Amazon recently announced they will be updating their returns processing fee in 2024. This update will change how Amazon charges for return fees. They are introducing return rate thresholds for product categories. Along with the updated fees, there’s an updated FBA Returns dashboard that shows sellers if they are above or below these thresholds. Understanding these updates is important for sellers to avoid unexpected charges. Sellers that reduce the number of returns will reduce costs related to FBA fees, improve customer satisfaction, and improve the profitability of their business. This post will cover the returns processing fee, 2024 changes to the returns processing fee, the updated FBA Returns dashboard, and best practices for reducing Amazon returns.
Amazon Returns Processing Fee Overview
The Amazon return processing fee is the fee charged to sellers for administering the return of product orders. The purpose of this fee is to address the operational costs of returns and to reduce waste. Amazon is adjusting the calculation for how returns fees are calculated by comparing your returns with a category benchmark. To help sellers better understand why returns are occurring, they updated the FBA Returns dashboard. The goal with this fee is to force Amazon sellers to analyze their products, process, and business to reduce the number of returns.
2024 Changes to the Amazon Returns Processing Fee
As of June 1, 2024, there will be changes to how the Amazon return processing fee is calculated. At a high level, Amazon will be assessing your return rate and comparing it against a category benchmark. If your return rate exceeds the category benchmark then there will be a fee charged to the number of units that exceeded the threshold. Those units will be assessed a fee based on the product size tier and shipping weight the product falls within the rate card. A product’s return rate is calculated by taking the percentage of the shipped units that are physically returned during that month and the subsequent two calendar months. If your product ships less than 25 units in a month, you will be exempt from this fee.
Category Returns Processing Fee Rate Thresholds
Amazon has established category return rate thresholds based on different categories your product is in. It is important to note that apparel and shoes categories are not applicable in this process and will continue to be applied for each customer-returned unit, likely due to the nature of high returns of apparel. The category return thresholds vary between 2.9% for grocery and 12.8% for backpacks. If your product does not fall within the provided specified categories, it would be calculated in the “everything else” rate at 4.8%. Amazon notes they continue to audit the thresholds and periodically update them. Here is a chart of the current posted return rate thresholds that will go into effect June 1, 2024:
Returns Processing Fee Rate Cards
If your product's return rate is over the threshold, the number of units above the threshold will be charged a fee based on the size tier and shipping weight for the product. The larger and more heavy your product is, the higher the fee will be. If your product is over 3lbs, the rate becomes variable based on weight intervals assigned by Amazon. Here is a chart of the current posted rates for size tiers. These are subject to change but worth reviewing when these go into effect June 1, 2024:
Example of the Returns Processing Fee Change 2024
Now that we have established the new rules in place for 2024 return processing. Let’s take a look at an example to help illustrate how the return processing fee works in practice. Here is the scenario:
1,000 units were sold in January
The returns processing fee for this category is 10%
The returns processing fee for this product size tier is $2
In January, February, and March, 200 of the 1,000 units shipped were physically returned
Since the number of returned units exceeded the threshold, 100 units will be charged the return processing fee (10% of 1,000 units = 100 unit threshold)
The return processing fee for the January units will be charged $200 ($2/unit * 100 units exceeding the threshold)
This fee will appear on the monthly payment report between April 7 to 15th
Every month Amazon will continue to perform this calculation on your return rate compared to the category threshold. To make this process easier for sellers, Amazon has launched an updated Return Insights Dashboard to help monitor and take action on high return products.
Amazon Return Processing Fee Return Insights Dashboard
The updated FBA returns page provides Amazon sellers with data and insights on FBA returns. Sellers can drill down by date, marketplace, product group and down to ASIN to see the average return rate, total return units, and number of ASINs with returns. Sellers can view a time chart that shows the return rates, ordered units, and number of returned units. The insights section provides the “why” behind these returns, which can be reasons such as size too small/short, unwanted items, the item being defective, accidentally ordered the wrong item, or product not as described on the website, etc. These return reasons are all submitted by Amazon customers during the return process through a selection and comments while returning the product. Sellers can drill down by ASIN to review the high impact products that are driving the return rate as well as filtering by the return reason to see if there are holistic issues across the whole catalog. Sellers can take the appropriate action to resolve these issues and hopefully reduce the number of returns and bring down the return rate going forward. In the next section, we will review some best practices to reduce the number of Amazon returns.
Best Practices to Reduce the Number of Amazon Returns
Here is a list of best practices Amazon sellers can do to reduce the number of returns. Reducing the number of returns means happier customers and reduced fees for sellers.
Accurate product details in merchandising - ensure you have accurate product details that describe your product. This can include information such as the product weight and dimensions or the use case. If there are special instructions, be sure to state what they are
Proper packaging and FBA shipping prep - There are a lot of touch points when shipping through FBA. The product goes from your warehouse to Amazon’s warehouse and is delivered to customers. Be sure to have packaging that will prevent damage to the product.
Accurate product ID/UPC and labeling - To ensure that Amazon customers get the right product they ordered, make sure you have the correct product ID association with your SKU, ASIN, and UPC when sending in products.
High quality images, video, and media - Images and video are a great way for customers to see the product on their device and understand what they are purchasing. Make sure you have high quality imaging that accurately showcases your product.
Product Lifecycle Support - The PLS program has a mission to offer relevant post-purchase product support to customers and empower them to make the most of the products purchased on Amazon. Enrolling in certain PLS programs can help reduce the number of returns by communicating with customers post-purchase.
FAQ
What is Amazon’s Returns Processing Fee?
Amazon’s returns processing fee is a fee for FBA products with high return rates that are above category-specific thresholds.
What is an acceptable return rate where I won’t be charged the Returns Processing Fee?
Amazon uses category-specific return rate thresholds when applying a returns processing fee. You will need to review the threshold for each category your products are in. If you ship fewer than 25 units of your product in a month, that product is exempt from receiving a returns processing fee.
How is my product’s return rate calculated?
Your product’s return rate is the percentage of the product’s shipped units in a given month that are returned during that month and the subsequent two calendar months.
How much am I charged for the Returns Processing Fee?
The amount you are charged for the returns processing fee will depend on the category your product is in. Each category has a different fee. The returns processing fee is charged for each returned unit above your product category’s return rate threshold.
How is my product’s Returns Processing Fee calculated?
Your product’s returns processing fee is based on the size tier and shipping weight of your product.
Where can I see if my product’s return rate is below the threshold for the category?
The FBA Returns page allows you to see your product’s return rate and the threshold for the category.
When will I be charged a Returns Processing Fee for the high return rate?
For a specific month’s returns, the return processing fee charge will be made between the 7th to 15th day of the third subsequent month.
Conclusion
Understanding the 2024 Amazon Returns Processing Fee updates can help sellers avoid unexpected return fees, reduce return fees, and increase customer satisfaction. Knowing the category return rate thresholds will prevent sellers from being surprised by return fees. Along with the updated FBA Returns dashboard, sellers can better understand why customers are returning products and if there’s anything they can do to help reduce returns. Sellers without knowledge of the returns processing fee updates could be receiving additional charges they’re unaware of. Goat Consulting would love to help with your returns processing fee questions. Click the Contact Us button below to start that conversation.
About the Author - Mike Gray
This post was written by Mike Gray, an Account Manager at Goat Consulting. Mike helps his clients sell on Amazon by increasing sales, mitigating risk, reducing costs, and solving problems. Mike has experience helping brands analyze their returns along with potential underlying issues. If you want help understanding the Returns Processing Fee, or assist with other aspects of selling on Amazon, Mike is happy to lead your account.