The Seller's Guide to Amazon FBA Returns

This article has been updated to include Amazon's extended holiday returns policy for 2020.

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

Amazon FBA 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 in shipping fees, others are skeptical of how this policy can be exploited and are worried about being left in the cold.

How Amazon FBA Returns Work

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 neither pays any additional fees nor receives 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).

Amazon has extended the holiday return policy for 2020. Orders shipped between October 1 and December 31 must be returnable through January 31, 2021. 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 new 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 less restrictions on returns means 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.

Takeaway

With plenty of arguments on both sides, this new policy could both benefit and harm sellers.

In Amazon’s official email, they explained that their 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.