What’s the big takeaway from Amazon’s apparent decision to open small department stores? It’s that merchandise is stuff that’s expensive to ship and even more expensive to take back and that the best way to make money from it is to have people get it and take it home themselves.
That’s the reckoning of The Atlantic staff writer Amanda Mull in an article published this week titled “People Liked Malls.”
“The people who do Amazon’s math aren’t dumb. It’s a company that pursues efficiency at virtually any cost and encouraging people to buy three sizes of the same pair of jeans and send two back just isn’t efficient,” Mull wrote.
“It is, in fact,” she continued, “enormously wasteful on almost every level, and not even a particularly great experience for buyers, who now have to manage a small-scale logistics business to ensure that stuff they don’t want is repackaged, shipped back out within a given company’s return window, and actually refunded.”
Mull noted that 25% to 30%of online purchases are returned and that every return costs the retailer between $10 and $20. Returns shot up by 70% during the pandemic, she noted, and—as most experienced online purchasers know—retailers often return purchasers money and tell them to keep the product. It’s cheaper that way, but not very healthy for top-line revenues.
“What solves all of these problems—the high return rates, the cost-prohibitive last-mile freight, the logistics nightmares, the buyer frustration, and the monumental volume of consumer waste it all sends to landfills?” Mull asked. “Stores. Going to a store.”
Mull makes the point that merchandise is physical and, as a result, the best and cheapest way to view it, test it, try it on, and take it home is to obtain it at a physical store.
“During the pandemic, the volume of online shopping taxed the country’s shipping and logistics infrastructure past its breaking point,” Mull concluded. “There is no clear way for the industry to keep up if demand continues to grow.