Amazon’s Plan To Fix Its Multi-Billion Dollar Returns Problem

Summary

The transcript delves into the growing issue of e-commerce returns, which have surged due to the ease of online shopping, particularly on Amazon. It explores the environmental and financial impact of returns, highlighting the company's efforts to reduce waste through reselling, donations, and liquidation programs. Despite challenges, Amazon is committed to minimizing product disposal, aiming for a zero-product disposal goal. However, convenience for customers and the rise of the secondary market present complications, as Amazon tries to balance customer satisfaction with sustainability. Experts suggest a long-term focus on preventing returns rather than just processing them.

Takeaways

• 😀 Amazon's e-commerce growth has led to a huge increase in returns, creating environmental and logistical challenges.
• 😀 In 2021, returns in the U.S. reached a record $761 billion, which is higher than the U.S. government's national defense spending.
• 😀 Amazon makes returns incredibly easy for its Prime members, with options like scanning a QR code at Kohl's or Whole Foods, allowing returns without packaging.
• 😀 Amazon is working towards a goal of zero product disposal, aiming to reduce waste generated by returns.
• 😀 Amazon resells, liquidates, and donates returned products to minimize waste, with plans to give 300 million units a second life annually.
• 😀 Amazon's return policies foster loyalty, as 96% of online shoppers are more likely to return to a retailer with an easy returns process.
• 😀 Despite the increased returns, Amazon faces significant environmental impacts, with returns contributing to carbon emissions and landfill waste.
• 😀 Amazon has launched several programs like donation options, liquidation programs, and resale channels to reduce the environmental toll of returns.
• 😀 The secondary market for returns is booming, driven by younger shoppers who prioritize sustainable options.
• 😀 Amazon's donations program has been growing, with over 56 million items donated in 2021, supporting nonprofits and reducing waste.
• 😀 Reverse logistics costs Amazon significantly, with returns costing up to 66% of an item's original price, contributing to increased Prime membership fees and seller charges.

Q & A

What is the environmental and economic impact of e-commerce returns?

E-commerce returns have significant environmental and economic costs. In 2021, merchandise returns totaled $761 billion, which is more than the U.S. government's spending on national defense. The returns create billions of pounds of landfill waste and generate millions of metric tons of carbon emissions annually.

How does Amazon handle returns from its customers?

Amazon makes returns as easy as possible for its customers. Customers can return items at various locations like Kohl's, UPS stores, and Whole Foods Market by scanning a QR code. In some cases, Amazon even tells customers to keep the item, instead of returning it.

What programs has Amazon launched to address the issue of returns and waste?

Amazon has launched several programs aimed at reducing waste from returns. These include initiatives to resell, liquidate, or donate returned items, with a goal of giving a second life to 300 million units annually.

What is Amazon's goal regarding product disposal, and why is it important?

Amazon has set a goal to achieve zero product disposal. This goal reflects the company's responsibility as a major player in the retail space and its commitment to sustainability. Achieving this goal will help minimize environmental impact and reduce waste.

What challenges does Amazon face in trying to resell returned products?

Many returned products cannot be resold in their original condition due to damage, hygiene concerns, or legal reasons. As a result, Amazon must find alternative ways to handle these items, such as liquidating or donating them.

How does Amazon's return policy influence consumer behavior?

Amazon's easy return policy encourages customers to buy more, knowing they can return items without hassle. This has led to behaviors like ordering multiple sizes or colors and returning what doesn't work, contributing to higher return rates.

How does Amazon deal with the environmental costs of returns?

Amazon works to minimize the environmental costs of returns by promoting the resale of returned products, donating eligible items, and in some cases, using energy recovery methods for items that cannot be reused or recycled.

What are some of Amazon's innovative programs aimed at reselling returned products?

Amazon's Grade and Sell program allows sellers to resell returned products at a discounted price. The products are graded based on condition (like new, very good, good, or acceptable) and sold on Amazon's specialized sections such as Warehouse Deals, Amazon Renewed, and Amazon Outlet.

How does Amazon's liquidation program work?

Amazon's liquidation program allows sellers to recover costs from excess inventory and returns by selling these items to liquidators. The liquidators then resell the goods on the secondary market, which helps avoid waste and provides a way for Amazon and its sellers to recoup losses.

What role does Good360 play in Amazon's donation efforts?

Amazon partners with Good360, a nonprofit organization, to donate returned and excess products. Through this partnership, Amazon channels millions of items to over 100,000 nonprofits, helping keep products out of landfills and providing valuable resources to communities in need.