion of merchandise was returned, according to estimates in a new report from the National Retail Federation.

That report says 10.3% of those returns were fraudulent. Meanwhile, Amazon third-party sellers told CNBC they end up throwing away about a third of returned items.

“Somebody has to pay for that,” said Micah Clausen, who sells party supplies and home goods on Amazon under a third-party store named Iconikal. “It’s falling back on either Amazon or the third-party seller. It comes out of their bottom line and inevitably makes prices go higher.”

UPS predicts the 2021 holiday season will see a 10% increase in returns compared to the year-earlier period, which translates into more waste — and expense — for all online retailers.

At the head of the pack, Amazon has received mounting criticism over the destruction of millions of items. Now the e-commerce giant says it’s “working toward a goal of zero product disposal.” Last year, it launched new programs to give sellers like Clausen new options to resell returns, or send them to be auctioned off on the liquidation market.

Liquidity Services consumer marketing manager Meredith Diggs explains one way e-commerce has normalized shopping habits that lead to more returns.

“Wardrobing [is] where people will order the same thing in three different sizes to see which one fits and then they return the other two, not realizing that those other two most of the time don’t go back on that retailer’s shelves,” Diggs said.

“Categories like apparel see really, really high return rates in the 10s of percents,” added Raunak Nirmal, who used to work at Amazon and now runs an Amazon aggregator, Acquco, with more than 40 third-party brands. His return rate is closer to 3%.

“If it’s a new product, Amazon would allow that product to get resold on the listing as new, but it really needs to be in pristine condition for that to happen and that’s more rare than you would expect, even if the customer hasn’t used the product at all,” Nirmal said.

When an item can’t be sold as new, Amazon gives the seller up to four options for what to do with returns: each with a fee: Return to Seller, Disposal, Liquidation, or (by invitation only for now) Fulfillment by Amazon Grade and Resell.

With the Return to Seller option, the return leaves the Amazon warehouse for several more legs on a truck, plane or cargo ship. It heads back to the seller for further processing, then it could go off to another Amazon warehouse for sorting and repacking, then on to a new customer, who could always choose to return the item again.

“You’re essentially forced to decide if you want to recall that inventory to your warehouse — which is an expensive process — repackage it yourself, and then ship it back into a warehouse to sell, which doesn’t make sense I would say 80% to 90% of the time. Or you could choose to dispose it,” Nirmal said.

Disposal is an all-too-common fate for returns from many of the biggest online retailers. In a statement, Amazon told CNBC, “No items are sent to landfill. We are working towards a goal of zero product disposal and our priority is to resell, donate to charitable organizations or recycle any unsold products. As a last resort, we will send items to energy recovery, but we’re working hard to drive the number of times this happens down to zero.”

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Where Online Returns Really End Up And What Amazon Is Doing About It