Friday Forecast: Amazon's Change in Returns Policy: It's a Package Deal

by Colleen Ferrier and Rick Petry on Aug 4, 2017 1:32:37 PM e-Commerce

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E-commerce giant Amazon created an uproar this week when CNBC reported that the online retailer was making changes to its returns policy that would dramatically affect marketplace sellers.

According to the report, sellers doing their own fulfillment would now be subject to the same return policies as those shipping products via the company’s Fulfillment by Amazon service. The service allows product sellers to outsource the pick, pack, and ship functions of their business to Amazon’s formidable warehouse network for a fee. Controversy ignited around two primary aspects of the policy decision scheduled to take effect October 2: 1) Items sold by third-parties would now be “automatically authorized” for return, enabling customers to print out prepaid return labels and send products back without first informing the seller, eliminating potential opportunities to mitigate problems; and 2) in instances where it is not worth the seller’s time and money to have a specific item returned, refunds could now be granted while the consumer effectively keeps the unwanted item; a scenario Amazon calls “returnless refunds.” Great news if you’re a consumer, but if you’re an Amazon seller – well, not so much.

Welcome to the art of the package deal where “quid pro quo” is synonymous with “caveat venditor” or “let the seller beware” – a phenomenon that is a likely preview of coming attractions. Product marketers are already conditioned to accept what can sometimes be considered onerous terms and conditions driven by the dominant retailers and e-tailers. On social media, some saw Amazon’s move as nothing more than a naked ploy to force sellers into using the e-tailer’s fulfillment services. With little to no room for negotiation, such policies can dictate and impact everything from inventory levels, warehousing, returns, and the ability for the dominate players to manipulate pricing – and margins – at their whim. If you don’t like it, you can pound sand – and seek distribution elsewhere. Simply put, the majority of the power lies in the hands of a few.

But is this just the start? With the continuing consolidation of the marketplace, many categories such as consumer electronics and sporting goods have but one dominant big box brick and mortar chain left; think Best Buy and Dick’s. In other categories such as home improvement, powered by The Home Depot and Lowe’s, there is speculation that there may not be room enough for two. Turning to e-commerce, with the recently announced merger of QVC and HSN, the race for online dominance is a three-legged one between the home shopping conglomerates, Amazon and Walmart. It leaves product marketers squeezed between a damned-if-you-do rock and a damned-if-you-don’t hard place. Why? Because these players have become so efficient at commanding paid and organic search, so effective at aggregating consumer opinion, and so crafty at adjusting pricing on the fly, that it leaves scant room for anyone else. Throw in schemes like Amazon Prime and other continuity programs that reward loyalty and subsidize margins, and it becomes very difficult to compete on anything resembling equal footing. And if you can’t survive on the margins you’re left with, retailers are increasingly happy to private label a similar product in your category, effectively cutting out the middle man, and reducing your brand to rubble.

Don’t get your Friday Forecasters wrong – these titans of commerce are shrewd and incredibly good at what they do. They deserve our admiration and have created opportunity for many. But amid an environment where choices are shrinking like so much profit, what is a product marketer to do? We believe direct response – and taking products directly to the people – is one answer. Social media and influencer marketing allow marketers to pinpoint smaller groups of consumers, and offer new ways of reaching an audience on a direct basis, in addition to television, which remains an effective avenue. Different SKUs and offers, multiple brands, and even OEM can allow marketers to play in both the category-dominant and direct-selling sandboxes. In short, product manufacturers need to find ways to spread their bets amid a marketplace bent on consolidation. It is in the best interest of consumers as well, because without such diversification, they may ultimately find themselves shipping products back, only to discover, as Elvis bellowed in his 1962 hit: “Return to sender, address unknown. No such number, no such zone.”

 About the Authors

Colleen & Rick.jpgColleen Ferrier is a seasoned direct marketing expert who specializes in guiding integrated direct-to-consumer campaigns with an acute focus on ROI. Her broad experience has included management oversight of marketing, operations, media, and international distribution. The campaigns she has been instrumental in helping lead to success across her 15+ year career include Pillow Pets, Little Giant Ladder, Dream Lites, and Stompeez. Ferrier has a Bachelor of Arts in Communications from Augusta University, Georgia.

Rick Petry is a direct marketing veteran of over 25 years who has been involved with campaigns that have generated over $1 billion in sales. He provides creative services to both B2C and B2B marketing campaigns and recent projects have included Actegy/Revitive, Education Connection, GOLO, Joybird, and OYO/DoubleFlex. The author of over 200 articles on direct marketing best practices, Petry has a Bachelor of Arts in Cinema/Television from the University of Southern California and an MBA with a Concentration in Marketing and Sales from Marylhurst University.

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