With Prime Day coming to an end Wednesday night, online businesses big and small are capitalizing on Amazon’s largest summer sale of the year to see a spike in profits.
But increased product promotion and sales at discount prices aren’t just handed to e-commerce businesses on a silver platter. Those gaining most advantage from the big sale had to do their homework and prepare their logistics capability to handle the high influx of order traffic.
It all comes back to the customer experience, which demands speedy deliveries and simple return policies, among other factors.
Returns and the customer experience
Kristen Kelly is vice president of product at Columbus, Ohio-based returns software company Loop Returns. She says merchants begin planning for Prime Day long before the actual sale starts, and slowdowns are to be expected.
“We see impacts to logistics even before [Prime Day],” Kelly told FreightWaves in a virtual interview. “As Amazon is increasing their inventory and their fulfillment, you’ll see backups at their warehouses because they’re trying to get all those goods in there. So merchants that might use Amazon fulfillment services or warehouses are already seeing the slowdowns on the days leading up to this.”
Kelly said it’s difficult to hire more manpower to help move things along more efficiently during Prime Day compared to other holiday sales that may last for several months. Because it’s such a short time period for this sale, it doesn’t really justify bringing on new employees when compared to hiring part-timers for holiday sales in late November or December.
While merchants may be unable to do much about speed during this time, one way they can still prepare for Prime Day is making returns a simple and easy process for customers.
That first requires a solid return policy. Most businesses outline those policies upfront when selling goods online. Kelly said return policies vary between retailers.
“It really depends on the behaviors that they are trying to incentivize with those customers,” Kelly said. “You’ll see somebody that really wants exchanges to happen might offer a free exchange, whereas they might charge for a refund.”
Item and freight costs also factor into return policies, with rising return fraud possibly being one of the biggest challenges merchants are facing.
“Returns fraud and abuse has definitely been on the rise over the last couple of years,” Kelly said. “It used to be that most merchants had it in their return policies that as soon as it was scanned at the carrier they would issue their refund. That would be well before they received it back at the warehouse.”
Some customers have gotten really good at exploiting that.
“Warehouses started receiving a box of rocks or a can of soup,” Kelly said. “Yes, the label got scanned and [customers] got that money, but then [the merchants] were without that item. We see more and more merchants going to the method where they need to actually receive the item at the warehouse and inspect it before they issue that refund. Or implementing something like a boxless, labeless drop-off where somebody actually physically accepts that item and validates that it’s the correct SKU and the correct quantity before they get that refund.”
She added that Amazon has an advantage dealing with fraud compared to other retailers because the company can shut down the accounts of fraudsters.
Her advice to merchants is to make the returns process clear for customers.
“Nothing will frustrate a customer more than thinking they understand the return policy and then being caught off guard,” Kelly said. “We’re also seeing returns cost a lot of money to merchants: from the postage that it costs to get those returns shipped back to them, the processing at the warehouse and then if they have to do any refurbishment. And we’re seeing that customers are tolerating fees by merchants, so merchants should be looking at ways that they can save on the cost by shifting some of that to consumers.”
Kelly said 60% of Loop Returns’ merchants are charging for returns and exchanges now, and consumers are willing to pay for this.
“They should also be thinking about returns as part of the customer experience,” Kelly said. “If a customer has a bad returns experience, that does impact whether they come back and shop with that brand. So you want to look at things that are convenient for them, that are cost-effective for them and the merchant themselves.”
DHL weighs in on e-commerce
Other key challenges retailers face during this time come from higher shipping costs and inflation.
According to a 2024 e-commerce survey by Bonn, Germany-headquartered logistics company DHL, online sellers are keeping high hopes despite some challenges. The survey states that 40% of respondents view shipping costs as the biggest threat to their business, while 38% identify inflation as their primary challenge.
“While shipping costs are certainly a concern, we’re also seeing speed and quality gaining prominence over cost,” said DHL spokesperson Robert Mintz, in an emailed statement to FreightWaves. “This shift can be attributed to online merchants looking to expand their businesses this year and their increased focus on time-definite delivery options.”
Additionally, 65% of respondents said that the U.S. presidential candidates’ stances on international trade will affect their vote, with 23% strongly agreeing.
“This underscores the importance of international trade policies in shaping the business environment, as e-commerce businesses seek to navigate and capitalize on global market opportunities,” Mintz said. “The focus on trade views highlights the interconnectedness of politics and business strategies in the current economic climate.”
During the previous election year in 2020, 78% of respondents said the U.S. presidential candidates’ views on international trade would affect the way they vote in the election year.