Amazon Sellers Have A Merry Christmas, But Struggle With Returns

There’s no arguing the fact that Amazon has been a lifeline for small businesses this year. During the extended holiday season, the eCommerce giant says its independent sellers saw their sales grow more than 50 percent over 2019. And while the eCommerce champion said it delivered more than 1.5 billion gifts this season, nearly one billion products were sold by third-party sellers.

That’s the good news. Now those sellers have to play on the same returns field as their bigger competitors, as returns season follows what was a watershed event for Amazon and its sellers. Issues are already starting to pop up, most notably around the on-time delivery and customer experience rating that is so important for those third-party sellers. One law firm that specializes in advising Amazon sellers, as well as some companies that are buying up those sellers, says returns need to be top priority, or they risk the wrath of the platform. According to New York-based Rosenbaum Famularo, Amazon has a quick hook for sellers that have minor infractions, such as not refunding customers fast enough.

"There will now be millions of consumers retuning products, which sellers will need to address, no questions asked. We are urging them to process these returns as quickly as possible," said CJ Rosenbaum, Esq., founding partner of the firm. "Sellers need to focus on this in order to avoid their order defect rate from going over the 1 percent threshold."

The order defect rate (ODR) is used to measure a seller's performance based on the percentage of orders that receive negative feedback and are calculated using three components: A-to-Z claims (unsatisfactory or slow deliveries); negative customer feedback, including comments and ratings; and credit card chargebacks, or the number of orders refunded. To continue selling on Amazon, sellers have to maintain an ODR under 1 percent. With so much business going out this holiday season, Rosenbaum is concerned that the independent sellers might not be prepared for the business coming back.

"Failure to refund consumers fast enough will have a more detrimental effect on ODR rate than the returns themselves. Amazon is aware returns are going to spike even more after this holiday season since the period of time has been extended," said Rosenbaum. "Making sure sellers stay on top of refunds will ensure ODR rates are not severely affected and their accounts are not in jeopardy of getting suspended."

According to the Amazon return policy, when a consumer orders from an independent seller, the return is sent back to that seller, not Amazon’s. Most of the return policies for those sellers are similar to Amazon’s. To its credit, Amazon has adopted a very liberal returns policy this year. Items shipped between Oct. 1 and Dec. 31 can be returned until Jan. 31, 2021. It’s a big help when a retailer has Amazon’s infrastructure – but no one else has that kind of capacity.

“While other marketplaces may limit returns to 30 days, the consumer expectations brought on by Amazon’s liberal return policies could result in buyers asking for returns or refunds well beyond the 30-day limits set by other marketplaces,” said Amazon seller blog eSeller Café. “This could also result in some buyers making claims that items are not as described to credit card companies, which could force a late return. In rare cases, credit card and digital payment services such as PayPal may allow chargebacks up to 180 days.”

The blog goes on to warn that the expected wave of returns will impact sellers’ bottom line and cash flow, especially during January. “The true profit of the 2020 holiday season may not be known until the end of January 2021,” it said.

Data from online fulfillment service Ware2Go shows that this year, the return rate for online orders is 10 to 12 percent higher than in physical stores, with an extra 10 percent tacked on due to the holiday. According to a Ship2Ware consumer study, 88 percent of Americans plan to return some holiday gifts, and 54 percent expect to do so within two weeks after the holidays.

eBay has directly addressed the independent seller issue by extending estimated delivery dates for transactions from Nov. 15 through the end of the year. The evaluation period for on-time delivery and customer experience ratings will be adjusted retroactively to mid-November.

“Even in cases where a buyer may see a faster delivery estimate, your shipment will be considered on time if it arrives by the latest day for the shipping service,” reads a recent post on the company’s sellers blog. “For example, if you use a standard shipping service with a one- to five-day delivery time plus your stated handling time of two days, the item needs to arrive within seven working days. If your package is delivered any time during this period, we recognize that you shipped on time.”