Inside the black box of Amazon returns

Managing returns can get costly for retailers as well as the planet.

- Simone Peinkofer

E-commerce may make shopping more convenient, but it has a dark side that most consumers never see.

Say you order an electric toothbrush for Father's Day and two shirts for yourself from Amazon. You unpack your order and discover that the electric toothbrush will not charge, and only one shirt fits you. So, you decide to return the unwanted shirt and the electric toothbrush.

Returns like this might seem simple, and often they are free for the consumer. But managing those returns can get costly for retailers, so much so that many returned items are simply thrown out.

In 2022, returns cost retailers about US$816 billion (S$1.1 trillion) in lost sales. That is nearly as much as what the United States spent on public schools and almost twice the cost of returns in 2020. The return process, with transportation and packaging, also generated about 24 million tonnes of planet-warming carbon dioxide emissions in 2022.

Together, costs and emissions create a sustainability problem for retailers and the planet.

As a supply chain management researcher, I follow developments in retail logistics. Let's take a closer look inside the black box of product returns.

RETURNS START WITH KILOMETRES OF TRANSPORTATION

So, you repackaged your unwanted shirt and the electric toothbrush and drove them to UPS, which has an agreement with Amazon for free returns. Now what?