The concealed expenses of Amazon returns

The Conversation originally published this article.

While online stores have the potential to streamline the shopping experience, they also have a dark side that most consumers are unaware of.

Imagine you decide to shop on Amazon for Father’s Day gifts and yourself, and end up buying an electric toothbrush and two t-shirts. After unpacking your order, you discover that only one of the t-shirts is the right size, and the electric toothbrush won’t charge. You decide to send back the unflattering tee and the power toothbrush.

This sort of return may seem simple, and in most cases it is. As a result of the high cost of processing returns, many items that are sent back to stores are eventually discarded.

About $816 billion in sales will be lost by retailers due to returns in 2022. That’s nearly twice the cost of returns in 2020 and almost as much as the United States spent on public schools. About 24 million metric tonnes of greenhouse gas were released into the atmosphere from the return process in 2022 due to transportation and product packing.

I keep up with developments in retail logistics as a scientist specialising in supply chain management. Let’s peek further into the mysterious world of merchandise returns.

Returns begin with miles of transport

You put the unwanted t-shirt and electric toothbrush back in their original packaging and drove them to UPS, since they have a deal with Amazon to accept free returns. And now what?

These items are transported by UPS to the retailer’s return processing warehouses. Costing the retailer $66, or 66% of the price of a product priced at $50 based on a single quote, this step of the process also results in the emission of carbon dioxide due to the extensive travel required by trucks and aeroplanes to deliver the goods. The returned bundle’s plastic, paper, or cardboard contents are thrown away.

It takes twice as long to process a return as it did to ship the original order because the item must be unpacked, inspected, repacked, and rerouted. That adds more costs for the company, especially in a competitive job market. The products must be unloaded manually, inspected, and action taken based on the return factor.

Restocking and reselling ways more miles

An employee at the storage facility would repackage the clothing and ship it to another storage facility if they thought it was saleable.

The t-shirt is ready to be loaded and sent as soon as another buyer places an order.

Having customers make returns in-store can greatly reduce costs associated with storage and transportation, but customers may find it inconvenient to make the trip to the store. Approximately 26% of all internet purchases are returned by their original purchasers.

Refurbishing, if repair work expenses less than the item

If an item in storage is defective, like the electric toothbrush we used as an example, the worker may return it to the manufacturer for servicing. More greenhouse gases would be produced as it was wrapped and loaded onto a truck and possibly an aeroplane before being sent out to the manufacturer.

If the electric toothbrush can be fixed, the refurbished product can be sold to consumers once more, usually at a reduced price.

The process of reconditioning returned items is more environmentally friendly than buying new products since it helps to achieve a closed-loop supply chain in which objects are recycled rather than thrown away.

However, there are instances where the price of repairs exceeds the item’s resale value. It may be more cost-effective for a store to just dispose of an item rather than pay the higher costs associated with restocking or refurbishing it.

Land fills are a typical end for returns

The future of the t-shirt and electric toothbrush is bleak if the company cannot make a profit by reselling them. Some are sold on a wholesale basis to big-box retailers. The vast majority of products that are returned are destined for landfills, often in foreign countries.

According to a remark from the return innovation platform Optoro, approximately 5 billion pounds of garbage from returns was shipped out to land fills in 2019. The estimated waste had nearly doubled by 2022, reaching around 9.5 billion pounds.

Period of complimentary returns may not last

Consumers who wanted to return items by mail in the past were usually expected to pay the shipping costs themselves. Free returns and convenient drop-off locations, such as UPS or Kohl’s stores, changed that. To stay competitive, many other retailers began offering free returns on purchases as well.

It’s possible the pendulum is starting to swing back. From 2021 to 2022, the share of retailers who accepted deliver returns for credit rose from 33% to 41%.

Many different strategies are being employed by retailers in an effort to reduce the return rate, waste, and losses that are ultimately passed on to consumers in the form of higher prices.

Some stores have limited the number of returns you can make in a certain time period, ceased accepting returns altogether, or both. Better quality photos and videos that accurately display size and colour are also helpful in reducing clothing returns, as are virtual dressing rooms. Customers may help reduce retail’s growing environmental footprint if they make use of such tools and pay attention to sizing.

This short piece first appeared on The Conversation and has been reposted here with permission. Read the first article we posted.

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