Amazon’s Friction Engineering

In a rare move, Amazon.com is increasing friction in one aspect of its customer experience. The company will add a small fee for some returns at UPS stores. This hardly represents a tectonic shift at the e-commerce giant, but it might be the first example of the firm making things slightly more difficult or expensive for its customers.

Amazon has built the world’s biggest e-commerce company with a relentless focus on customer experience. They have focused on every part of the shopping process to make things quick and easy. One Click ordering, Frustation-free packaging, and Try Before You Buy all serve to make things easier and faster for customers.

Returns, the Bane of E-Commerce

Returns have always been a pain point for retailers. The items returned often aren’t saleable, and simply processing returns can be expensive. In particular, mail order and e-commerce companies find returns problematic. Beyond damaged merchandise, they must also consider the cost of shipping returned and replacement items.

For decades, mail order companies discouraged returns by making making processes difficult and often expensive. In the vinyl disc era, record clubs shipped their products in packaging that was rendered unusable after opening. Customers were free to return unwanted items, but would have to find packaging for the awkwardly-shaped albums and then pay to ship them back. Other companies enforced tight return windows and required the customer to request an authorization before returning an item. Restocking charges were common.

Amazon Makes Returns Easy

Amazon took a different approach. Even though they knew their return rate would go up, they made most returns free and easy. They also knew that customers confident that they could return items would place more orders. They made it possible to initiate a return with just a few clicks, and offered a variety of options for product drop-off or pickup.

Since boxing items and printing shipping labels for returns is a pain point for customers, Amazon made it possible to drop off the unpackaged items at UPS Stores with only a bar code. Other current options include Kohl’s stores, Whole Foods supermarkets, Amazon retail locations and Amazon Lockers.

Beyond customer convenience, unboxed returns have other advantages. They usually can be shipped in bulk to processing centers, minimizing transportation cost and dramatically cutting packaging waste.

Amazon Singles Out UPS For A $1 Fee

Of their unboxed drop-off sites, UPS likely represented the highest cost option for Amazon. They own Whole Foods and their own branded stores, and have a partnership with Kohl’s. Steering customers away from UPS returns would almost certainly be a cost-saver.

So, like the mail-order companies of old, Amazon is adding a little friction to the UPS process: a $1 fee. The fee will apply only if customers have a Whole Foods, Amazon Fresh, or Kohl’s store nearby.

No doubt Amazon expects the modest fee to nudge customers to use the preferred return locations.

Is Amazon Abandoning Its Customer Focus?

Jason Atem’s article at Inc. on the Amazon news features the breathless headline, “Amazon Just Made a Surprising Change That Breaks Its Most Important Rule. It’ll Make Some Customers Angry.” Atem notes that under Jeff Bezos, Amazon was guided by a business model that puts the customer at the “center of everything Amazon does.”

“This changes that model,” Atem writes.

While I was surprised that Amazon would do something that might diminish its customer experience, I don’t view the dollar fee as a major departure from its core principles.

First, the charge only applies when a customer has other convenient options. Although I’m equidistant from a UPS Store and a Whole Foods, I always choose the latter for returns. Parking is easier, the wait time is almost always zero, and I can pick up a few grocery items. Customers who don’t have a convenient alternative will still be able to do their UPS Store returns at no cost.

Second, a dollar is a very small fee. It likely doesn’t cover what Amazon pays UPS. Many retailers are now charging much higher fees for returns that aren’t dropped off at their stores. JCPenney, Abercrombie & Fitch, and J.Crew charge as much as $8 per return.

Friction Engineering

I’d view this modest fee as a nudge to steer customers toward Amazon properties that handle returns at much lower cost and that offer shopping opportunities once a customer is on site. No Amazon customer is going to cancel their Prime membership in disgust over an easily-avoided one dollar fee.

Despite the minimal cost, though, I expect most customers facing the fee will gravitate to the free return options. Research shows that “free” has an outsized appeal to our brains, and is a more powerful motivator than the absolute value of the free thing.

Over the years, Amazon has focused on lowering friction to attract customers and keep them loyal. With the UPS fee, they are adding a little friction to ethically steer customers toward a preferred behavior. I’d call this smart friction engineering.