How Amazon’s Broken Returns Process Is Driving Sellers To Leave Amazon

Summary

Amazon’s low-friction returns experience helps attract shoppers, but the costs and risks can fall heavily on sellers. Return shipping, inspection, fraud, and resale decisions can make some products uneconomic to recover. Sellers interviewed described raising prices, limiting their exposure to Fulfilled by Amazon (FBA), or moving returns to specialist providers. Amazon has introduced new fees and seller tools that may be reducing return rates, but sellers say they still have limited control over what happens to returned goods.

Business impact and key metrics

• Returns are costly: In 2024, nearly 17% of sales were returned—more than double the rate five years earlier. The estimated cost to retailers was $890 billion. Processing a return can cost about 30% of an item’s price, and one seller said it takes selling two to three additional products to break even on a return.
• Fraud and misuse are increasing: Retailers reportedly estimated that nearly 14% of returns were fraudulent in 2024, up from 5% in 2018. A separate survey found 64% of shoppers admitted to “wardrobing” at least monthly in 2024, nearly three times the 2023 level; 75% said they had exaggerated or embellished a return reason.
• Amazon exposure can mean higher return rates: Music-gear sellers Mike and Joylynn Jelliff said Amazon accounted for nearly 70% of their $2.8 million annual sales, and their Amazon return rate was more than three times their rate across eight other marketplaces. Other sellers cited Amazon return rates of 6–8% versus under 1% for direct website sales, or 4.5% on Amazon versus under 1% on Shopify.
• Fees can feed into prices: Amazon charges customers a $1 fee for some UPS-handled returns and introduced an additional FBA returns fee for products exceeding certain category thresholds. The extra fee varies by weight, from $1.65 to $160 or more. A SmartScout survey found 65% of sellers raised prices in 2024 because of Amazon fee changes; one seller said fraud alone prompted a 10% price increase.
• Returns have environmental costs: Optoro estimated that returns generated 29 million metric tons of carbon emissions and 9.8 billion pounds of landfill waste in 2024.
• Seller margins can become precarious: One seller said return fraud and abuse left the business with just over 1% net profit on Amazon.

Processes, policies, and business playbooks

• Use tighter inspection and disposition processes. GoodBuy Gear checks returned baby products against product-specific criteria, including recalls and common defects. Items may go through as many as 50 checks; each is handled by four employees and inspected for about 15 minutes. The company sends brands photos and inspection details so they can decide whether to resell, donate, or discard an item.
• Document returns to support fraud claims. The Jelliffs installed 40 cameras to record outgoing products, incoming returns, and unboxing. They said Amazon’s fraud-appeal tools—including multiple appeals and requests for photos—helped them contest false claims.
• Evaluate whether to recover, refund, or let the customer keep the item. Sellers noted that return shipping and handling can exceed an item’s value. Amazon now lets FBA sellers choose, in some cases, to tell customers to keep an item or not to resell returned goods.
• Reduce automatic returns where possible. Amazon began allowing sellers to opt out of auto-generated return labels again for some items over $100 in 2023. The Jelliffs said their return rate fell after opting out and using other return-management tools.
• Improve product listings and product quality. One seller viewed Amazon’s return-rate thresholds and its “frequently returned” warning labels as pressure to improve listings and products. An e-commerce group observed U.S. Amazon seller return rates fall nearly 5% in September, a couple of months after the new threshold fee was introduced. The report said Amazon’s changes may have contributed, but were not the only possible factor.
• Compare marketplace reach with control and margin. Several sellers said they would prefer to reduce their Amazon reliance but stay because customers shop there. One seller aimed to shrink Amazon’s share while maintaining access to its customer base; another left FBA despite losing the Prime badge because of concerns about product safety and brand reputation.
• Consider specialist reverse-logistics partners. GoodBuy Gear focuses on inspecting and reselling baby gear, offering a more tailored alternative to high-volume marketplace processing. It reported 33 new seller sign-ups in 2024, three times the prior year, and 50% year-over-year business growth.

Examples and operational lessons

• Product safety can outweigh fulfillment convenience. Ceres Chill inventor Lisa Myers said Amazon resold a returned breastmilk chiller containing another customer’s rotten milk. After a negative review, she stopped FBA sales and outsourced returns to GoodBuy Gear, accepting the loss of FBA benefits rather than risk another safety incident.
• A single bad return can damage a small brand. Reusable swim-diaper seller Rachelle Barron said Amazon sent a returned diaper with dried feces to a customer as new. The resulting review coincided with a sharp sales decline; she said the business had been doing about $1 million in sales before the incident.
• Returned goods require category-specific judgment. Sellers showed examples including empty boxes, bricks substituted for products, used Halloween costumes, damaged car seats, contaminated baby gear, and items returned with personal or bodily fluids. Such goods may be unsafe or unsuitable for resale as new.
• A dedicated returns business can turn waste into inventory. GoodBuy Gear began after its founder saw usable strollers and car seats slated for destruction. The company aims to give 200,000 items a second home in the year described and was expanding to a larger warehouse in Columbus, Ohio.
• Returns policies affect customer communication. Sellers said direct website customers can ask questions before purchasing, while Amazon’s marketplace makes seller-customer interaction more difficult. They associated direct support with lower return rates, particularly for products that require instruction or practice.

Resale, recovery, and disposal

Amazon says the vast majority of returns are resold as new or used, returned to selling partners, liquidated, or donated. Its programs include:

• Grade and Resell: Amazon evaluates eligible FBA returns and lists them as used.
• FBA Liquidations: Sellers can recover some value by selling goods in bulk through liquidation partners.
• FBA Donations: Eligible overstock and returns can be donated through Good360.
• Amazon Resale, Renewed, and Outlet: Channels for used or open-box, refurbished, and overstock products, respectively.

Amazon said these seller programs give a second life to more than 300 million items annually. The company’s previously stated goal of zero product disposal was still in progress three years later, with no timeline provided. Amazon says unrecoverable items may be sent for energy recovery as a last resort, including for legal, hygiene, or product-damage reasons.

Presenters and sources

No named on-camera host or presenter is identified in the subtitles. Sources featured or cited include CNBC; Amazon; sellers and businesses Kristin Langenfeld of GoodBuy Gear, Rachelle Barron, Mike and Joylynn Jelliff, Lorie Corlett, Lisa Myers of Ceres Chill, and Cathryn Lavery of BestSelf; and data or industry sources Optoro and SmartScout. The segment also references Liquidity Services and nonprofit Good360.