Amazon's Returns Problem Is Killing Sellers and Raising Prices

That little “free return” button on Amazon has a dark side. Nearly 17% of Amazon sales now end in a return, and when they do, it is usually the seller, not Amazon, who eats the cost: the lost product, the original shipping, the return shipping, the non-refundable fees, and often a one-star review on top.

Returned items frequently get slapped back on the shelf and resold as new, and return fraud has tripled since 2018. To survive, sellers raise prices, which means you pay for all those “free” returns every time you shop, on Amazon and everywhere else.

Here is how the system actually works, why it is getting worse, and what it would take to fix it.

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Table of Contents

Key takeaways

Nearly 17% of Amazon sales end in a return (per CNBC), versus under 1% on a typical direct website. Clothing and electronics can run 20-30%.
Return fraud nearly tripled since 2018, from about 5% to 14% of returns, per the National Retail Federation.
Sellers eat the cost, not Amazon. Processing a return runs roughly 30% of the item’s price, before counting the lost product and fees.
64.8% of sellers raised prices in 2024 (SmartScout) to cover returns, fees, and fraud, which feeds higher prices everywhere.
The waste is enormous: 2024 returns created an estimated 29 million metric tons of CO2 and sent 9.8 billion pounds of product to landfills.

How bad is Amazon’s return problem?

Amazon’s return problem is severe and getting worse: nearly 17% of sales now end in a return, versus under 1% on a typical direct website, and high-return categories like clothing and electronics run 20-30%. I see it firsthand. I am not a huge Amazon seller. I do about six figures a year on the platform selling handkerchiefs and linens. Even at my size, the returns are out of control. We get back products that are completely destroyed, covered in stains, missing half the package, or sometimes an empty box. One time, someone stuffed an old, ratty t-shirt in a box just to match the weight. That actually happens.

It is happening to sellers everywhere. The return rate on Amazon has more than doubled in five years, and the 17% figure comes from CNBC. On our own website over at bumblebeelinens.com, our return rate is under 1%. On Amazon, that 17% is just the average.

Why are Amazon returns so high?

Returns are effortless. There is no accountability, no human interaction, just click, return, refund, done. And there is no real inspection before items get shipped back out. Amazon’s return centers are built for speed, not accuracy. If an item looks vaguely like the right shape or weight, it goes back into inventory whether it is broken, missing pieces, or soiled.

I have had customers email me saying they bought my product on Amazon and it arrived with food stains. Each time, I apologize and explain it is likely Amazon’s fault, which is a terrible explanation, and I get a one-star review no matter what. This is how the system works, and it is getting worse. According to the National Retail Federation, return fraud has nearly tripled since 2018, climbing from about 5% to 14%.

The three kinds of return fraud

Return fraud on Amazon comes in three main forms: wardrobing, item switching, and empty-box returns. Amazon runs on the honor system, and some customers are anything but honorable:

Wardrobing: buying an item, using it for a weekend, and sending it back. Think Halloween costumes, graduation gowns, even electronics.
Item switching: buying a new product, swapping in an old broken one, and returning the junk, knowing Amazon probably will not check.
Empty boxes: shipping back nothing, or a rock or a brick. As long as the box scans with the right weight, it slips through.

Every time, the seller eats the cost. Amazon has already taken its fees and gotten paid. The seller is left with the broken product, the refund, the return shipping, and sometimes negative feedback. I have had a single bad return wipe out the profit from ten sales.

How returns destroy seller margins

Returns on Amazon do not just hurt, they destroy margins. It costs roughly 30% of an item’s price just to process a return, counting shipping, handling, labor, and the damage or loss of the item. It is worse than that, because you also lose:

The product, which may be unsellable
The original shipping cost, which you do not get back
The return shipping cost
The non-refundable FBA fee
Amazon’s newer refunds fee

So you sold a product and paid for the privilege of losing money. For some of our products, we have to sell three more units just to break even on one return.

This is why 64.8% of sellers raised prices in 2024, according to a SmartScout survey, just to cover rising return costs, fees, and fraud. Forbes reported that the average price of third-party goods on Amazon rose 6.7% in 2024, with categories like electronics and clothing up as much as 29%. In my own community, the average increase was around 17%. Even sellers doing millions are crushed. One seller in my mastermind group runs at just over 1% net profit on Amazon, entirely because of return abuse and fraud. According to Marketplace Pulse, Amazon is less competitive than it was four years ago, with fees (referral, FBA, storage, advertising, and returns) consuming up to 61% of a seller’s revenue.

