5 Ways Amazon Handles Billions in Returns Every Year

Amazon has grown exponentially over the past decade. You could use Amazon to order your weekly grocery haul, fill your closet with clothes, and get furniture for your living room. There are bound to be some returns for a company that sells pretty much everything. Among Amazon's many perks, its return policy is exceptionally generous. Customers send a stream of items back to Amazon every year, but the company has stated it wishes to get to a zero product disposal goal in the near future.

Let’s look at how Amazon handles this massive volume of returns and how the company may achieve its goal.

If you use Amazon regularly, you’ve probably had to return a few items in the past. The company makes the process painless for its customers — one of many Amazon Prime perks.

Customers could return items at 18,000 locations. Some of these locations accept returned items without a box or label, including stores such as Kohl’s, Whole Foods, or UPS. The easy process may create customer loyalty — but it sends a large number of items back to warehouses.

Though Amazon hasn’t given exact numbers, a National Retail Federation Survey estimates that online retailers dealt with roughly $760 billion of returns in 2021. Since Amazon is the country’s largest online retailer — conducting about 41% of all online sales — it’s safe to say the sheer volume of returns it handles is massive.

Amazon would be creating mass amounts of waste if it tossed every returned item into a landfill. The United States generated about 16 million metric tons of carbon emissions only for transporting returned merchandise in 2020, according to the Environmental Capital Group and reverse logistics company Optoro.

However, Amazon has made some moves to do away with the waste caused by returns. Here is what the company is doing now and may do in the future.

Obviously, the quickest way to get rid of returned items is to dump them in the trash, but Amazon told CNBC it does not send its merchandise to landfills. Instead, they will perform an energy recovery as a last resort, basically burning — or otherwise destroying — unusable products.

The Environmental Protection Agency (EPA) describes energy recovery as converting non-recyclable waste materials into usable heat, electricity, or fuel through various processes. Materials could be burned, decomposed, or turned into fuel gas, among other methods.

Cherris Armour, Amazon’s head of North American returns, told CNBC that the company prioritizes creating a second life for the products they receive back. She stated that energy recovery is used for items that cannot be recovered or recycled.

Amazon began a donation program where sellers in the U.S. could automatically donate returned goods through a nonprofit network called Good360 In 2019. Amazon donated more than 25 million products to global charities in 2020.

Good360’s mission statement notes that they help “companies resolve the business challenge of responsibly distributing excess goods for maximum impact.” The network partners with major brand names — like Nike, NFL, and Disney — and coordinates with local charities for direct delivery at their locations.

The nonprofits that Good360 works with pay a fee to help cover the cost of shipping these excess items, and they also agree to a specific set of standards. For example, they agree they won’t be reselling the items, putting them on online marketplaces, bringing them to local flea markets, or anything else that is not directly related to their charitable cause.

There are certain products that Amazon might resell, and in 2020, the retail giant launched programs to promote these items. One program allows sellers to recover a portion of the value of returns — by sending them to third-party liquidation services that take charge of repurposing these items.

Another program grades and resells some returned items. In fact, one of the ways to save money on Amazon might be by buying these resold items at discounted prices.

Amazon says all returned products undergo a rigorous 20-point inspection process before being sold at a discount. After evaluating the products, each product is assigned a grade such as very good, good, or acceptable.

Amazon also offers customers the opportunity to purchase used goods on Warehouse Deals, shop for refurbished, pre-owned products (like electronics and appliances) on Amazon Renewed, or head to Amazon Outlet for overstock purchases.

A sure-shot way to cut down on the environmental impact of returns is to let customers keep the items rather than paying to ship them back to an Amazon warehouse. As far as stores with great return policies go, Amazon, like Costco,  has built a stellar reputation.

There are certain items that Amazon may let customers keep. If they send the wrong type of soda in an Amazon Fresh order, they may refund the customer their money and let them keep the soda. This saves time, energy, and money on the return process.

While this method certainly has its pros, such as reducing the shipping and environmental costs of getting the item back to Amazon, it also has some cons. For example, customers may simply not want to keep the product, which might still create waste.

Another method that Amazon might try in the future is discouraging returns in the first place. Amazon currently has undisclosed limits on returns, and it may limit or ban users who abuse its policy.

According to the National Retail Federation’s 2021 report, online orders have a higher rate of returns than brick-and-mortar stores. These online returns are a major driver of the increased rate of returns in the retail sector.

However, because of Amazon’s reach, it wouldn’t be surprising that other companies might follow suit if Amazon were to change its return policies. Retailers who have begun offering free returns to compete with the online giant may also reevaluate their policies.

“The industry at large would bow down to Amazon in a heartbeat if Amazon were to start to charge for returns because it would give them air cover to do the same,” said Mark Kohen, retail studies director at Columbia Business School, during an interview with CNBC.

However, Amazon’s simple return policy instills customer loyalty. So, it’s unclear if Amazon plans to change its return policy any time soon.

In the first quarter of 2021, more than 200 million people had Amazon Prime accounts. 148 million of these users were in the U.S. Coming up with different methods of handling returns coming back from such a large customer base could be an essential part of Amazon’s continued success. The company's exception return policy is just one of the Amazon's many customer perks. 

Amazon's methods of handling returns include turning them into energy, donating them, or reselling them for a discounted price. You could give returned goods a second life while learning how to manage money by purchasing these discounted items.

However, even though Amazon hasn’t given an exact date for achieving its zero product disposal goal, the company has made it clear that it’s a goal they hope to achieve in the near future.