Returns are easy for shoppers on Amazon. But for the small businesses that sell most of the items on the site, returns have become a major burden.
Some sellers are ditching Fulfillment by Amazon (FBA), while others are looking to leave the platform entirely.
At the center of the problem is a sharp rise in returns fraud. In one shocking example, a customer received a breastmilk chiller filled with someone else’s rotten breastmilk.
In another case, used diapers were sent to a new customer as if they were unused.
“There were actually two diapers that were sent out that were poopy,” said Rachelle Baron, who runs Beau and Belle Littles, to CNBC.
The bad review that followed nearly destroyed her business.
The Soaring Cost of Fraud and Abuse
According to the National Retail Federation, nearly 14% of all U.S. retail returns in 2024 were fraudulent, up from 5% in 2018.
Altogether, returns cost retailers $890 billion last year.
FBA sellers are hit especially hard. They rely on Amazon to handle storage, packing, shipping, and returns.
But when Amazon gets something wrong, the seller is the one who pays the price.
Lisa Myers, founder of Ceres Chill, pulled her business out of FBA after Amazon sent a customer a used product with bodily fluids inside.
“To have something, and I don’t mean to be dramatic, but dangerous, somebody else’s bodily fluids in your kitchen rotting in something that you had intended to use for your child is unacceptable,” she told CNBC.
“That’s the moment I broke down crying and just sat down and thought, I have no idea how this could have happened.”
Amazon’s Fees Drive Up Prices
Amazon added new return fees in 2024 for items with high return rates. In some cases, sellers can be charged up to $160 per item.
Some sellers said they responded by raising prices just to stay afloat.
A survey by SmartScout found that 65% of Amazon sellers raised prices last year directly because of return-related fees. Others pointed to returns fraud as their main reason for price hikes.
Lorie Corlett, who sells Hot Wheels collector cases, said her profit margin on Amazon is just over 1%, mostly due to fraud and returns abuse.
“It’s really Amazon that’s accountable at the end of the day. People would stop doing it if Amazon held them accountable,” she said.
Sellers Take Matters Into Their Own Hands
Some sellers are fighting back in creative ways.
Mike Jelliff, who sells professional music gear through his GeekStands brand, installed 40 cameras in his warehouse to monitor every outgoing and incoming package.
He uses the footage to appeal fraudulent returns and keeps a list of repeat offenders.
Jelliff said Amazon has made some recent improvements, like allowing sellers to opt out of automatic return labels for expensive items and appeal return decisions multiple times.
He said these tools helped reduce his return rate.
Amazon’s Process Still Misses the Mark
Still, the process remains messy and expensive. For most FBA sellers, Amazon handles so many different types of items that inspecting returns properly is nearly impossible.
Kristin Langenfeld, co-founder of GoodBuy Gear, said the platform cannot properly evaluate every product it receives.
“Amazon has millions of different products that are being sold, and what to look for on each product to judge it being sellable or unsellable, they’re actually not qualified to make some of those decisions,” she said.
Langenfeld started her company after seeing baby gear marked for destruction in a returns warehouse.
Her team now inspects each item for 15 minutes across dozens of quality checkpoints.
The approach is working: 33 new sellers joined her platform in 2024, triple the number from the year before.
The Environmental Impact of Returns
Returns also come with a big environmental cost. In 2024, 9.8 billion pounds of returned products ended up in landfills, and returns generated an estimated 29 million metric tons of carbon emissions.
Amazon says it’s working to reduce waste.
Sellers can now use programs like “Grade and Resell,” “FBA Liquidation,” and “FBA Donations” to give items a second life.
According to the company, these programs helped rehome more than 300 million items last year.
Caught Between Exposure and Damage Control
Even so, many sellers feel stuck. They rely on Amazon for visibility and customer access, but the platform’s flawed returns process continues to chip away at their profits, reputations, and mental health.
“It hurts our business to not participate in Fulfilled by Amazon,” said Myers. “It’s just we’re not willing to, we will never put profit over the safety and, frankly, mental health of our customers.”
Unless Amazon gives sellers more say and responsibility in how returns are handled, more businesses might decide it’s just not worth staying on the platfor