The Hidden Costs Of Amazon Shipping And Returns

CNBC

27 May 202254:54

EducationalLearning

32 Likes 10 Comments

TLDRThe video explores the complex world of ecommerce returns and their environmental impact. It reveals how returned items go on winding reverse logistics journeys, often getting destroyed or dumped in landfills. However, with mounting criticism and younger generations prioritizing sustainability, retailers like Amazon are reselling returns or sending them to booming liquidation marketplaces. Though fraught with unpredictability, liquidators are transforming returns into big business, reintroducing them into the circular economy through refurbishing and reselling to bargain outlets and individual resellers.

Takeaways

😲 Online shopping return rates are much higher than brick-and-mortar stores.
😮 Returns cost retailers a significant amount in processing fees and lost sales.
😢 Many returned items end up being destroyed or in landfills.
😠 Some consumers take advantage of lenient return policies by making fraudulent returns.
😃 Liquidation companies are now big business, reselling returned items.
🤑 YouTubers and resellers make money buying and unboxing liquidation pallets.
🌎 Reselling returns is better for the environment than destroying items.
🔄 Major retailers like Amazon now have programs to resell used and refurbished returns.
💰 The supply chain issues have increased demand for refurbished electronics.
🛒 New bargain stores are popping up selling only liquidated merchandise.

Q & A

What is the scale of the waste and emissions generated from product returns?
-Product returns generate nearly £6 billion of landfill waste per year and 16 million metric tons of carbon dioxide emissions. That's equivalent to the waste produced by 3.3 million Americans annually.
What percentage of merchandise sold in 2021 was returned by consumers?
-In 2021, over 16.5% of all merchandise sold was returned by consumers, up by over 56% from the previous year.
Why does Amazon use delivery service partners (DSPs) instead of hiring delivery drivers directly?
-Using DSPs allows Amazon to maintain flexibility, avoid providing employee benefits, and shift many costs like vehicle expenses to the contractors. It also lets them easily scale up delivery capability.
What percentage of drivers joined Amazon DSPs in the 6 months leading up to October 2020?
-63% of Amazon DSP drivers surveyed joined in the 6 months prior to October 2020, likely due to pandemic-related layoffs and need for work.
How does Amazon track driver safety metrics?
-Amazon uses a Mentor app that scores drivers on metrics like speeding, braking, device usage. It ranks DSPs and offers bonuses to those with high collective driver scores.
What happens to products when the 'disposal' return option is chosen?
-When disposal is chosen by a seller, the items are either incinerated by Amazon for energy recovery or sent by retailers to landfills and destroyed.
What are some of the new options Amazon offers besides disposal?
-Amazon now offers liquidation, where pallets of returns are sold at auction to resellers, and an invitation-only FBA Grade & Resell program where Amazon grades and resells certain returned items.
How big is the liquidation resale industry?
-The liquidation resale industry hit $644 billion in 2021, more than doubling over the past decade from $309 billion in 2008.
Why are refurbished goods in high demand right now?
-Because of supply chain issues and shortages of new products, there is strong demand and high resale value for refurbished consumer electronics and other goods right now.
What percentage of millennials bought secondhand products in 2021?
-81% of baby boomers reported buying secondhand products in 2021, up dramatically from 39% in 2019, showing growing acceptance across generations.

Outlines

00:00

😲 The environmental impact of Amazon's returns

Paragraph 1 discusses the large volume of landfill waste and carbon emissions generated from Amazon returns each year, amounting to the waste produced annually by 3.3 million Americans. It describes Amazon's rise enabling easy consumer returns, contributing to the reverse logistics waste problem.

05:00

📦 The winding journey of online returns

Paragraph 2 explains how returning online purchases is more complicated than in-store returns, with items going through a reverse logistics journey of multiple legs. It discusses the higher return rates for e-commerce and the associated costs and fees for retailers.

10:03

😫 Employees process large volumes of returns

Paragraph 3 provides an inside look at a returns center where employees quickly inspect and sort high volumes of Amazon returns. Algorithms determine the next steps based on the item's condition.

