Sending back an online order has never been easier. It’s often free for the buyer, and some retailers even allow buyers to keep the item for themselves by offering a full refund.
Amazon returns can be dropped off at Kohl’s, UPS, or Whole Foods without packaging or even printing a label.
But there’s also a darker side to the record number of returns flooding warehouses after the holidays.
“Out of all these returns, about 6 billion pounds of landfill waste is currently generated annually, as well as 16 million metric tons of carbon dioxide emissions,” said Tobin Moore, CEO of return solutions provider Optoro. “That’s the equivalent of the waste produced by 3.3 million Americans a year.”
Moore says that online purchases are returned at least three times more often than in-store items. A record $761 billion worth of merchandise returns in 2021, according to a new report from the National Retail Federation, is estimated.
This report states that 10.3% of these returns were fraudulent. Meanwhile, third-party Amazon sellers told CNBC that they end up throwing away about a third of returned items.
“Someone has to pay for this,” said Mika Clausen, who sells party and home goods on Amazon at third-party store Iconikal. “He resorts to either Amazon or a third-party seller. It comes from their profits and inevitably drives prices up.”
UPS predicts that during the holiday season 2021, profitability will increase by 10% compared to the previous year, which will lead to increased losses and costs for all online stores.
Amazon, which leads the group, is under increasing criticism for destroying millions of products. Now, the e-commerce giant says it’s “working to achieve its zero product goal.” Last year, the company launched new programs to give sellers like Clausen new opportunities to resell returns or auction them off in the liquidation market.
Liquidity Services Consumer Marketing Manager Meredith Diggs explains how e-commerce has normalized shopping habits, resulting in higher profits.
“Wardrobe [is] when people order the same item in three different sizes to see which one fits and then return the other two, not realizing that those two don’t go back to that retailer’s shelves most of the time,” Diggs said.
“In categories like apparel, the return rate is very, very high — several tens of percent,” added Raunak Nirmal, who used to work at Amazon and now runs Amazon’s aggregator, Acquco, with more than 40 third-party brands. Its return percentage is closer to 3%.
“If it’s a new product, Amazon will allow you to resell that item on the list as new, but it really needs to be in pristine condition to do so, which happens less often than you would expect…” Nirmal said.
When an item cannot be sold as new, Amazon provides the seller with up to four options for how to deal with returns: each with a fee: Return to Seller, Recycle, Eliminate, or (currently by invitation only) fulfill Amazon Rate and Resell.
With the “Return to Seller” option, the return leaves the Amazon warehouse for several more stages by truck, plane, or cargo ship. It goes back to the seller for further processing, then it can go to another Amazon warehouse for sorting and repacking, and then to a new buyer who can always return the item again.
“You essentially have to decide if you want to recall that inventory to your warehouse — which is an expensive process — repack it yourself and then send it back to the warehouse for sale, which I would say doesn’t make sense. Or you can get rid of him,” Nirmal said.
Recycling is an all-too-frequent fate of returns for many of the largest online retailers. Amazon said in a statement that “Items are not sent to landfill. We are working towards zero product recycling and our priority is to resell, donate to charities or recycle any unsold products. As a last resort, we will send items for energy recovery, but we are working hard to reduce the number of such cases to zero.
“Energy recovery” often means burning it. According to the US Environmental Protection Agency, it is “the conversion of non-recyclable waste into usable heat, electricity, or fuel through a variety of processes, including incineration, gasification, pyrolysis, anaerobic digestion, and landfill gas utilization.”
“Honestly, I was really shocked by the items that the computer system tells you to destroy,” said Shay Machen, a seasonal worker at Amazon’s return center in Mississippi. “The book was returned to me, it was a children’s book, and the buyer said it was broken on arrival and bent, which is not the case. And whatever I entered into the system, it said to destroy the item. And it was heartbreaking.”
Recycling returns is a common practice in e-commerce. Luxury retail brands like Burberry have been criticized in the past for burning millions of unsold merchandise to protect their brands. Burberry told CNBC that it ended the practice in 2018. An H&M spokesperson stated, “The product carriers mentioned were moldy or did not meet our chemical limits.” Similar claims were made against Coach, Urban Outfitters, Michael Kors, Victoria’s Secret, and J.C. Penney.
“That’s the easiest thing to do and sometimes some brands do it because, you know, they want to protect their brand and they don’t want fewer value products on the market,” Moore said.
Some brands, like Nike, have found creative ways to recycle returns, turning them into new, valuable items.
“Some of the shoes they can’t sell can end up being ground up and turned into tracks,” Moore said. “It takes energy to grind and turn things into other things. I think in the first place if you can sell it in its original form, that’s the best scenario for the environment.”
Amazon has a number of programs designed to do just that. For certain electronics such as Amazon devices, phones, and video games, this gives customers the option to ship them to a certified recycler or exchange them for Amazon gift cards. And since 2019, its FBA donation program allows merchants to automatically offer eligible surpluses and give back to charitable groups through the Good360 non-profit network. Amazon says more than 67 million items have been donated so far.
Amazon also announced two new homecoming programs last year after UK broadcaster ITV reported that the company was destroying millions of items such as TVs, laptops, drones, and hair dryers in a single warehouse in the UK.
First, there’s liquidation, which Amazon is now offering sellers as an option instead of recycling.
Amazon and other major retailers are partnering with liquidation marketplaces such as Liquidity Services and B-Stock Solutions, which sell unwanted inventory to resellers in bundles or even trucks.
“You can get back about 5% of the selling price if your product can be liquidated,” Nirmal said. “And eventually it will end up in someone’s hands, who hopefully will be able to use it.
YouTube creators like Hope Allen have gained fans by searching for deals online, and liquidation pallets have become a popular trend. Last year, she paid $575 for a pallet of Amazon returns on Liquidation.com, supposedly worth nearly $10,000, and unwrapped it on her channel where she uses HopeScope.
“There were definitely some items in the pallet that was real trash. But then there were other items like the UGG robe or some nice heated winter gear that I love, right? They didn’t think it was worth restocking? It’s a $300 coat,” Allen said.
“For one of our clients, we once auctioned about 42 truckloads of floor tiles in one lot,” said B-Stock Solutions founder and CEO Howard Rosenberg. “We have sold many mobile phones worth over a million dollars in one auction.”
The liquidation can go to resellers, who then sell the items at flea markets or sites like Craigslist and eBay. Allen sells items she doesn’t keep on Poshmark or donates them.
“It’s like a fancy version of dumpster diving, but a little more promising, safer and more legal,” Allen said.
Amazon is offering some sellers another option, but by invitation only until the end of this year.
As part of the FBA Review and Resale Program, Amazon rates items as New, Very Good, Good, or Acceptable and then resells them in dedicated sections of its site. These sections include Warehouse Deals for used items, Amazon Renewed for refurbished items, Amazon Outlet for clearance sales, and an ironic daily deal site called Woot! who sells a “Bag of Crap” for $10 and describes himself as “a wild outpost on the fringes of the Amazon community.”