Round trip, or: How important is the return rate on Amazon?
For most online retailers, it is an important performance metric: the return rate. For Amazon sellers, however, it usually does not play a really significant role. Especially resellers who mainly have commercial goods in their portfolio pay more attention to customer dissatisfaction with returns. However, the Amazon return itself can also influence the performance of a product or an online retailer.
Basically, retailers must be aware of one thing: Every single KPI value, no matter how small, 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 based on which it is decided, which retailer appears in the Buy Box.
The same applies to the ranking of private label products. Here, the SEO factor comes into play as well. For the A9 algorithm, keywords play a crucial role, for example. However, the return rate of an Amazon seller also influences the order in which search results are displayed. In this blog post, we would like to show you how returns work on Amazon and how the rate can influence the ranking and the Buy Box profit.
How does the right of withdrawal work on Amazon?
Amazon is absolutely customer-oriented. The focus is always on the perfect customer experience. This also includes that customers can return ordered goods to the online giant relatively easily, as long as they do so within the return period set by Amazon. Because in the end, it is worth it: The security of being able to return practically everything to Amazon and the satisfaction that a smoothly processed return generates among customers make the relatively high return rate not a big problem for Amazon: The avoidance of risk for the customer leads to significantly higher order numbers.
Accordingly, a quite straightforward system has also been established. Amazon customers log into the online return center. There, all their orders are displayed for 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 retailer may need to give their approval beforehand. Then this return is also included in 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 know various types of returns. Defective items, for example, can be returned up to two years after receipt of the goods, while other items such as food may not be returnable at all. Marketplace sellers can define their own conditions for an Amazon return – these must, however, “at least correspond to Amazon’s return policies”.
What is the average return rate on Amazon?
Basically, 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 hardly possible to give a general 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. Accordingly, 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 slightly 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 of the University of Bamberg
On this point, everyone seems to agree: Too many returns are made in German online retail. Because every return costs money. Not only the environment or society in general, but also the online retailer. On average, each return incurs costs of 7.93 euros. However, the actual expenses depend heavily on the number of processed returns.
Table 3: Average costs of a return depending on the processed returns:
| Number of Returns per Year | Process Costs |
| Less than 10,000 Returns | 17.70 Euro |
| Between 10,000 and 50,000 Returns | 6.61 Euro |
| Over 50,000 Returns | 5.18 Euro |
Headlines were particularly made by Amazon, as the company had items that were returned but completely intact destroyed on a large scale. It is therefore in the interest of both companies and consumers as well as the environment that fewer packages are returned.
How can Amazon returns be reduced?
Given these alarmingly high numbers, the question is justified as to what measures online retailers can take to encourage their customers to return fewer packages. And while marketplace sellers often have little influence, the situation is different with the return rate.
The following tips help to avoid having to process an Amazon return so often:
What Impact Does Returns Have on Seller Ranking at Amazon?
Let’s be honest: To be precise, we do not know if and how Amazon factors the return rate into ranking or Buy Box. However, there is much to suggest that it does. Because every time a customer has returned an order, Amazon loses money. Therefore, showing customers products that have a conspicuously high return rate and thus low sales can hardly be in the interest of the American corporation.
Conversely, this means: Products with a low return rate are likely favored by Amazon in ranking and in the allocation of Buy Box. However, so many factors play a role that it is impossible to say how much weight the return rate carries on Amazon. There is consensus, however, that customer dissatisfaction with a return is the more important factor for the allocation of Buy Box.
By the way, 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 for when the online giant takes action, nor has it ever been made public. However, it is likely to take some time before a customer account is closed.
What does the KPI “Dissatisfaction with Returns” mean?
Amazon measures not only the return rate but, above all, how satisfied a customer is with the return process. The customer experience is considered negative when
Of all the returns of 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 even tends towards zero percent.
Detailed information on which metrics are decisive for the Buy Box can be found here: 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 should be clear from the above section, returns 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 extremely important 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 developed 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 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 at the level of an entire Amazon marketplace. The tool allows you to identify unprofitable products as well as 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 have to deal with. In extreme cases, Amazon even suspends the accounts of online shoppers if too many orders are returned within a certain period.
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 of the product category. However, what is more decisive is how many returns are classified as negative. Over 10% is absolutely unacceptable; getting as close to 0% as possible must always be the goal of Amazon sellers.
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 rate of 14.35% of returned items in the electronics sector. In the fashion industry, however, researchers arrive at a figure of up to 45.87% of returned items.
It is not possible to answer precisely how high the average return rate on Amazon is, as the company does not release any figures on this. Due to the very customer-friendly return policies, the return rate of the e-commerce giant is likely higher than in the rest of online retail.
How many returns an Amazon seller will have largely depends on the category, the type of product, the payment method, and some other factors. Therefore, this question cannot be answered uniformly.
Amazon is repeatedly accused of not monitoring returns adequately. There have also been reports that returns are being destroyed on a large scale, even though they were intact products.
To effectively reduce returns, sellers should focus on stable packaging, fast shipping, and detailed product descriptions. The more realistic a customer’s perception of the product is, the lower the return rate usually is, as wrong purchases are prevented from the outset.
Products with a low return rate are likely favored by Amazon in ranking and when awarding the Buy Box. However, so many factors play a role that it is impossible to say how much weight the return rate has in Amazon’s calculations.
Amazon generally offers a 30-day return period. Conditions vary depending on the type of item and seller. Defective items have a 2-year period. Some items, such as food, may not be returnable.
Image credits in the order of the images: © Mediaparts – stock.adobe.com / © Moonpie – stock.adobe.com / © sizsus – stock.adobe.com