15:04

🚽 Bathroom breaks are a challenge for drivers

Paragraph 4 discusses how delivery drivers for Amazon DSPs often don't have time to find bathrooms during routes, leading some to urinate in bottles. It covers various driver complaints about dangerous routing, long days, and constant monitoring.

20:05

🛒 Many returns end up in landfills

Paragraph 5 examines the large amount of returns that end up in landfills or incinerated each year. It notes the rise of online shopping and lenient return policies contributing to more waste and costs for retailers.

25:07

🌎 Returns create pollution equal to millions of Americans

Paragraph 6 quantifies the 16 million metric tons of carbon emissions and £5.8 billion of landfill waste generated annually from US returns. This is likened to the waste produced by 3.3 million Americans per year.

30:08

🔥 Luxury brands also destroy unsold merchandise

Paragraph 7 gives examples of luxury retailers like Burberry and Richemont destroying large volumes of unsold merchandise to protect brand image. This highlights the common practice of disposal across the industry.

35:10

💸 Liquidation resells pallets of returns

Paragraph 8 explains how liquidation companies buy bulk pallets of returns and overstock from retailers, then resell items at a large discount. This diverges returns from landfills but is not highly profitable.

40:12

♻️ Amazon expands options to avoid disposal

Paragraph 9 discusses how Amazon has added new options for sellers to avoid disposing of returns, including expanded liquidation and invitation-only FBA grading and reselling of used products.

45:14

🚚 Inside the booming liquidation industry

Paragraph 10 provides an in-depth look inside liquidation warehouses, describing the operational process of sorting, processing, and reselling bulk volumes of consumer returns and overstock.

50:15

🔧 Refurbishing maximizes value of returns

Paragraph 11 focuses on the refurbishment process for electronics, which enables efficient reselling of items at a high percentage of original retail value due to current shortages.

Mindmap

Keywords

💡Returns

Returns refer to products that customers send back to the retailer after purchasing, either because they changed their mind, the item was defective, or for other reasons. The video focuses heavily on the massive volume of returns generated by ecommerce and the complex reverse logistics required to process these returns. For example, it states that $761 billion worth of merchandise was returned in 2021, with online purchases about 3 times more likely to be returned than in-store ones.

💡Reverse logistics

Reverse logistics refers to the process of receiving, sorting, and managing returned products. This is a key challenge for retailers as ecommerce returns are far more complicated than brick-and-mortar returns. The video explores reverse logistics facilities and the costs involved at each step of inventory coming back into the system.

💡Landfill waste

With high volumes of returns, retailers often end up throwing away items that cannot be resold. This generates huge amounts of landfill waste and carbon emissions. For example, the video states returns create nearly £6 billion of landfill waste and 16 million metric tons of CO2 annually.

💡Circular economy

A circular economy aims to eliminate waste by continually reusing products and materials. The video posits liquidation and refurbishment of returns as more sustainable alternatives to disposal, allowing items to remain in use.

💡Amazon delivery drivers

Much of the video focuses on the working conditions for Amazon's network of contract delivery drivers. Their high-pressure jobs and demand to meet quick delivery times has led to issues like drivers urinating in bottles.

💡Liquidation

Liquidation refers to the resale of returned and excess merchandise, usually at a steep discount. This allows retailers to recover some value rather than trashing items. The video profiles the booming liquidation industry led by companies like Liquidity Services.

💡Refurbishment

Refurbishment is the process of inspecting used products, repairing them if needed, and preparing them for resale. Many returned electronics and other goods can be refurbished rather than discarded. This is both more profitable for retailers and better for the environment.

💡Bargain stores

Bargain retail stores are a major outlet for liquidated merchandise. The video discusses how stores like Big Lots, Ollie's, and Dirt Cheap buy up pallets of returns and excess inventory to sell at big discounts.

💡Gen Z consumers

Younger generations like Gen Z are fueling demand for refurbished and sustainably-sourced products. Their preference helps make liquidation and refurbishment viable alternatives to throwing out returns.

💡Carbon emissions

Excessive product returns lead to higher carbon emissions through the transportation and disposal of returns. The video states 16 million metric tons of emissions are created annually just from returns. This underscores the environmental impact of reverse logistics.

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Transcripts

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