The Seller's Guide to Amazon FBA Return Policy

The Fulfillment by Amazon (FBA) program changed its returns policy in September 2018, leaving some sellers cheering, others jeering, and still others scratching their heads trying to figure out what’s going on.

The Amazon FBA return policy allows customers to return and replace an item free of charge while Amazon pays the re-shipping bill. This is effectively a way to reduce refunds while simultaneously maintaining customer satisfaction — without pushing the burden onto the seller.

But while some sellers are grateful for Amazon’s assistance with shipping fees, others are skeptical of how this policy can be exploited and are worried about being left in the cold.

How Amazon FBA Return Policy Works

Amazon's FBA return/replacement policy is fairly straightforward and transparent.

• Customers initiate a return through the online Return Center or directly with Amazon customer service.
• Amazon FBA automatically ships a replacement item from the seller’s inventory and pays for all of the shipping fees.
• Amazon reviews the original item to see if it is damaged or was even returned at all.
• The seller doesn't pay any additional fees or receive payment for the replacement order. Fees and payments on the original order remain the same.
• If the customer returned the item damaged, or never returned it at all, Amazon reimburses the seller according to the standard FBA customer returns policy.

The process essentially cuts the seller out of the equation completely. Amazon dips into your inventory for you and handles the shipping details. All you have to worry about is the loss of a supposedly defective item, as determined by Amazon’s analysis.

There are a few other criteria worth noting as well. To qualify for a replacement:

• The item must be in new condition.
• A replacement must be available in your inventory.
• The product category must allow returns (for example, grocery products fall under the class of non-returnable items, so are void for replacements).

Also of note: The Amazon extended return policy applies throughout the holiday season. Orders shipped between October 1 and December 31 must be returnable through January 31. Amazon automatically authorizes returns.

On the whole, the policy change seems to be Amazon ingratiating themselves to the shopper, but without stepping on the seller’s toes. By allowing customers to replace items for no additional fees, they’re making the Amazon shopping experience less risky and more comfortable.

However, even if Amazon had the best intentions in mind, a lot of sellers are still nervous about the implications of this system.

Complaints and Criticism

While sellers like the part about not paying anything for shipping, most are concerned with Amazon granting itself the power to drain anyone’s inventory without permission. It may look like a winning policy on paper, but experienced Amazon sellers know how these things tend to play out in reality.

We have heard complaints and concerns from Amazon sellers over the new policy. Here's an overview of the top five:

1. Customers will return items indiscriminately.

By allowing free returns and replacements, Amazon is removing the largest barrier preventing customers from returning items indiscriminately. Like the criticism for the Amazon Prime Wardrobe, sellers are worried that fewer restrictions on returns mean customers will start returning items for no valid reason.

2. No time to come around.

The policy also negates the “Endowment Effect” — the longer a customer holds on to a product, the less likely they are to return it. With free returns, if a customer doesn’t fall in love with a product immediately, they have no reason to hold on to it; they never get a chance to “come around.”

3. Can’t rely on Amazon investigations.

Veteran Amazon sellers won’t simply gloss over the fact that it’s Amazon’s own investigation team that determines whether or not an item return is valid. The Returns Center at Amazon is not perfect. If an investigator who’s unfamiliar with a product mistakes a damaged item for one in good condition, it’s the seller who pays for the error.

4. People who break the product.

The policy comes dangerously close to actually rewarding and encouraging irresponsible behavior by the customer. If someone who doesn’t know how to use a product accidentally breaks it, they can receive a replacement for no cost as long as Amazon doesn’t flag the return as invalid. With less accountability, buyers may break and misuse products without consequence.

5. Scammers.

Last but not least, this policy opens a lot of doors for scammers. If a customer knows how to get around Amazon’s return investigations, they can make a healthy profit from the new policy.

One seller recounts a story of how a customer bought sterling silver jewelry and returned a base-metal version of the same jewelry, which went undiscovered by the returns reviewer. Another customer removed precious gemstones from their jewelry order before returning it.

There will always be scammers looking to make a quick buck. It’s up to companies like Amazon to think of new ways to stop them — not new ways to encourage them.

Consistency Matters

With plenty of arguments on both sides, the Amazon FBA return policy could both benefit and harm sellers.

In Amazon’s official email, it explained that the reason for the change was to “reduce the effort required to manage your returns and decrease your customer Return Dissatisfaction Rate (RDR), thereby improving your ratings.” Outside speculation also considers this a response to inconsistent 3P seller return policies; by adding more and more vendors to their uniform policy, Amazon provides a more consistent shopping experience across their entire site.

But for every benefit Amazon mentions, there’s a critic predicting how it can go wrong. As always, sellers should proceed with caution.

