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The Hidden Costs Of Amazon Shipping And Returns

CNBC・42 minutes read

Amazon faces challenges with waste generation, tight delivery schedules, and driver safety concerns, particularly regarding surveillance and intense workloads. The rise in e-commerce has led to increased returns, impacting sellers, consumers, and the environment, with a growing focus on sustainability and circular economy practices to address these issues.

Insights

  • Amazon's delivery system, including the use of Delivery Service Partners (DSPs) and driver monitoring, raises concerns about driver safety, workload, and job security, with a focus on optimizing efficiency and reducing waste generated by returns.
  • The growth of the liquidation industry, driven by the popularity of secondhand shopping and refurbished electronics, provides sustainable alternatives to disposal, contributing to the circular economy and reducing carbon emissions and waste, especially for returned items that would otherwise end up in landfills.

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Recent questions

  • How does Amazon handle delivery logistics?

    Amazon has built its own logistics network, Amazon Logistics, to control the delivery process. They rely on Delivery Service Partners (DSPs) for last-mile delivery, allowing for fast shipping. The DSP model offers flexibility and cost savings, with drivers handling most aspects of delivery. Amazon ranks DSPs based on driver scores and offers bonuses for high scores. Safety concerns exist, with cameras monitoring driving behavior to reduce accidents.

  • What challenges do Amazon drivers face?

    Amazon drivers face challenges like relentless workloads, safety concerns, and job security issues. They deal with emotional and mental strain due to constant monitoring and fear of mentor scores. Some drivers find cameras reassuring in certain situations, like dealing with aggressive dogs. Drivers also report difficulties with routes, package loads, GPS issues, and finding bathrooms, leading to extreme measures like urinating in bottles.

  • How does Amazon handle e-commerce returns?

    Amazon faces criticism over waste generated by returns and aims for zero product disposal. E-commerce returns are complex, with online sales resulting in higher return rates compared to brick-and-mortar stores. Amazon offers sellers options for returned items, including disposal, liquidation, or reselling as new. The return process costs can reach up to 66% of the item's original price, with increased costs due to supply chain issues.

  • What is the impact of e-commerce on shopping habits?

    E-commerce has normalized shopping habits, leading to increased returns, especially in categories like apparel. Up to 67% of consumers preferred online purchases over in-store by October 2020. Expecting $120 billion in returns from the holiday season this year, up from $100 billion pre-COVID in 2019. Sellers like Rudnick Normal average a 1 to 3% return rate, with Amazon's overall marketplace returns higher than anticipated.

  • How does the liquidation industry handle returned items?

    The liquidation industry, now a $644 billion business, handles returned items that aren't liquidated by destroying, incinerating, or sending them to landfills. Companies like Liquidity Services recycle tons of cardboard, Styrofoam, and electronics yearly to prepare items for resale. They offer online auctions starting at $5 and facilitate pick-ups at their warehouses to save on shipping costs. Other liquidation companies specialize in branded marketplaces for major clients, contributing to the circular economy.

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Summary

00:00

Amazon's Delivery Network: Challenges and Opportunities

  • Nearly £6 billion of landfill waste is generated annually, along with 16 million metric tonnes of carbon dioxide emissions.
  • The circular economy aims to prevent items from ending up in landfills.
  • Amazon delivery drivers face intense workloads, with one driver having 113 stops in a day.
  • Amazon has over 115,000 drivers who play a crucial role in delivering packages, especially during prime day sales.
  • Amazon has built its own logistics network, Amazon Logistics, to control the delivery process.
  • Amazon relies on Delivery Service Partners (DSPs) to handle last-mile delivery, allowing for fast shipping.
  • DSP drivers face challenges like relentless workloads, leading to concerns about safety and job security.
  • Amazon's DSP model allows for flexibility and cost savings, with drivers responsible for most aspects of delivery.
  • Amazon's DSP program offers opportunities for entrepreneurs, with Amazon providing support and discounts.
  • Safety concerns exist for Amazon drivers, with reports of accidents and fatalities, highlighting the risks involved in the delivery industry.

