Amazon Unsold Items and Customer Returns
What does Amazon do with unsold items, customer returns or surplus inventory? Sometimes, they simply destroy or discard it into landfills, by the truckloads. That’s right, new TV’s, unopened toys, baby diapers, kitchen equipment and other electronics, never sold, never opened are being trashed due to slow sales, over supply or lack of demand.
Before being kicked out of the area by Amazon security, reporters posing as Amazon employees went undercover to expose Amazon’s “Destruction Zones”, the place where products go to die within Amazon warehouses if they don’t meet sales expectations.
One facility alone reportedly sending 293,000 items to a dump during a nine month period.
Investigators used a drone to follow a loaded truck to their destination. The trucks drove to a disposal center and then to a landfill.
While the investigation and finding of “Destruction Zones” was discovered in France, it is also believed to be common practice in Britain and other Amazon warehouses.
Amazon charges a fee called FBA Removal Order Fee to remove unsold, overstock or customer returns that are unfulfillable to be sent back to the seller.
Source: Britain’s Daily Mail
Source: French TV documentary (video)
Source: CBS News
Why Does Back-Track Care About This?
Back-Track is on a mission to help Amazon sellers recover part of the $32 Billion in “Lost Value” in their Amazon customer returns. Back-Track will reBOX, reNEW or rePAIR customer returns for Amazon sellers to help them resell the product once again as refurbished or through Amazon’s Renewed program.
We believe that re-purposing the product and extending its life is better economics for Amazon sellers and also better for our environment at the same time. Having less Amazon customer returns destroyed is a good thing.
From our experience working with Amazon sellers, our data shows that about 80% of Amazon’s customer returns are “Not Defective”. These are products that function as they were designed and can be resold again to someone else.
For every item that Back-Track reNEWS or rePAIRS that’s one less item going into a landfill prematurely. That’s one less item draining profits away from Amazon sellers. That’s one more item in the hands of a consumer like it was originally designed for.
Why Does Amazon Destroy Unsold Products?
Many times the answer is simply “Economics”
- There’s a cost to store the goods inside the Amazon warehouse. If items are not selling, the cost to hold, cycle count and move products that are not selling is wasteful in itself and so removing the product from Amazon’s warehouse removes these wasteful costs.
- There’s limited space. Even with all the square footage Amazon warehouses have, there’s limited space for products and Amazon needs to make productive use of every square foot within their warehouses.
- The cost to ship the unsold merchandise back to the factories in China can be a higher cost than to simply destroy it locally.
Supply and Demand are NOT in Sync
- With Amazon becoming more and more reliant on 3rd party sellers to generate the supply side of the equation, the market becomes “over-supplied” with multiple Amazon sellers (sometimes 100’s) competing for the same single Amazon customer. This creates an excess of supply within Amazon’s warehouses at the cost of 3rd party sellers.
- Trends change quickly in our rapidly evolving world. What’s hot today, can be out the window tomorrow.
- Cheap production costs in China and other Asia countries make it possible for factories to produce goods in excess of demand to help them with scale and lower “average cost”.
A wise friend once told me, “Hope makes the world go around”.
- It’s every entrepreneur’s dream that their newest idea, latest private label brand or clever marketing scheme will be their quick path to the lifestyles of the rich and famous. This hope brings products to market within an unproven “Market” demand to buy them. Some entrepreneurs are success, but most are not as successful as they hoped.
Why Doesn’t Amazon Donate the Unsold Products?
This is one of the most common arguments of outrage you hear. It’s a logical solution to the problem. Give the products to people in need. Donate or move the unsold products to poor countries where these items can really be used to make life better. It’s a win-win.
If we lived in a perfect world, maybe Amazon would donate their unsold products in a way to “help others”. We all know, the world isn’t perfect.
Again, “Economics” is a major reason here. As mentioned earlier, hope + entrepreneurship = excess supply. This excess supply drives down prices (via competition) and as long as the product is sold on the Amazon marketplace, Amazon benefits most from this situation of excess supply.
Excess supply creates Amazon’s “Competitive Advantage” by being a place to go for low prices and large selection.
It’s in Amazon’s best interest to hold onto and defend the competitive advantage (excess supply = lower prices) they created and therefore not allow the over-supply of products to be “resold” in a liquidation fashion outside of Amazon’s marketplace. To do so would generate lower prices outside of Amazon’s marketplace.
Some brands also wish to keep their finger on the “supply and demand” levels for their items as well. Too much supply may diminish their brand reputation as being a “Premium Brand”, therefore destroying the excess supply keeps prices artificially higher, profits higher and brand image where they like it.
Amazon FBA Customer Returns for 3rd Party Sellers
Another related area that doesn’t get the attention it deserves is the level of customer returns Amazon generates for their 3rd party sellers.
In 2018 Amazon 3rd party sellers sold $160 Billion of the $277 Billion in Gross Merchandise Sales Volume (GMV). It’s estimated that 20-30% of products purchased on Amazon are returned by customers.
With a 20% customer return rate, Amazon customer returns are estimated at $32 Billion for 3rd party sellers in 2018. Back-Track estimates that 80% of them are NOT defective.
This means that $25.6 Billion of Amazon’s customer returns each year are “Renewable” and Back-Track is attacking this situation head-on with our reNEW and rePAIR services for Amazon 3rd party sellers.
Don’t “Destroy” your Amazon customer returns and also destroy $32 Billion in revenue for 3rd party sellers. reNEW or rePAIR your customer returns and recover your lost profits today!
Click here to find out more about Back-Track’s reNEW and rePAIR services.
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Amazon FBA Removal Order Fees
After a customer return arrives at an Amazon FBA warehouse, the product is inspected. If the inspection process determines the inventory is missing parts, damaged or defective, the item will be classified as “Unfulfillable” and put into stock under the unfulfillable inventory. This inventory will not be re-listed for sale on the Amazon marketplace.
Unfulfillable Amazon FBA inventory must eventually be returned to the seller or disposed of. Amazon charges a “Removal Order Fee” to pick and ship the unfulfillable inventory back to the seller. Here’s a link to Amazon’s Removal Order Fee.