Amazon Introduces New Refunds Policy

In a bid to boost its product shipping business, Amazon.com, Inc. (AMZN) has unveiled a new returns policy that enables customers to return products without contacting sellers. The new policy is applicable to sellers who are not part of the company's Fulfillment By Amazon (FBA) program. The policy also includes "returnless refunds," a new seller opt-in feature that makes certain products eligible for refunds without being returned by customers.

Under the new policy, sellers will not be able to offer assistance to customers before their items are returned. The "returnless refunds" feature enables sellers to offer a refund on certain products that are expensive to ship for customers to return or are difficult to resell. (See also: Fulfillment: Amazon's Not-So-Secret Money-Making Machine.)

According to a CNBC report, small businesses are "outraged" over the changes. The report quotes a seller as saying that the new policies will "totally crush small businesses that fulfill their own order." On the topic of returnless refunds, the report quotes a small business owner as saying that it amounts to customers getting things "from us for free! Is this a joke?" Amazon emailed a statement to the network stating that the new features "allow sellers to reduce time and costs associated with returns." The Seattle-based company also clarified that it did not charge a premium for return labels.

The CNBC report frames Amazon's policy changes as part of CEO Jeff Bezos' obsession with customers. But the move could also boost membership to Amazon's Prime subscription program. During an earnings call earlier this year, Brian Olsavsky, Amazon's chief financial officer, said that FBA "reinforces" Prime, and vice versa. (See also: Amazon Prime's Crazy Long Reach.)

According to Olsavsky, fulfilled units, which is a combination of retail plus FBA, grew 40% during the fourth quarter of 2016 compared with the same period in 2015. Meanwhile, paid units grew by 24% in the fourth quarter. Last year, FBA recorded growth rates of 70% compared with 2015. Most of the growth in FBA units came from outside the U.S., especially in countries where the logistics system is not developed.

FBA makes it possible for Amazon to exert greater control over its platform in a couple of ways. First, it enables the company to reduce individual product prices (by reducing shipping prices). Second, it allows Amazon to provide expedited shipping service for more products on its platform. The company has made significant investments in logistics initiatives in recent years – from leasing airplanes to acting as a shipping agent. (See also: Making Sense of Amazon's Move Into Logistics.)