Preventing Amazon Returns

The trouble with product returns goes beyond just the loss of a sale. eCommerce stores are usually the ones who pay for return shipping, not to mention the cost of packaging or the labor involved in moving the inventory to and fro — and that’s assuming the product’s resalable, which sometimes it’s not. And don’t forget to handle these setbacks with a smile on your face, because if you don’t, you lose a customer on top of everything else.

What’s best for everyone, buyers and sellers, is to address product returns before they happen, especially during the holidays when they’re most prevalent.

So what can you do? Here are five ways to prevent product returns and mitigate their losses.

1. Segment Risky Customers

Sometimes the products are to blame for returns, but sometimes it’s the shopper. Certain customers are just more likely to make returns than others, and if you can identify those customers, you can tailor your marketing efforts to avoid them.

The first place to start is your analytics. Are there any trends in where your returns are coming from? Certain referrals or ad campaigns? Certain geographic locations? Look for patterns and trace them to the source — your returns could be coming from a specific type of customer, or from a badly worded ad or misleading influencer post.

For those with enough time, you can even mark specific customers and put them into separate emailing groups. If you can segment customers by what they’re likely to return, you can fine-tune your marketing campaigns to make sure these customers see only ads for products they’ll probably keep.

2. Extend Your Time Frame for Returns

Reading the heading might leave some of you scratching your heads, but it’s true. Having a longer time period allowance for returns actually decreases them.

The most reasonable explanation for this phenomenon is what’s called the “Endowment Effect.” Essentially, the likelihood of a customer returning an item goes down the longer they own it, presumably because they develop an attachment to it and get used to its flaws.

Lenient return policies in general take a lot of the pressure from a customer’s choice to return a product. Policies limited to 30 days rush customers into making premature decisions, whereas something like a 90-day period gives them enough breathing room to experiment with the product and ultimately come around to liking it.

3. Improve Amazon Product Page Accuracy

In general, descriptive product pages — including pictures, videos, and written descriptions — are an eCommerce best practice. If your customers expect one thing but receive another, can you really blame them for returning it?

Give shoppers the most accurate product description possible to avoid any surprises upon receipt. That means adding all relevant details and specifications into the product page descriptions, as well as high-definition images to show off aspects like appearance and texture.

Product videos are an enormous help in this department as well. Unlike static images, videos show off a product in three dimensions, giving viewers a better sense of what it’s like to own it. Moreover, videos can also demonstrate how to use more complicated products, circumventing returns because users couldn’t figure out how to use them correctly.

4. Improve Your Reverse Logistics

Naturally, eCommerce companies take plenty of care in organizing their outgoing shipping logistics, but what about products coming back? These issues fall under reverse logistics, and the more returns you receive, you more you have to worry about it.

According to Reverse Logistics Magazine, the “return and repair” process accounts for 10% of all supply chain costs, but improper reverse logistics compounds that figure to approximately 30%. A UPS report puts that loss even steeper for high-tech manufacturers, losing over 50% of inventory value for return products from mishandled reverse logistics.

Optimizing your reverse logistics could be as simple as going over the numbers and rethinking your policies. However, many eCommerce brands are outsourcing their returns to 3P logistics providers for extra efficiency. Either way, investments in improving your reverse logistics usually pay off: one account from the Penske blog saw a 4x decrease in cost per return, not to mention a 12% increase in customer satisfaction.

5. Collect Data on Reasons for Amazon Product Returns

The more data you collect on returns, the better. In addition to pouring through analytics, you can also just ask the customers themselves. Implement an extra step in the returns process for eliciting customer feedback on why they initiated a return in the first place.

The results may surprise you. Of course, you’ll get answers like “I just didn’t like it,” but you’ll also receive helpful feedback that reveals problematic areas. Maybe the product didn’t deliver what was promised, in which case you should change what you’re promising. Maybe the sizing was off from expectations, in which case you should devise a new sizing chart.

In eCommerce, there are plenty of opportunities for your shoppers to misinterpret what you’re selling — after all, online stores lack the advantage of brick-and-mortar stores where customers can touch and examine products before purchasing. If you can isolate the worst areas through empirical data, you can fix them ASAP to stem the problem.

Retaining Your Seller Reputation

A final note on one of the worst consequences of product returns - bad customer reviews. If one customer misreads a product description and unwittingly buys a product they don’t want, they still have the power to hurt your business, even if you accommodate them at every turn during the returns process.

That’s why eComEngine built a feature in FeedbackFive that automatically excludes refunded orders from email requests for reviews. FeedbackFive is a tool that helps you improve all aspects of getting Amazon reviews, optimizing email deliveries at the perfect time, and helping you stay ahead of negative reviews. It also lets you choose conditions requesting reviews, with an option to exclude people who returned your product. Customize your parameters once, and you never have to worry about it again. Try it today!