13:48

Amazon DSPs: Driver Monitoring, Safety, and Challenges

  • Amazon ranks DSPs based on collective driver scores, offering bonuses for high scores.
  • Drivers express emotional and mental strain due to constant monitoring and fear of mentor scores.
  • Cameras in some vans record 100% of the time, monitoring driving behavior for safety.
  • A.I. software in cameras can detect safety issues and provide alerts, like distracted driving.
  • Some drivers find cameras reassuring in certain situations, like dealing with aggressive dogs.
  • Amazon emphasizes driver safety with camera technology, reducing accidents by 48%.
  • Drivers face challenges with routes, package loads, and GPS issues determined by Amazon algorithms.
  • Drivers report difficulties finding bathrooms, leading to extreme measures like urinating in bottles.
  • Amazon faces criticism over waste generated by returns, with a goal of zero product disposal.
  • E-commerce returns are complex, with online sales resulting in higher return rates compared to brick-and-mortar stores.

26:57

Rising E-commerce Returns Impact Sellers and Consumers

  • Up to 67% of consumers preferred online purchases over in-store by October 20, 20.
  • Expecting $120 Billion in returns from the holiday season this year, up from $100 Billion pre-COVID in 2019.
  • E-commerce has normalized shopping habits leading to increased returns, especially in categories like apparel.
  • Sellers like Rudnick Normal average a 1 to 3% return rate, with Amazon's overall marketplace returns higher than anticipated.
  • Amazon informed seller Garland of unsold inventory storage issues, leading to higher seller fees.
  • Amazon's lenient holiday return policy allows most items purchased since October 1st to be returned through January.
  • Return process costs can reach up to 66% of the item's original price, with increased costs due to supply chain issues.
  • Bad actors exploit the no-questions-asked return process, leading to increased scrutiny and potential loss of return privileges.
  • Returns undergo a costly reverse logistics journey, contributing to carbon emissions, even when returned to a store.
  • Amazon offers sellers options for returned items, including disposal, liquidation, or reselling as new, with disposal often being the most cost-effective choice.

39:15

Amazon Partners with Liquidity Services for Auctions

  • Amazon partners with Liquidity Services, offering customers like Allen the opportunity to bid on pallets of returns or individual items at a new warehouse in Phenix.
  • Auctions start at $5 for single items, including furniture, baby products, electronics, outdoor and fitness gear, and bikes.
  • Amazon also runs a grade and resell program for certain returns, categorizing items as new, very good, good, or acceptable before reselling them on specific sections of its site.
  • Various Amazon platforms like Warehouse Deals, Amazon Renewed, Amazon Outlet, and Woot handle used, refurbished, and overstock items, providing sustainable alternatives to disposal.
  • The liquidation industry, once on the fringes, has now grown to a $644 billion business, with a significant rise during the pandemic.
  • Returns that aren't liquidated often end up destroyed, incinerated, or in landfills, contributing to carbon emissions and waste.
  • Liquidity Services, a major player in liquidation, handles returns for Amazon and the Postal Service, processing items like knives, military vehicles, and more.
  • The company recycles tons of cardboard, Styrofoam, and electronics yearly, ensuring items are ready for resale.
  • Other liquidation companies like B Stock specialize in branded marketplaces for major clients, facilitating the reentry of returns into the circular economy.
  • Gen-Z shoppers and other consumers are driving the popularity of secondhand shopping, with a growing focus on sustainability and refurbished electronics due to new goods shortages.

51:50

"High Demand for Refurbished Electronics and Bargain Finds"

  • Refurbished consumer electronics and high-end items like machines for making microchips are in high demand due to supply shortages. Fortune 500 companies are turning to the secondary market for quicker access to equipment, with retailers like Amazon, Best Buy, and HP offering refurbished items and open-box deals.
  • The liquidation boom has led to the rise of bargain stores like Dirt Cheap and Treasure Hunt Liquidators, where customers search through returned items for profitable finds. Companies like Liquidity Services are embracing the direct-to-consumer trend, offering online auctions starting at $5 and facilitating pick-ups at their warehouses to save on shipping costs.
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