Back and Forth, or: How Important is the Return Rate on Amazon?
For most online sellers, the return rate is an important performance metric. However, for Amazon sellers, it usually does not play a significant role. Especially resellers who primarily have branded goods in their portfolio pay more attention to customer dissatisfaction with returns. Nevertheless, the Amazon return itself can also impact the performance of a product or an online seller.
Sellers must be aware that every single KPI value is recorded by Amazon. The return of items, the duration of deliveries, or the selling price – everything has significance for the e-commerce giant. This can also be seen in the many different factors used to determine which seller appears in the Buy Box.
The same applies to the ranking of private label products. Here, the factor of SEO comes into play as well. For the A9 algorithm, for example, keywords play a crucial role. However, the return rate of an Amazon seller also influences the order in which search results are displayed. In this blog post, we want to show you how returns work on Amazon and how the return rate can affect ranking and the winning of the Buy Box.
How Does the Right of Withdrawal Work on Amazon?
Amazon is absolutely customer-oriented. The focus is always on providing the perfect customer experience. This includes allowing customers to return ordered goods to the online giant relatively easily, as long as they do so within the return period specified by Amazon. Ultimately, this is worthwhile: the assurance that almost anything can be returned to Amazon, along with the satisfaction that a hassle-free return process generates for customers, makes the relatively high return rate not a significant issue for Amazon. The avoidance of risk for the customer leads to significantly higher order numbers.
Accordingly, a straightforward system has been established. Amazon customers log into the Online Returns Center. Here, all their orders are displayed, from which they can return items. By clicking the corresponding button, the return is initiated, and Amazon provides a return label. For marketplace orders, the online seller may need to give their approval first. This return will also count towards the return rate of the Amazon seller.
In general, online shoppers can return items to Amazon within a 30-day return period. The return policies include various types of returns. Defective items, for example, can be returned up to two years after receipt, while other items like food may not be returnable at all. Marketplace sellers can also define their own conditions for an Amazon return – but these must “at least meet Amazon’s return policies.”
What is the average return rate on Amazon?
In general, the return rate on Amazon is always higher than in the rest of online retail, precisely because the e-commerce giant is so accommodating to its customers. However, it is difficult to provide a blanket answer regarding the average Amazon-specific return rate due to the variety of product categories and products. The University of Bamberg has compiled some data and facts as part of its research on returns. According to this, the frequency of returns is particularly dependent on
According to the University of Bamberg, the following return rates apply for retailers in the highest-grossing product categories, which are likely to be even higher on Amazon.
Table 1: Return Probability of a Package (Alpha Return Rate):
| Payment Method | Consumer Electronics | Fashion | Media/Books |
|---|---|---|---|
| Invoice | 18,60% | 55,65% | 11,45% |
| E-Payment | 13,68% | 44,10% | 8,08% |
| Prepayment | 8,59% | 30,15% | 4,46% |
Table 2: Return Probability of an Item (Beta Return Rate):
| Payment Method | Consumer Electronics | Fashion | Media/Books |
|---|---|---|---|
| Invoice | 14,35% | 45,87% | 5,83% |
| E-Payment | 8,75% | 37,31% | 5,58% |
| Prepayment | 5,39% | 26,13% | 3,92% |
Source: Return Research by the University of Bamberg
In this regard, everyone seems to agree: too many returns occur in the German online retail sector. Each return costs money, not only impacting the environment or society in general but also the online seller. On average, each return incurs costs of €7.93. However, the actual expenses vary significantly depending on the number of returns processed.
Table 3: Average Costs of a Return Depending on Processed Returns:
| Number of Returns per Year | Process Costs |
| Less than 10,000 Returns | €17.70 |
| Between 10,000 and 50,000 Returns | €6.61 |
| Over 50,000 Returns | €5.18 |
Amazon made headlines particularly because the company had articles that were returned but completely intact destroyed on a large scale. Therefore, it is in the interest of both businesses and consumers, as well as the environment, that fewer packages are returned.
How can Amazon returns be reduced?
Given these alarmingly high figures, the question is valid as to what measures online sellers can take to encourage their customers to return fewer packages. While marketplace sellers often have little influence over certain aspects, the situation is different when it comes to the return rate.
The following tips can help reduce the frequency of Amazon returns:
What Impact Does Returns Have on Seller Ranking on Amazon?
