Returns on Amazon are free and straightforward for shoppers, but they’re dangerous and expensive for the small businesses that sell a majority of the products on the world’s biggest e-commerce site. Returns have driven some sellers to exit the favored Success by Amazon program, while others told CNBC they’d like to go away the platform altogether.
At the guts of the issue is a giant rise in returns fraud, which has led to customers mistakenly receiving used products once they ordered something recent. In two particularly egregious examples involving baby products described to CNBC, Amazon sent customers used diapers and a chiller with another person’s rotten breastmilk inside.
“I actually don’t think that customers understand what number of small businesses are on Amazon and the way their return habits affect small businesses and families like mine,” said Rachelle Baron, owner of Beau and Belle Littles, which sells reusable swim diapers on Amazon.
Baron said her business tanked after a return incident with Amazon. The e-commerce platform shipped soiled swim diapers to customers after the used baby products had been returned to Amazon, Baron said.
“There was actually two diapers that were sent out that were poopy,” she said.
In 2024, nearly 14% of all U.S. retail returns were fraudulent, up from 5% in 2018, in accordance with a report by the National Retail Federation. In total, the report found that returns cost retailers $890 billion in 2024.
Amazon began charging sellers in its success program (FBA) a brand new fee in June 2024 for items that exceed certain return rate thresholds. Sellers who join for FBA depend on Amazon for logistics, including shipping, packing and returns.
In September, a pair months after the fee went into effect, e-commerce group Helium 10 saw return rates for U.S. Amazon sellers drop nearly 5%.
“It’s forcing the vendor to have higher quality listings and better quality products,” said Helium 10 General Manager Zoe Lu.
Amazon has also began adding a warning label to some “steadily returned items,” which may very well be contributing to the dip.
Rising prices
Nonetheless, the brand new fee may additionally be resulting in rising prices.
One survey by e-commerce evaluation company SmartScout found that 65% of sellers said they raised prices in 2024 directly due to Amazon fee changes. Other sellers told CNBC returns fraud is the explanation they’ve raised prices.
In total, CNBC talked to seven Amazon sellers to learn how they’re handling the rising cost of returns.
“We’re running at about just over 1% net profit on Amazon, totally resulting from fraud and return abuse,” said Lorie Corlett, who sells Sterling Spectrum protective cases for decent wheels. She said her return rate is 4% on Amazon and only one% on other marketplaces like Walmart. “It’s really Amazon that is accountable at the top of the day. People would stop doing it if Amazon held them accountable.”
Amazon told CNBC it has no tolerance for fraudulent returns and that it takes motion against some scammers. Those measures include denying refunds and requiring customer identity verification.
Mike Jelliff sells skilled music gear through his GeekStands brand on Amazon and eight other marketplaces. He said his return rate on Amazon is 3 times higher than the typical he sees elsewhere.Â
“On eBay, we’re allowed to dam specific customers out,” Jelliff said. “But on Amazon, that customer continues to be allowed to repurchase from us.”
Jelliff showed CNBC the system of about 40 cameras he’s installed in his Tyler, Texas, warehouse to trace every outgoing item, incoming return and unboxing. He uses the photographs when filing appeals with Amazon, including when customers request refunds claiming they never receive an item. He keeps a blacklist of repeat offenders who commit this type of fraud and people who return used and damaged items, which develop into a complete loss for him.
Amazon has made some improvements to its returns process, said Jelliff, who doesn’t depend on FBA. This includes Amazon allowing small businesses to make multiple appeals when fighting a fraudulent return. Amazon has also let Jelliff opt-out of automatic return labels for items above $100 starting in 2023, and his return rate has been dropping since.
Mike Jelliff at his GeekStands warehouse in Tyler, Texas, on June 6, 2025. Jelliff sees 3 times more returns of his skilled music gear on Amazon, in comparison with the typical on other marketplaces like eBay and Walmart.
Jacob Schatz
Why returns are destroyed
Determining which returns are fraudulent and that are ready for re-sale is labor-intensive and item specific, experts said. That creates loads of room for error.
“Since it’s such a big operation, things are missed,” said Lu of Helium 10. “I feel they’re probably missed on the margins, but these stories are very impactful since it is such a reckoning for the brand.”
Ceres Chill founder Lisa Myers, who once relied on Amazon to handle returns for her business as a part of FBA, has one in all these stories.
In 2023, Amazon sent one in all Ceres Chill’s products to a customer with another person’s rotten breastmilk inside, said Myers, adding that the client wrote a review saying, “she’s going to always remember that smell.”Â
“To have something, and I do not mean to be dramatic, but dangerous, any individual else’s bodily fluids in your kitchen rotting in something that you simply had intended to make use of in your child is unacceptable,” Myers said. “That is the moment I broke down crying and just sat down and thought, I do not know how this might have happened.”
Myers said she left FBA after the incident, forsaking advantages like having her products labeled with Amazon’s Prime badge.
“It hurts our business to not take part in Fulfilled by Amazon,” Myers said. “It’s just we’re not willing to, we are going to never put profit over the security and, frankly, mental health of our customers.”
As a substitute, Myers outsources all her returns to baby resell specialist Goodbuy Gear, which is on course to re-sell 200,000 returned baby products this yr.
Re-selling responsibly
Kristin Langenfeld began GoodBuy Gear when she was a brand new mom struggling to search out an excellent quality, used jogging stroller.Â
“We have spent the last nine years constructing out a database that has all the products and the variations, the common issues, the recalls,” Langenfeld said. “For a few of these, there’s 40 points that we inspect on the item itself, and it’s really complicated.”
Langenfeld showed CNBC the method at her warehouse in Malvern, Pennsylvania, where each item is inspected for about quarter-hour and is often handled by not less than 4 employees. The resource intensive process is paying off. She says 33 recent sellers signed up in 2024, 3 times greater than the previous yr. And with business growing 50% year-over-year, she’s upgrading to a much bigger warehouse in Columbus, Ohio.
She was inspired to handle returns after visiting a serious retailer’s returns warehouse five years ago.
“Taped on the ground were signs that said ‘incinerate,’ ‘destroy,'” she said.
Returns generated an estimated 29 million metric tons of carbon emissions in 2024, and 9.8 billion kilos of returns ended up in landfills, in accordance with reverse logistics software provider Optoro.
In 2020, Amazon added two recent options for sellers to re-home returns. “Grade and Resell” allows all U.S. FBA sellers to have Amazon rate the return and mark it as “used” before re-selling it. FBA Liquidation allows sellers to recoup some losses by offloading palettes of products for re-sale on the secondary market through liquidation partners like Liquidity Services.
There’s also an FBA Donations program that is been around since 2019, allowing sellers to mechanically offer eligible overstock and returns to charity groups through the non-profit Good360. Amazon told CNBC these seller programs give a second life to greater than 300 million items a yr.
For shoppers wanting to maintain returns from incineration or landfills, Amazon also has options.
Amazon Resale has used and open-box goods, Amazon Renewed sells refurbished items and Amazon Outlet sells overstock. Day by day deal site Woot!, bought by Amazon for $110 million in 2010, also sells scratched and dented items. Customers may trade in certain electronics, like Amazon devices, phones and tablets, for Amazon gift cards or send them to the corporate’s certified recycler.
“I hope the change that we’re in a position to make as a rustic is that we stop making crap,” Langenfeld said. “We should always make prime quality products which might be meant for resale.”
