Amazon is dealing with a rapidly growing number of returns, which is causing a huge problem for the e-commerce giant and the planet.
A study by the National Retail Federation found that a record $ 761 billion in goods was returned to retailers in 2021. That amount exceeds $ 741 billion spent by the United States on national defense in 2021.
Amazon will not share its total return, but in 2021 the National Retail Federation estimates that 16.6% of all goods sold during the holiday season were returned, up 56% from the previous year. . For online purchases, the average return rate was even higher, at nearly 21%, up from 18% in 2020. With $ 469 billion in net sales last year, Amazon’s return figures are probably staggering.
Returns to the United States generate 16 million metric tons of carbon emissions during their complex return journey and up to 5.8 billion pounds of landfill waste each year, according to return solution provider Optoro.
“We are talking about billions, billions and billions [dollars of] waste that is a by-product of the Vilnius consumerist, ”said Mark Cohen, director of retail research at Columbia Business School and former CEO of Sears Canada.
“Reverse logistics will always be nasty, because in most cases the goods cannot be resold as they were originally,” Cohen said. “The best way is in a garbage can, in a landfill.”
Amazon told CNBC it did not send items to landfills, but relied on “energy recovery” as a last resort.
“Recovering energy means burning something to produce heat to produce energy. And you are rationalizing the disposal of goods as a conversion from one form of matter to another,” Cohen said. “To the extent that they do that, I don’t think they reveal it completely.”
Amazon has said it is “working towards a zero-disposal target”, although it will not set a target date to achieve that target.
“We’re promoting a second life for all the products we get back,” said Cherris Armor, head of Amazon’s North American returns, in an exclusive interview with CNBC.
“And that comes in the form of selling most of the items we get. They are resold as new and used, or returned to the seller or supplier, or we donate them, “said Armor.
Energy recovery, Armor added, is only for “non-recyclable or non-recyclable items” due to legal or hygienic reasons or product damage.
Armor first joined Amazon 12 years ago, starting as a night shift operations manager at the Indianapolis Performance Center. She said the goal of zero product disposal is something Amazon has been talking about for many years.
Cheris Armor, head of Amazon’s reverse logistics in North America, posed with two other Amazon employees at the Phoenix Performance Center in Arizona in November 2021.
Amazon
Easy returns are good business, but then what?
Researchers have found that consumers love easy returns.
A frequently 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 deterred from buying if they knew they would have to pay for reverse sending. In 2019, Amazon expanded the free and easy return of millions of items.
“Amazon has really changed the game in the world of reverse logistics because of how easy it is to return them,” said Zach Rodgers, who managed returns for an Amazon subsidiary called Quidsi from 2010 to 2012, before becoming a chain management assistant. supplies at Colorado State University.
“So now you have more traditional retailers like Walmart or Target that have such policies, because that’s really a big part of the way you compete at retail,” he said. “This creates brand loyalty, makes you more likely to register [Amazon’s] Prime, and Prime is really what drives this company’s flywheel. “
Amazon now allows the return of 18,000 seats, including the option to leave items without a box or label at Kohl’s, UPS and some Whole Foods stores. There’s a Try Before You Buy for Prime members program designed to make returning clothes even easier, with return labels already included in the box. At the end of the easy return, Amazon is increasingly allowing customers to keep some “returned” items while recovering them.
“If I tell you to keep the product, instead of counting the cost and carbon impact of returning it, I look better as a company, don’t I?” Said Tony Schiarotta, executive director of the Reverse Logistics Association. “Let’s let people keep it and then it won’t respect us. But now you, as a consumer, what can I do with this thing, right?”
Now Amazon has to solve the problem of what to do with the returns at the back end.
Amazon spent nearly $ 152 billion on logistics in 2021 – almost a third of all net sales. That’s up from $ 119 billion in 2020. A factor of return on these costs, so anything Amazon can do to reduce those costs will help the company’s end result.
“They will do it for their own interests, although they will do it for the sake of saving the planet,” Cohen said. “But at the end of the day, their actions will be based on the economy of what we see.”
To that end, in 2019, Amazon launched a donation program that allows U.S. retailers to automatically donate surplus and returned goods to a network of 100,000 local charities through a partnership with the Good360 nonprofit network. The organization works with about 400 companies, including giants such as Walmart, CVS and Nike, but says Amazon is its largest corporate donor.
Good360 says it coordinates with local charities for direct pickups at more than 230 Amazon facilities, helping Amazon save on transportation costs as gas prices reach record highs. Non-profit organizations pay Good360 a fee to cover transportation costs.
They also agree to certain rules before gaining access to Amazon donations.
“They will not resell these items, put them on online auction sites, take them to local flea markets or anything like that. So protecting the brand integrity of our donors is really essential to what Good360 does, ”said Shari Rudolph, Good360’s Chief Development Officer and CMO.
There are also potential tax write-offs that can come with a donation from a non-profit organization.
“There are some programs that are available,” Rudolph said. “I have no idea what the Amazon team is taking advantage of, if anything else.
Good360 Operations Manager Regina Freeman is working on Amazon’s September 2020 return to Baltimore, Maryland.
Jim Haling photo
Secondary market
There is also a boom in the secondary market that makes it easier to make money from second-hand goods. Against the backdrop of growing pressure from younger shoppers looking for sustainable shopping opportunities and a supply chain lag that causes a shortage of new goods, Colorado Rodgers estimated the size of the secondary market for 2021 at $ 688 billion, compared to $ 649 billion in 2020
As second-hand goods have become a potential source of money, Amazon has launched two new returns recovery programs in 2020. It now gives retailers the ability to liquidate returns by sending them to large third-party liquidators such as Liquidity Services to help them. trade on the secondary market.
Also in 2020, Amazon began offering select resellers the option to evaluate and resell returns. With this option, Amazon evaluates the returned item and evaluates it – as new, very good, good or acceptable – then resells it in special sections on its website. There are offers for second-hand warehouses, Amazon Renewed for refurbished items, Amazon Outlet for overstocks and a site for everyday transactions called Woot! who sells a “bag of nonsense” for $ 10. Amazon even offers customers gift cards to trade in their used Amazon devices, which they can try to upgrade and resell.
“We expect these programs to help give a second life to more than 300 million units a year,” Armor told Amazon.
It’s just a smart business, said Rodgers, a former Quidsi employee.
“Let’s assume that the return is 20%, that’s $ 93.8 billion return. If instead of getting pennies on a dollar from a rescue trader, you could get maybe 30 cents on a dollar from a strategic target location, that brings us up to $ 28 billion, “Rodgers said.
“With $ 28 billion, having a Woot or Amazon Outlet, it makes a lot more sense now because we’re really starting to get a return on our investment,” he said. “Before, when we were on a small scale, it was like ‘This is rubbish, get rid of it.’ Now that we’re getting bigger, they’re growing to the point where monetizing that return would actually be irresponsible not to. “
But reverse logistics experts say the best way to reduce waste and reduce return costs is to first prevent them from occurring and then create a barrier to returning goods.
“The industry as a whole will bow to Amazon for a moment if Amazon starts charging for returns because it will give them air coverage to do the same,” Cohen said.