Amazon last week launched two new programs that it predicts will keep 300 million products in use each year, furthering its circular economy goals. Small companies will be able to resell returned goods as used on Amazon, and they can offload the handling of returns and overstock merchandise to Amazon and its partners, through the new Fulfillment by Amazon Liquidations and Grade and Resell options.
While online commerce has boomed during the COVID-19 pandemic, the retail colossus has come under fire for destroying mountains of new products including laptops, iPads, TVs and face masks instead of reselling, recycling or otherwise keeping them in circulation. Exposés last year by iTV News in the U.K. and later the Canadian Broadcasting Corporation outraged consumers and sustainability advocates, leading Amazon to pledge it would work toward "zero product disposal."
Meanwhile, as Amazon advances its ambitions to reach net-zero carbon by 2040 and 100 percent renewable energy by 2025, the company has been expanding its sustainability team. In January it enlisted George Bandy, former Mohawk Group CSO, as worldwide head of circular economy efforts.
Customer returns are a fact of life for all retailers, and what to do with those products is an industry-wide challenge.
"Customer returns are a fact of life for all retailers, and what to do with those products is an industry-wide challenge," Libby Johnson McKee, director of Amazon worldwide returns, recommerce and sustainability, said in a press statement. "These new programs are examples of the steps we’re taking to ensure that products sold on Amazon — whether by us or our small business partners — go to good use and don’t become waste."
ROI for SMBs
Small businesses have been selling goods through Amazon for 21 years. Since 2006, the Fulfillment by Amazon (FBA) program has given them the option to let Amazon handle the storage, packing and shipping of products to customers.
Now with FBA Liquidations, sellers can also lean on Amazon’s "wholesale liquidation partners and technology to recoup potential losses on returned and overstock inventory." Amazon did not provide details about those partners or technologies.
The other new offering, FBA Grade and Resell, allows merchants to list returned items for sale as used, rated from "like new" to "acceptable," at a price they choose.
Without these new programs, small businesses on Amazon would either have to ask customers to ship returns back to them or have Amazon donate the items. Through FBA Donations, which launched over the past two years, sellers can donate returns or surplus items without having to manage or deliver them. This has led to 67 million items, including school supplies, being donated to charity partners, according to Amazon.
As much as I genuinely believe Amazon has a thousand-year view of the environment and wants to change the world for the better in that regard, this is simply another way to clear the shelves.
FBA Liquidations is available in the U.S., Germany, France, Italy and Spain, and coming to the U.K., where FBA Grade and Resell is already available. The latter is coming to the U.S. later this year, then arriving early in 2022 in Germany, France, Italy and Spain.
Among Amazon's circular offerings for consumers, its little-known Amazon Second Chance hub shares details about products and packaging that can be passed on, traded in or given a second life, as well as online discount stores for used, overstocked and refurbished products.
For small businesses, managing surplus inventory or returns can be a heavy lift. For Amazon, it takes up valuable warehouse space.
"As much as I genuinely believe Amazon has a thousand-year view of the environment and wants to change the world for the better in that regard, this is simply another way to clear the shelves of slow-moving inventory," says Andrew Tjernlund, who runs a thriving business selling air ventilation equipment on Amazon and another company distributing EV chargers.
He doesn't believe Amazon’s new FBA programs will be necessary for his Tjernlund Products. "We have understood for years that Amazon is a technology company — not a warehouse developer or shipper... This really helps new sellers that don’t know better and is driven by Amazon not wanting to build extra buildings to enable irresponsible producers."
Stuff gets a second life
Amazon's new reverse logistics offerings, enabled by third parties, come as numerous independent companies are finding gold in circular economy plays. B-Stock, for one, calls itself "the world's largest online recommerce marketplace for customer returns and excess merchandise."
"The secondary market is booming and shows no signs of slowing," says Marcus Shen, COO of B-Stock, which he notes matches hundreds of companies selling excess inventory to hundreds of thousands of global business buyers who resell it themselves. "From like-new inventory to salvage, no matter the category or the condition, B-Stock has business buyers looking for this exact inventory, fueling the circular economy."
All major retailers have an urgent opportunity and a responsibility for accelerating the circular economy and reducing waste.
Last year, the company's number of first-time buyers grew 34 percent, and some 120 million items amounting to some 400 million pounds traded hands there. B-Stock, which lists Amazon as a partner, also says its number of sellers grew by 26 percent in the first quarter of 2021, compared with the same period last year.
When asked about the potential environmental effects of Amazon's new initiatives, Boma Brown-West, the consumer health director at EDF, noted the outsize role e-commerce companies can play in driving a circular economy.
"Consumer products are the single largest source of environmental impact in our modern world, and their disposal is a large contributor to the billion tons of municipal waste generated in the world every year," she said via email. "All major retailers have an urgent opportunity and a responsibility for accelerating the circular economy and reducing waste. While any announcement of retailers’ efforts to do just that are important, it’s not yet a cause for celebration. The real winners will emerge based on their ability to successfully implement circularity programs."
Brown-West added that "doing more" to improve efficiencies and reduce material waste can start by following leaders, and she called out product takeback programs from the likes of Apple, Samsung and Patagonia.
In addition, leading on waste means raising retailers' ambitions and promoting an economy that eliminates toxic ingredients. "Otherwise, we risk reusing or recycling materials that contain toxic chemicals, perpetuating our exposure,” Brown-West said.