What has Amazon actually done about returns?

To be fair, Amazon has started making changes, mostly because the problem got bad enough that sellers were ready to walk:

For items over $100, sellers can opt out of auto-generated return labels, so the customer has to request permission.
A photo requirement on certain claims, so customers upload proof before sending something back.
A “Frequently Returned Item” warning label on listings, which is basically game over for any listing that gets one.
A returns penalty fee when a category crosses a certain return rate, ranging from $1.65 per return to over $160 per item.

Return rates did drop about 5% after these changes. It is not enough, because Amazon still sides with the customer almost every time. Defective claim, refund. Did not match the description, refund. Claims it never arrived even with tracking, refund. Sellers are guilty until proven innocent, and even a won case often ends with the customer keeping the refund and the seller getting a canned apology. The penalty fees also hit sellers even when the returns are fraudulent.

Why shoppers pay for Amazon’s returns too

You pay for Amazon’s returns through higher prices, because all the abuse, fraud, and waste gets baked into what you see at checkout. It hurts everyone, including shoppers. That brick someone mailed back, that costume someone wore and returned, that product a scammer swapped out, you are paying for it. Sellers are not charities and cannot eat the cost forever, so they raise prices, and not only on Amazon. Sellers raise prices on Shopify, Etsy, and everywhere else to survive. When you see prices creeping up, part of it is inflation, and part of it is the hidden tax of free, no-questions-asked returns.

The environmental cost is staggering too. In 2024, returns generated an estimated 29 million metric tons of CO2, roughly like driving 6 million cars for a year, and sent over 9.8 billion pounds of product to landfills. Perfectly good items get thrown away, liquidated for pennies, or incinerated, because it is often cheaper to dump them than to inspect, restock, and resell.

What would actually fix Amazon’s returns problem

Fixing Amazon’s returns problem comes down to four things, and the fix is straightforward even if it is not easy:

Amazon needs to inspect returns instead of quietly reshelving broken items and empty boxes.
Hold fraudulent customers accountable. Amazon and sellers both know the serial abusers, yet there are no consequences and no blacklist.
Give sellers real tools, like the ability to block abusive buyers and dispute sketchy returns before an auto-refund.
Shoppers can help by returning genuinely defective items but skipping casual returns and wardrobing, since a small business absorbs the loss, not Jeff Bezos.

Most experienced sellers say the same thing: “I hate being on Amazon, but I have to be there because that is where the customers are.” For many, Amazon is 30% to 70% of revenue, so walking away is hard. Still, sellers are shrinking their Amazon exposure, pushing customers to their own websites, and diversifying to Walmart, Etsy, and eBay, anywhere with less return abuse. The math does not lie.

Frequently asked questions

What is Amazon’s return rate?

Nearly 17% of Amazon sales end in a return, according to CNBC, compared with under 1% on a typical direct-to-consumer website. High-return categories like clothing and electronics can exceed 20-30%.

Who pays for Amazon returns?

The seller does, not Amazon. Amazon has already collected its fees. The seller absorbs the lost product, the original and return shipping, the non-refundable FBA fee, and Amazon’s refunds fee, and often a negative review too.

What is wardrobing?

Wardrobing is buying an item, using it briefly, and returning it for a full refund, common with costumes, formalwear, and electronics. It is a major form of return abuse that sellers end up paying for.

How much does one return cost a seller?

Processing a return runs roughly 30% of the item’s price, before counting the lost or unsellable product and non-refundable fees. For some products, a seller has to sell three more units just to break even on a single return.

Has Amazon fixed its returns problem?

Only partly. Amazon added opt-out return labels over $100, photo requirements, “Frequently Returned Item” labels, and penalty fees, which cut return rates about 5%. The core problem remains because Amazon still refunds customers almost automatically.

Why are Amazon prices going up?

Returns, fraud, and rising fees get baked into prices. SmartScout found 64.8% of sellers raised prices in 2024, and Forbes reported third-party prices up 6.7% on average, with some categories up 29%. Those increases spread to other channels too.

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Amazon’s Returns Problem Is Killing Sellers and Raising Prices