While returns on Amazon are straightforward for consumers, they pose significant challenges and costs for the small businesses that comprise most of the marketplace. The rise in returns has caused some sellers to reconsider their participation in Amazon’s Fulfillment by Amazon (FBA) program, with many expressing a desire to leave the platform entirely.
A major issue is the increase in returns fraud, resulting in customers sometimes receiving used items instead of new ones. Two particularly notable incidents reported to CNBC involved Amazon mistakenly sending out used diapers and a cooler containing someone else’s spoiled breastmilk.
“I don’t think consumers realize how many small businesses are on Amazon and how their returning practices impact those families,” said Rachelle Baron, who owns Beau and Belle Littles, which specializes in reusable swim diapers sold on Amazon.
Baron recounted how her business suffered after one return incident where Amazon shipped soiled swim diapers to customers, noting, “Two of the diapers that went out were dirty.”
According to a National Retail Federation report, nearly 14% of retail returns in the U.S. in 2024 were fraudulent, a significant increase from 5% in 2018, resulting in a staggering total cost of $890 billion for retailers.
In June 2024, Amazon introduced a new fee for sellers in its FBA program for items that surpass certain return rate thresholds. These sellers, who depend on Amazon for logistics such as shipping and returns, have found this fee burdensome.
By September, just a few months after the fee’s implementation, e-commerce analytics firm Helium 10 reported a nearly 5% drop in return rates among U.S. Amazon sellers.
“This is compelling sellers to enhance the quality of their listings and products,” stated Zoe Lu, General Manager of Helium 10.
Moreover, Amazon has begun to label certain “frequently returned items,” which may also contribute to the decline in returns.
Increasing Prices
However, the introduction of this new fee might also lead to higher prices for customers.
According to a SmartScout survey, 65% of sellers reported raising prices in 2024 as a direct result of Amazon’s fee changes. Additional comments from other sellers indicated that returns fraud was also a factor in their price hikes.
CNBC reached out to seven Amazon sellers to learn how they are addressing the rising costs associated with returns.
“We’re operating at just over a 1% net profit on Amazon, significantly impacted by fraud and return abuse,” said Lorie Corlett, who sells protective cases for hot wheels through Sterling Spectrum. She highlighted that her return rate on Amazon is 4%, compared to only 1% on other marketplaces like Walmart. “Ultimately, it’s Amazon that needs to take responsibility. People would stop abusing the system if Amazon enforced stricter controls.”
Amazon responded to CNBC by stating that it does not tolerate fraudulent returns, taking steps against scammers, including denying refunds and enforcing customer identity verification.
Mike Jelliff, who sells musical equipment under the GeekStands brand on Amazon and several other platforms, stated that his return rate on Amazon is three times higher than other channels.
“On eBay, we can block certain customers,” Jelliff explained. “However, Amazon still allows those customers to repurchase from us.”
Jelliff showcased to CNBC the array of about 40 cameras he has installed in his Texas warehouse to monitor every item being shipped, returned, and unpackaged. He utilizes the recorded footage to appeal against fraudulent claims, specifically when customers demand refunds for items they did not receive. Additionally, he maintains a blacklist of repeat offenders who fraudulently return used or damaged goods, which he considers a total loss.
While Jelliff, who does not rely on FBA, noted that Amazon has made improvements to its returns processes, such as allowing multiple appeals for perceived fraudulent returns, he has also been granted the option to avoid automatic return labeling for items priced over $100 since 2023, helping to reduce his return rate.
Mike Jelliff at his GeekStands warehouse in Tyler, Texas, as of June 6, 2025. Jelliff experiences three times more returns on his professional music gear sold on Amazon compared to other platforms like eBay and Walmart.
Jacob Schatz
Why Returns Are Discarded
Determining which returns are fraudulent and which items can be resold is a labor-intensive and item-specific process, leading to potential mistakes.
“Given the scale of operations, it’s likely that some items slip through the cracks,” said Lu from Helium 10. “Those oversights might not be frequent, but the impact of these incidents can be very damaging for a brand.”
Lisa Myers, founder of Ceres Chill, who at one point relied on Amazon for returns management via FBA, has her own troubling story.
In 2023, Amazon mistakenly sent a product from Ceres Chill to a customer containing someone else’s rotten breastmilk, leading Myers to comment that the customer described the experience saying, “she will never forget that smell.”
“To receive something, and I don’t mean to exaggerate, but something hazardous, someone else’s bodily fluids in your home is unacceptable,” Myers stated. “It was the moment I broke down in tears, as I simply couldn’t comprehend how this could happen.”
Myers decided to exit the FBA program following this incident, despite the advantages of having her products carry the Amazon Prime badge.
“Not participating in FBA is detrimental to our business,” Myers admitted. “Yet, we cannot prioritize profit over the safety and peace of mind of our customers.”
Now, Myers has outsourced all her returns to Goodbuy Gear, a baby resell specialist, which…
is on track to resell 200,000 returned baby items this year.
Selling Responsibly
Kristin Langenfeld founded GoodBuy Gear while she was a new mother looking for a quality used jogging stroller.
“Over the past nine years, we’ve created a detailed database that includes all product types, common issues, and recalls,” Langenfeld explained. “Each item undergoes about 40 inspection points, which makes the process quite complex.”
Langenfeld demonstrated the inspection process at her warehouse in Malvern, Pennsylvania, where each product is examined for roughly 15 minutes by a team of at least four staff members. This thorough and resource-heavy method is proving effective, as 33 new sellers joined in 2024, which is three times more than last year. With a 50% annual growth rate, she is moving to a larger facility in Columbus, Ohio.
Her motivation for addressing returns stemmed from a visit to a major retailer’s return warehouse five years ago.
“On the floor, there were signs saying ‘incinerate’ and ‘destroy,'” she noted.
Returns are responsible for approximately 29 million metric tons of carbon emissions in 2024, and an estimated 9.8 billion pounds of returned items ended up in landfills, according to reverse logistics software provider Optoro.
Amazon has faced backlash for disposing of millions of unused products. In 2022, the company informed CNBC that it was “aiming for zero product disposal,” but did not provide a specific timeline. Three years later, that goal is still being pursued, with Amazon stating, “Most returns are resold as new or used, sent back to sellers, liquidated, or donated.”
In 2020, Amazon introduced two new methods for sellers to manage returns. The “Grade and Resell” feature allows U.S. FBA sellers to have Amazon evaluate returns and label them as “used” prior to resale. The FBA Liquidation option enables sellers to recover some losses by selling pallets of items in the secondary market through partners like Liquidity Services.
Additionally, there’s been an FBA Donations program since 2019, enabling sellers to automatically donate suitable overstock and returns to organizations via the non-profit Good360. Amazon shared with CNBC that these seller initiatives give a second chance to over 300 million items annually.
For customers wanting to prevent returns from going to waste, Amazon offers various options.
Amazon Resale features used and opened items, Amazon Renewed offers refurbished products, and Amazon Outlet sells excess inventory. The daily deals platform Woot!, acquired by Amazon for $110 million in 2010, also provides scratched and dented goods. Customers can trade in specific electronics, such as Amazon devices, phones, and tablets for gift cards or send them to the company’s certified recycler.
“I hope our country can shift to making better products,” Langenfeld stated. “We should focus on creating high-quality items designed for resale.”
