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Handling High Post-Holiday Return Costs and Fraud
Stay on top of the latest e-commerce and marketplace trends.
Returns are more common in January than in any other month; two out of three consumers will return at least one gift during the holiday season. Retailers have to deal with two issues during the post-holiday season: what to do with returned items, and how to deal with buyer and return fraud. This is because the high frequency of returns makes it easier for fraud cases to slip by.
In January, it is more important than ever to have a strategy for handling returns in a cost-effective way that also takes into account preventing fraud and addressing the fraud that does fall through the cracks.
Learn more about what makes returns different for sellers this year, and what you can do to protect yourself from high return costs and fraud.
How is Handling Returns Different in January?
Two things make handling returns different in January – the high amount of returns and the lengthened post-holiday return timeline Amazon gives buyers each year.
Usually, consumers have 30-days to return items on Amazon, but during the holidays, most items purchased by consumers on Amazon made between October 1 and December 31 can be returned until January 31, 2022. This timeline may be a bit shorter for 3rd party sellers on Amazon since they create their own return policy. This lengthed return timeline changes the return logistics that sellers have in place at any other time of the year.
Over $66.7 billion worth of product returns will be pushed back into the supply chain in January.
The Reasons Why Returns are Especially Challenging for Sellers This Year
There is a 7% increase in the cost of holiday returns from this holiday season, and new data shows the average return costs retailers two-thirds of the original item price when including labor, transportation, and warehousing costs. Paired with a higher number of returns to major retailers means even more logistics costs than usual while wrapping up the 2021 holiday season.
But what is making these costs go up?
The Continued Pandemic
There are already increasing slim margins for logistics costs. The pandemic has continued to cause product shortages, delays, and labor shortages.
The pandemic has also resulted in shoppers being hesitant to return directly to retailers’ physical stores, and are now used to the convenience of online deliveries and returns. Although an increasing number of consumers prefer to drop off e-commerce retail returns at an in-person location or third-party store, like what Amazon is offering at Kohl’s, many are returning items via mail.
Early Holiday Shopping & Supply Chain Issues Impacting Returns
Contrary to years past, the rise of early holiday shoppers has also created a surge in early returns. A more extended return process period means less freight consolidation and more costs. Instead of troves of packages all arriving around the same time, returns are coming back not only earlier but dispersed throughout October, potentially up to February.
The Best Ways to Handle Returns in January
Supply chain constraints, shipping delays, high transportation costs, and labor shortages are all compounding to negatively impact businesses, especially when it comes to returns.
CBRE estimates that logistics for major retailers costs 12% of sales with growing e-commerce businesses. That is double the cost of traditional retailers. To top it all off, many consumers expect free returns as an option. This is a cost that can eat up sellers or marketplaces because, on average, to process a return for a $50 item, the cost would be $33 or 66% of the item price. Even if you can process and re-sell the item, which is not always the case, returning some items may end up costing you money.
Here are a few ways to mitigate or make back costs for your holiday returns.
1. Provide Consumers with the Option to Return Items in Person
In-person returns can lower the investment you need to make in your call center, transportation, processing, and more. Paired with an automated returns process, you can quickly route returns back to stock or a resale channel to avoid additional losses.
Amazon has capitalized on this trend by offering tens of thousands of drop-off locations to ship items back, including Whole Foods Market, Amazon Books, Kohl’s, and more.
2. Allow Consumers to Keep or Donate Unwanted Items
If the price of the product will ultimately lose your business money to ship back or you don’t have the ability to re-sell or make back profits for that returned item, consider offering the customer the option to keep or donate the unwanted item instead of returning them.
Further Reading: Amazon, Walmart, and Target’s Approach to Returns
3. Create a Reverse Logistics Strategy or Return Plan
Investing in technology or a plan to help you find a way to make your return process more efficient is an essential part of reducing return costs, especially around the holidays. Depending on the type of seller you are, there is a different level of control on creating this strategy for your returns.
Further Reading: The Ultimate Guide to Optimizing Your Returns Strategy on Amazon
How to Handle Return Fraud on Amazon
Another cost to factor into returns during the holidays is potential return fraud. Not all return fraud is malicious, but most fraud is harmful to sellers. Return fraud is a growing threat to sellers and merchants on e-marketplaces, and if not handled correctly, it can result in a substantial loss of revenue.
Thankfully, you can use many preventative and responsive tactics as an Amazon seller to avoid fraud. Let’s walk through three tactics you may have to use when dealing with return fraud as a seller on Amazon.
1. Use Amazon’s Return Policy to Your Advantage
If you suspect there is fraud or a scam buyer, you should first go to Amazon’s return policy and check that whatever is happening is not in violation of any of Amazon’s policies. There is a laid-out set of company rules that you can use regarding returns and return fraud there. Being up to date on Amazon’s return policy and your own, if you are a third-party seller, will keep you prepared to handle and quickly identify fraud happening to you.
Although Amazon does not publicly state its return limits for buyers, generally, buyers who return more than 10% of their orders receive a warning or are even banned from returning orders in the future on Amazon. This will help manage repeat offenders if you are unable to catch the fraud yourself.
2. Fight Buyer’s Fraudulent Claims
If a scammer doesn’t get a refund, sometimes they will file a claim on Amazon. When that happens, Amazon will contact you and ask for your perspective that you must provide within seven business days. It is essential to provide as much detail and evidence as possible, including transaction receipts, any communication with the buyer, package tracking proof, and anything else that you can show to prove your side of the claim further.
3. Take Preventative Steps to Stop Fraud
Prevention is the best way to prevent buyer fraud or scams from happening. If you believe that you are being scammed, as we said before, be sure to report it by sending an email to Amazon to report the issue.
Here are a few other things you can do:
- Use the FBA program, which is less risky than the FBM program. If you are an FBA seller, Amazon is responsible for shipping, and they deal with any issues relating to shipping.
- Track your orders, so if a buyer fraudulently claims a package was not delivered, you can verify the order with your tracking system or shipper.
- Have evidence of all items that have been sent out and returned.
- Familiarize yourself with Amazon’s policies and updates to their policies. Unnecessary time and money are spent on fraudulent cases when you don’t know the policies well. For example, you do not need to provide a refund until a product is returned.
High return costs and potential return fraud are almost always stressors for sellers on e-marketplaces. Preventative strategies and effective automation are the best ways to make your next busy season more profitable and less stressful, whether that be Amazon Prime Day or the next holiday season.
Learn how you can save time, increase profits, and drive growth with Amazon automation in our ultimate guide for long-term Amazon business growth.