Member Exclusive   //   December 14, 2023

Amazon Briefing: How brands are preparing for the onslaught of January returns

This is the latest installment of the Amazon Briefing, a weekly Modern Retail+ column about the ever-changing Amazon ecosystem. More from the series →

While many Amazon brands breathed a sigh of relief after Black Friday and Cyber Monday, another major hurdle awaits: an avalanche of returned items.

Returns are nothing new, especially for a platform like Amazon. The NRF estimates that shoppers returned 17% of the products they bought in 2022, costing retailers over $800 million. And, Amazon has long been considered one of the platforms with the highest return rates — largely due to how easy it is for Prime customers to facilitate the process. One brand previously told Modern Retail that its return rate during the holidays exceeded 15%, while the return rate on its DTC site hovered around 2%.

Now, brands and agencies are trying their best to mitigate the problem — if such a feat is possible. Sellers are changing their packaging to try and make sure items have the best chance of being resold if returned. Others are leveraging partnerships to try and find new ways to sell returned items. Some products come adorned with new labels on to try and dissuade customers from returning them. Meanwhile, even Amazon has made slight changes to try and dissuade the practice.

According to Ryan Craver, founder of e-commerce agency Commerce Canal, one of the big ways he has been able to lessen the blow from excess returns is by trying to resell as many products as possible. It’s a persistent issue — Craver estimates that the return rate has increased about 14% year over year for the brands he works with.

For brands that use Amazon to fulfill their products, returned items face one of two ends. Once the product is received, Amazon inspects it and either deems it ready to be restocked and resold or that it’s damaged. In the latter case, Amazon lets brands have the items shipped back where they can deal with the products — otherwise Amazon will get rid of them.

“We sell a lot of apparel,” Craver said. “So I figured we needed to come up with a solution.”

Craver has begun striking up partnerships with UPS stores as a way to try and resell the stock that Amazon rejects. “We believe we are recouping 40% to 45% of what Amazon deems as unsellable — and it’s usually due to packaging,” he said. For those items that are still good but simply had some issue with what it was wrapped in, they are then put on other marketplaces like eBay or Postmark.

Other Amazon merchants are trying to nip the returns problem in the bud. Eva Hart, an Amazon brand owner and growth expert at Jungle Scout, has begun noticing slight changes in how items are showcased as a way to stop people from returning.

“I ordered an ugly sweater for a party a couple of weeks ago,” Hart said, “And it had this big green tag that said ‘if this is removed, you’re not able to return it.'” This type of tactic is becoming increasingly common — creating barriers to at least try and make a customer think about how they handle a product if they are considering sending it back. “I’m hearing buzz in the industry about… having that tag — making more rules,” Hart said.

But, of course, much of it is smoke and mirrors. One of Amazon’s core offerings is that people can easily return the items sent to them. Indeed, Amazon has been adding physical hubs like Kohl’s, UPS stores and Whole Foods as places for customers to drop off recent purchases. As such, these tags are a mere scare tactic; “I’m not sure how much they can really enforce it,” said Hart.

Beyond veiled threats, other packaging changes have been implemented this year aimed at ensuring items can be restocked. “Early in the year, what we advised to all of our clients was to go with different packaging that was a bit more return-friendly,” said Craver. That is, using materials that don’t easily rip or get damaged. “If it’s something that’s shrink-wrapped or poly-wrapped, it’s easier to return,” he said.

Overall, there’s an industry-wide realization that brands and retailers need to be more financially equipped to handle returns. Post-purchase platform Narvar expects this year to be largest year of digital returns, in terms of overall volume.

But not all of those returns are going to be free: 40% of retailers Narvar works with are charging for returns at some point in the process, up from about 30% a year ago. “Across the industry as a whole, we’ve seen more retailers start to charge for returns for at least some of their customer base,” said David Morin, vp of customer strategy at Narvar.

Similarly, Morin said, much of the focus right now is on making sure products get returned as pristine as possible. “There is a lot of conversation about how does a retailer reduce the return rate overall,” he said. “How do you make sure things are back into a sellable fashion quick and with higher confidence?”

Still, Morin pointed out, returns are an expected part of the overall holiday season. And it behooves brands and retailers to walk the tightrope of trying to reduce the overall rate while not alienating customers. “Instead of thinking about returns as a lost sale,” Morin said, he talks with clients about “how do you help the consumer get what they actually wanted or keep the money [that they previously spent] in the ecosystem?”

Even with brands trying to mitigate the problem, Amazon certainly isn’t going to make any major changes to the services — like free shipping — that it offers to customers. “Obviously this is the biggest season of returns,” said Jungle Scout’s Hart. For brands, it’s just something they’ll have to continue to deal with. “You have to take the good in with the bad.”

Amazon news to know

  • Online platform Zulily is suing Amazon over alleged price fixing. Zulily said that its suppliers were worried about being penalized by Amazon so it had to keep prices high on all other platforms.
  • Amazon is launching a new feature called Your Books to help its users keep track of their ebooks and also offer recommendations. It looks very similar to GoodReads, a service Amazon also owns.
  • An executive at Amazon drone arm has reportedly left the company. Sean Cassidy, Prime Air’s director of safety, flight operations and regulatory affair, announced his resignation internally last week.

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