I do agree that's one of the nicer effects (but it's not the only thing aligning incentives because there are reviews/reputation measures), but it also upsells

I do agree that's one of the nicer effects (but it's not the only thing aligning incentives because there are reviews/reputation measures), but it also upsells you on the cost of all the non-legitimate free returns being made (lack of effort in reading product descriptions, "free rentals", general consumer carelessness, "accidental damage", and such). So at the end of the day the consumers still bear negatives of this structure (increased the costs of this), but the retailer benefits from increased sales. Also what you say works more for unique direct-from-manufacturer sales and applies less to commodity products sold by Amazon. There's no need for "free" returns on the PS5 you just bought because that product's reputation is well-known. You're just paying for the retailer's costs to reduce all friction from sales while they get all the benefits.