Let’s be honest: Technically, we do not know if and how Amazon factors the return rate into ranking or the Buy Box. However, there is much to suggest that it does. After all, every time a customer returns an order, Amazon loses money. Therefore, showing customers products with a noticeably high return rate and consequently low sales is unlikely to be in the interest of the American corporation.
Conversely, this means that products with a low return rate are likely favored by Amazon in ranking and in the awarding of the Buy Box. However, so many factors come into play that it is impossible to determine the weighting of how the return rate influences Amazon. There is consensus that customer dissatisfaction with a return is the more important factor for the awarding of the Buy Box.
Incidentally, Amazon also warns customers with a return rate that is too high. In extreme cases, customer accounts can even be suspended. However, there is no set threshold at which the online giant takes action, nor has it ever been made public. It is likely that some time will pass before a customer account is closed.
What does the KPI “Dissatisfaction with Returns” mean?
Amazon not only measures the return rate but also how satisfied a customer is with the return process. The customer experience is considered negative when
Of all the returns from a marketplace seller, a maximum of 10 percent should be classified as negative. A higher negative return rate penalizes Amazon with a significantly reduced likelihood of winning the Buy Box. Ideally, this KPI should even trend towards zero percent.
For detailed information on which metrics are crucial for the Buy Box, visit: The Key Criteria for Winning the Buy Box!
How Do Returns Affect the Profitability of Your Products?
Returns can not only have a negative impact on rankings but also on business figures. As clarified in the previous section, returns can cost sellers a lot of money. Conversely, this means that products with a high return rate can jeopardize the success of your Amazon business. Therefore, it is crucial to understand and monitor the impact of returns on the profitability of your products.
In this context, Amazon sellers cannot avoid analyzing their finances. However, since manual data analysis often proves to be very complex, many of them rely on a software-based solution to avoid high expenses for experts and save time. SELLERLOGIC Business Analytics – a profit dashboard specifically designed for Amazon sellers – provides a detailed overview of return costs and other relevant product data in a single tool. And this goes back up to two years from the time of your registration and is nearly in real-time.
With SELLERLOGIC Business Analytics, you can track the loss or profit development of a product at the level of an Amazon account as well as across an entire Amazon marketplace. The tool allows you to identify unprofitable products and expenses that need optimization (such as costs incurred from returns) and make timely decisions.
Conclusion: Returns Cannot Be Prevented
Even with the use of Virtual Reality, the return rate on Amazon and in online retail in general will always be higher than that of brick-and-mortar stores. This is normal and something that all shipping retailers must deal with. In extreme cases, Amazon even suspends the accounts of online shoppers if too many orders are returned within a certain timeframe.
This does not mean that marketplace sellers should lose sight of the important KPIs related to returns. The return rate itself should ideally be below the average for the product category. However, what is more decisive is how many returns are classified as negative. Over 10% is absolutely unacceptable; the goal for Amazon sellers should always be to get as close to 0% as possible.
Frequently Asked Questions
The return rate of an online retailer indicates how many of the orders are returned by the customer. The University of Bamberg also defines the Alpha return rate as the probability of a package being returned versus the Beta return rate as the probability of an item being returned.
This depends on various factors, such as the category. For example, the University of Bamberg reports a return rate of 14.35% for returned items in the electronics sector. In the fashion industry, however, the researchers found a return rate of up to 45.87% for returned items.
It is difficult to provide a precise answer regarding the average return rate on Amazon, as the company does not release specific figures. Due to its very customer-friendly return policies, the return rate of the e-commerce giant is likely higher than that of the rest of online retail.
The number of returns an Amazon seller will have largely depends on the category, type of product, payment method, and several other factors. Therefore, this question cannot be answered uniformly.
Amazon has repeatedly been accused of not adequately monitoring returns. There have also been reports that returns are destroyed on a large scale, even though they are intact products.
To effectively reduce returns, sellers should focus on sturdy packaging, fast shipping, and detailed product descriptions. The more realistic a customer’s perception of the product is, the lower the return rate typically is, as this helps prevent purchasing mistakes from the outset.
Products with a low return rate are likely favored by Amazon in ranking and in the awarding of the Buy Box. However, so many factors come into play that it is impossible to determine the weighting of how the return rate influences Amazon.
Amazon generally offers a 30-day return period. Conditions vary depending on the type of item and the seller. Defective items have a 2-year return period. Some items, such as food, may not be returnable at all.
Image credits in the order of the images: © Mediaparts – stock.adobe.com / © Moonpie – stock.adobe.com / © sizsus – stock.adobe.com
