Marketplaces Ben Hedrick By Ben Hedrick

How Amazon’s Third Party Return Policy Changes Affect Your Business

In July, Amazon announced a change to the third-party marketplace seller return policy which is going into effect on October 2. This Q&A post will help you understand how this change impacts your business moving into the holiday season and beyond.

What is the prepaid label returns program and am I currently enrolled?

As part of the prepaid label returns program, Amazon will automatically authorize U.S. returns that fall within Amazon’s returns policy.  Amazon will then “provide customers with prepaid return shipping label on your behalf through Buy Shipping Services” and will “only send you return requests that are outside of Amazon’s policy or exempt from this requirement for manual review” (Amazon Seller Central – login required).

If you’re currently enrolled in the prepaid labels returns program, your Amazon Seller Central returns settings page will appear like this:

When will Amazon make this change?

If you are not currently enrolled in the beta prepaid label program today, Amazon will move everyone over to the program on October 2. You will not have to do anything to get moved over and you can still offer a custom return merchandise authorization (RMA) number on these returns.

What are the pros/cons of this change?

Pros Cons
Less time spent in Amazon’s return page approving returns (if auto approve was not already set up) No option to deny a return before going through the return process, which means you may run into instances where you have to appeal returns incorrectly authorized by Amazon
You potentially will be saving costs on return shipping labels by using Amazon’s rates when the reason code is attributed to your mistake Buyers may abuse reason codes by selecting defective to obtain a free label, which means you are probably going to be battling with Amazon on who is picking up the bill for the label
You do not have to worry about building prepaid labels which saves your customer service representatives (CSRs) time Extra time may be required to reconcile returns through Seller Central due to reason code abuse and high priority designation for  Amazon returns, due to their two-business-day refund policy
Ability to exempt some Amazon Standard Identification Numbers (ASINs) from the program based on certain criteria No option to opt out of  enrollment in the program

Can I give a re-stocking fee on returns?

Yes. However, sellers generally receive poor seller feedback by withholding funds in the form of a re-stocking fee, but it may be applicable in some scenarios. Remember that if you do start to see your seller ratings dip because of this change in business, residual effects like a drop in search or buy box percentage could occur.  Be sure you fully understand restocking fees before you choose to apply them.

Are some products exempt from this change?

Yes. A prepaid return exemptions page (Seller Central login needed) guides you through this process.

Where do I track these return charges starting October 2?

Since Amazon is going to be billing you for some of these return labels, it will change where some of your costs of business are attributed from, which means you will need to track this invoicing. According to Amazon Seller Central, “Each return shipping charge will be displayed in your Settlement and Payments reports, as Shipping services purchased through Amazon. These costs will be separated from the order charges.”  There is also an entirely new returns report that you can schedule and download that groups all approved returns together within the selected time period. The information in this report includes fields like tracking number, label to be paid by, return reason, RMA, date, label cost.

Who pays for the prepaid label?

It depends. You can use this link (seller central login needed) to view the buyer return reason codes to understand if you or Amazon will own the cost of the label. If you feel that the buyer abused the reason code or got authorized for a return outside Amazon’s standard return policy and the buyer should incur the cost of the label, you can reach out to Amazon’s prepaid appeals team (prepaid-returns-appeals@amazon.com) for disputing.

Why is Amazon requiring us to refund within two days?

Once you receive the returned merchandise at your facility, Amazon wants you to refund the buyer within two business days. If you do not complete the refund within this time frame Amazon will step in and issue a refund on your behalf and bill your seller account. From our experience, Amazon has been following through on this policy, but not always on the third business day, so they might be a bit more lenient on this requirement — time will tell. It would benefit the seller to adhere to this policy so the seller can control the refunds and also charge applicable restocking fees.  Amazon is enforcing this policy because they most likely feel that it is poor customer service to not follow up on a returned item with a buyer quickly. Since Amazon is supplying all the prepaid labels, they are able to track the return shipments and the time it arrives at your facility.

So what are my takeaways from this?

Here’s what we recommend you do immediately:

  1. Read through this page in Amazon Seller Central to make sure you understand the program in its entirety. Also review the refund page.
  2. Meet with your customer service and returns team to alert them of the changes. The most important information to communicate to them is that they will not have to visit seller central to approve returns and they need to process returns within the two-business-day window.  You may have to start prioritizing Amazon returns per the refund policy.
  3. Speak with your accounting department to ensure they are reconciling these return reports with the buyer’s pre-paid label reason codes
  4. Create a process for your returns team to identify if you are charged for the label so that they can notify the right team to submit an appeal (see more info on appealing above).  For example, this may occur if the buyer selected defective item as a reason code (to deflect label fees), but the returned item is in working condition.

Please reach out to the ChannelAdvisor Community page for any assistance with this subject.

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