More Reverse Logistics Lessons Coming Out of Amazon

We already discussed in a previous article how Amazon has hundreds of thousands of returned and unsold products a month destroyed. So, in the interests of balance we thought we’d take a look at some of the ways the ecommerce giant is innovating in the reverse logistics space.

Amazon’s generous 30-day/any reason returns policy is partly responsible for the returns culture we are experiencing right now, so it only seems proper that the retailer also shoulder some of the responsibility for coming up with new ways of tackling the influx of returned products.

Following on from our previous article on how reverse logistics warehouses have a lot to learn from Amazon, let’s take another peek behind the scenes and see what this online behemoth is up to now.

Zero Disposal

Amazon claims that it sends no products to landfill, but instead uses a concept known as energy recovery as a last resort once all resell and recycle options have passed and destruction is the only remaining option.

Energy recovery is essentially a more complex way of saying you burn something and release the energy contained within to be used to power something else. Amazon has stated it is working towards a goal of zero product disposal but has not set a date by which it hopes to achieve this.

Reselling

One strategy Amazon has deployed to help offset the vast quantities of returns coming back through its warehousing operation is to turn reselling into its own billion-dollar business.

We discussed in our previous article how a portion of products are repackaged and resold as new or used, but many products which are for whatever reason unsuitable for reselling on Amazon’s ecommerce platform are sold on to massive liquidation sites which then sell them on again for a fraction of their RRP.

One of the main sites Amazon employs for this task is the aptly named Liquidation.com which shipped a staggering $626.4 million of returned Amazon products in a single year, adding up to a total of $7 billion during its lifetime. This works through a bulk selling model where 50 or so random but coherent products are put in a crate and then sold for 5-15% of their market value through an auction system.

In selling retuned products to Liquidation.com as often as possible, Amazon saves the warehousing costs it would normally take to store all these items. Even though Amazon sells the items to Liquidation.com for a fraction of the price they were originally sold for, the savings in warehousing more than make up for it, while customers purchasing from the reseller can get a great deal on bulk goods.

"The majority of Liquidation.com's customers are other businesses that buy boxes in bulk, test the products, and sell them," writes Techspot. "While this easy and theoretically high-margin work has attracted a lot of 'get rich quick' schemes and even made a pretty penny for some people when their YouTube unboxings go viral, the business is actually quite challenging."

Grade and Resell

Since 2020, Amazon has also been offering a grade and resell service to selected sellers on its third-party marketplace.

When sellers take advantage of this option, Amazon evaluates the condition of returned items and awards them a quality grade, going from Acceptable and Good, to Very Good and Like New. Amazon then sells the products on through special sections of its ecommerce platform – Warehouse Deals for used goods, Amazon Renewed for refurbished products, Amazon Outlet for overstock, and Woot! a daily deal site which sells, among more sincere deals, a $10 mystery "Bag of Crap" to anyone brave enough to take a punt on it.

Amazon expects these initiatives to give a second life to over 300 million products every year. A drop in the ocean when weighed against all the returns coming in, but certainly a step in the right direction.

"Let’s assume a 20% return rate, that’s $93.8 billion of returns coming in," reports CNBC. "If instead of getting pennies on the dollar from a salvage dealer, you could get maybe 30 cents on the dollar from strategic targeted disposition, that bumps us up to $28 billion. At $28 billion, having Woot or Amazon Outlet, now that makes a lot more sense because we’re really starting to get a return for our investment."

Final Thoughts

Combatting the returns culture which has sprung up, largely as a consequence of Amazon’s own generous policies, needs to be a priority for ecommerce brands in 2022. Working on ways to give returned products a second life will not only benefit the environment, but your brand’s bottom line to boot.

Amazon’s reverse logistics operation is sure to be a hot topic at Consumer Returns 2022, taking place in October at the Hyatt Regency Austin, TX.

Download the agenda today for more information and insights.