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Amazon.com, Inc. Refunds Are A Cashflow Nightmare (For Sellers)

Amazon.com Inc (AMZN)
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Amazon.com, Inc. (NASDAQ :AMZN)  is changing its returns policy, and the result could be very scary for sellers. The firm, known for its cost-cutting dominance of e-commerce, is making it easier for customers to return goods they bought on the site. Sellers who operate through the platform are up in arms about the changes.

Starting from October 2 customer returns on Amazon will be “automatically authorized.” That means small sellers won’t have the option of disputing the return before the box shows up at their office. These returns will also take place at the expense of the merchant. That’s likely to increase their costs. Already it’s resulting in some outcry among smaller sellers on the platform.

Sellers react to Amazon.com, Inc. returns policy

The returns policy was revealed in an email sent out to sellers this week. One seller who contacted CNBC about the policy said that it would “will totally crush small businesses that fulfill their own orders”. The full details of the policy can be found here.

Amazon.com vs THE Amazon

That doesn’t mean that the firm is going to stand down just yet. Most small and medium sized e-commerce concerns can’t avoid the platform. It’s a massive, and growing, amount of US online purchasing.

Still, the stress on sellers could be so great that they end up abandoning the firm’s sales channel. In recent years Amazon.com, Inc. (NASDAQ :AMZN) has pushed its sellers and they have stuck with Bezos’ business.

Amazon will give sellers an opportunity to appeal refunds, but only after they’ve arrived. How the firm handles that process could make the difference in merchant contentment. Merchants will also, at their discretion, be able to opt into returnless refunds. This is likely especially useful for low value items that will cost more to return than to refund.

Also, and this is the crux for most sellers, merchants will be allowed to exempt a certain number of items. This number appears to be anything up to 50,000. That means that all but the biggest sellers will be unaffected if they take care.

The move appears to be part of the firm’s campaign to offer the same experience whether they buy third or first party products on the site.

Amazon stock could suffer

It’s very hard to tell what Wall Street wants from Amazon stock. There seems to be broad trust in the firm’s growth mission, but those holding shares would also like to see some kind of consistent earnings growth to prove the firm’s acumen. In its most recent earnings report, the company showed just the opposite.

What effect will the new refunds policy have on the firm’s cash generation? That depends on how big the protest from sellers is. If merchants can’t make money, they’ll stop selling. There has already been huge outcry over refund scams on the site in recent months. An automatic return policy could make those issues graver.

The returns policy shows one thing. Amazon CEO Jeff Bezos is willing to do anything to keep customers happy. He wants prices low and customer service high.

Amazon.com, Inc. is still one of the hottest stocks on Wall Street, and the firm is downright dominant in online retail. Michael Pachter of Wedbush Securities recently said that investors are willing to put up with anything if sales growth continues. With their cash flow in trouble, we’re about to see if sellers can keep to the same discipline.

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Aaron McLeish

5 Comments

  1. Good, Amazon sellers are constantly selling illegal, fake or non working equipment. So sick and tired of Seller’s thinking they can steal from you and not provide the items they advertised in their ads. When something is advertised, that is what you expect to get, what was advertised. Not a broken item, not a missing item from the box, no none of that. I want the working item as advertised. This consumer doesn’t want anything for free, never, but what I do want is what I paid for, PERIOD! Seller’s need to start doing that. At least half the items I order from Amazon are either banged up, not working or entirely missing from the order. And many seller’s completely refuse to communicate with you. They just want to steal your money, and then cry like babies when Amazon is trying to put a stop to the bad sellers. When I sell something I sell EXACTLY what I advertised, and after 1000+ sales I have an absolute perfect rating, not one negative review. THAT is how it is done… The ONLY seller’s bitching about this new policy are the sellers who are not as honest as they should be. I’m an honest seller and buyer and I fully welcome this new policy. Anything to help my customers feel more at ease is fine with me. Take a hike and sell your bogus junk at the flea markets if you don’t like the new policy.
    • What your describing isn’t an issue with refunds but actually a problem with how Amazon on-boards merchants; and Amazon should instead keep track of customer issues where items don’t arrive in the way presented on Amazon’s website. As for a policy that defines customer service as a “mandatory return policy” instead of providing customer service isn’t good business practice. As for your own business, congratulations on being up front and honest with customers. However, when I worked in retail operations for a retailer with over 1,000 locations we learned that 78% of returns were actually due to “customer remorse” with primary issues being price, lack of manuals/documentation provided by the manufacturer, or a customer’s expectations were set too high before the sale occurred.
    • Consumer fraud and theft are big problems. Just in general, the markets are plagued with shrink since the beginning of time. Any retailer especially big ones experience return switch scams, outright theft, and returns of destroyed goods by unethical people. Asserting that consumers are globally without fault or never ever try to do all sorts of various cheats, scams, and thefts is ridiculous. Some of them certainly do. Anyone who sells and has not experienced this either just turns a blind eye and pays them off, or sells a rare product that has a unique set of qualities that preclude it from returns. For example a staple food product like butter. Maybe you have a huge markup product and there’s plenty of padding there to absorb losses with no damage felt. Most sellers these days don’t, and return rate can make or break a new seller starting out. No entire population of consumers (human beings) is always going to be 100% satisfied with any product or level of service – even the very best. Besides that, with technical products sometimes a customer is just stuck or confused as to how to properly use a product and gets frustrated. Some people “rent” a product planning on returning it after their good use. See there are reasons for restocking fees. The list goes on. Even the finest products in the world have somebody that will complain or have an issue after their purchase. The point is, the customer is often right – but they are not always right. It is the right of a business to be able to deal with a situation on a case by case basis. Global pre-paid return labels and automatically approved returns will lead to tremendous abuse – especially once the undercurrent of scammers gets wind of it.
  2. Remind me not to sell on Amazon. What they are describing is a true seller’s nightmare. People will scam sellers and get stuff for free. It already is rampant on Ebay.
  3. I just bought speakers….saw 2 in the ad. Turns out I bought A speaker. I blame the seller…not Amazon. Who ever buys one speaksr?

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