How Amazon plans to fix its massive returns problem

Amazon is handling a rapidly growing number of returns that are causing a massive problem for the e-commerce giant and the planet.

A National Retail Federation survey found a record $761 billion of merchandise was returned to retailers in 2021. That amount surpasses what the U.S. spent on national defense in 2021, which was $741 billion. 

Amazon wouldn’t share its overall returns numbers, but in 2021, the National Retail Federation estimates 16.6% of all merchandise sold during the holiday season was returned, up more than 56% from the year before. For online purchases, the average rate of return was even higher, at nearly 21%, up from 18% in 2020. With $469 billion of net sales revenue last year, Amazon’s returns numbers are likely staggering. 

U.S. returns generate 16 million metric tons of carbon emissions during their complicated reverse journey and up to 5.8 billion pounds of landfill waste each year, according to returns solution provider Optoro. 

“We’re talking about billions, billions, and billions of [dollars of] waste that’s a byproduct of consumerism run amok,” said Mark Cohen, director of retail studies at Columbia Business School and former CEO of Sears Canada. 

“The reverse logistics are always going to be nasty because the merchandise, in most cases, cannot be resold as it was originally,” Cohen said. “The most expedient pathway is into a dumpster, into a landfill.”

Amazon has told CNBC it sends no items to landfills but relies on “energy recovery” as a last resort.

“Energy recovery means you burn something to produce heat, to produce energy. And you rationalize the disposal of goods as a conversion from one form of matter to another,” Cohen said. “To the degree they’re doing that I don’t think they fully reveal.”

Amazon has said it is “working towards a goal of zero product disposal,” although it wouldn’t set a target date for reaching that goal.

“We encourage a second life on all of the products that we receive back,” said Cherris Armour, Amazon’s head of North American returns in an exclusive interview with CNBC.

“And that comes in the form of selling the majority of the items that we do receive. They are resold as new and used, or they go back to the seller or supplier, or we donate them,” Armour said.

Energy recovery, Armour added, is only for “items that we can’t recover or are not recyclable” due to legal or hygienic reasons or product damage.

Armour first joined Amazon 12 years ago, starting as a night shift operations manager at a fulfillment center in Indianapolis. She said the goal of zero product disposal was something they talked about at Amazon for many years. 

An often-cited 2018 survey of 1,300 online shoppers found 96% would come back to a retailer if they had a good returns experience, and 69% were deterred from buying if they knew they’d have to pay for return shipping. In 2019, Amazon expanded free, easy returns to millions of items.

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