The convenience of Amazon’s return process has long been a selling point for consumers but behind the scenes, it’s wreaking havoc on the small businesses that form the backbone of the platform. As return fraud surges and operational costs mount, some sellers are abandoning Fulfillment by Amazon (FBA) altogether, while others are barely hanging on.
Returns on Amazon are free and frictionless for shoppers, but for sellers, they’re a source of mounting stress, lost profits, and in some cases, brand reputation disasters. Many sellers now say the cost of doing business on the platform outweighs the benefits, citing widespread return fraud and flawed reverse logistics.
Among the worst incidents reported: used diapers reshipped to customers, and baby bottle chillers filled with someone else’s spoiled breastmilk. These aren’t isolated cases—they’re signs of a systemic problem that disproportionately affects small sellers.
Fraud is rising fast. According to industry data, nearly 14% of all U.S. retail returns in 2024 were deemed fraudulent nearly triple the rate from 2018. These losses contributed to an eye-watering $890 billion blow to retailers nationwide last year alone.
Amazon attempted to stem the tide by introducing new fees in mid-2024 for FBA sellers who exceed a certain return threshold. While this change appears to be having some impact—return rates reportedly dropped by nearly 5% within a few months it’s also leading to unintended consequences.
A major one: higher prices. An industry survey revealed that 65% of Amazon sellers raised their prices in 2024 specifically due to the fee changes. Sellers say they’re left with little choice as they struggle to protect razor-thin margins from returns-related losses.
Lorie Corlett, who sells protective toy cases, put it bluntly: “We’re running at just over 1% net profit on Amazon, totally due to fraud and return abuse.” Her return rate on Amazon is 4% four times what she sees on other platforms like Walmart.
Some sellers are pushing back. Mike Jelliff, who runs GeekStands, installed 40 surveillance cameras in his Texas warehouse to record every shipment, return, and unboxing. This footage is now his frontline defense when appealing to Amazon against bogus refund claims.
Amazon, for its part, says it is working toward reducing waste. It claims over 300 million items a year are now given a second life through programs like Grade and Resell, FBA Liquidations, and charitable donations via non-profits like Good360. Customers, too, are encouraged to shop returned and refurbished goods through Amazon Outlet, Amazon Renewed, and resale platforms like Woot!.
