6 ms·

How a 'Refund Fraud' Gang Stole $700k from Amazon

71 points by lsllc 3y ago

seanw444 3y ago
This is why we can't have nice things.
- doublerabbit 3y ago
  > This is why we can't have nice things. A gang steals, we can't have nice things. When amazon steals from us, that's perfectly fine?
  - endisneigh 3y ago
    When did they say it’s perfectly fine for Amazon to steal?
  - seanw444 3y ago
    Just gonna end up making it harder for the rest of us to return our crap. This is an organized theft setup, not some random Joe trying to get a heater for the winter because his furnace gave out.
    - doublerabbit 3y ago
      Maybe stop buying the cheap-mass produced crap in the first place, that way you wouldn't need to return the crap. Amazon is an organized theft too, Amazon is no saint with their recent exposed tactics plus their historic controversies.
      - seanw444 3y ago
        Like the other person said, I never said Amazon was a saint. And guess what: stuff breaks. It happens. Returns are necessary. Making them even harder to do helps nobody. I wish decent brick and mortar stores weren't getting stomped on too, but this approach to "fighting the man" isn't going to have the effect you think it will.
  - chollida1 3y ago
    > When amazon steals from us, that's perfectly fine? Maybe I missed it, but where in the article did amazon steal from "us"?
    - lm28469 3y ago
      https://itep.org/amazon-avoids-more-than-5-billion-in-corporate-income-taxes-reports-6-percent-tax-rate-on-35-billion-of-us-income/ https://itep.org/amazon-avoids-more-than-5-billion-in-corpor...
      - lotsofpulp 3y ago
        Avoidance is not evasion, and equating it with stealing in this context is fruitless. One could claim it is legalized theft via political corruption, but Amazon alone did not write the rules, and it does not seem relevant to a situation where businesses have to change policies/increase prices/reduce offerings due to theft.
      - alphanullmeric 3y ago
        Refusing to give you something of mine is not taking something of yours. There would also be less refusal in the first place if taxes were actually proportional to the percentage of public services you use, but some people are against paying their fair share.
        tristor 3y ago
        > but some people are against paying their fair share. You're right, but you also left it as an exercise to the reader about who the "some people" are. Those "some people" are mostly large corporate entities, like Amazon, that do all sorts of tricks to keep their losses inside the US and their gains outside the US so they can avoid paying taxes on income that was made from US consumers. While I'm more anti-tax than the average person, it's important to understand that anything which sends US consumer spending outside the US en masse is ultimately a detriment to the US society because it enriches other countries while depriving the US of that money continue to flow through the economic cycle. Dead money sitting in accounts in Ireland, Cayman Islands, Switzerland, Hong Kong, Singapore, and Macau reduce the velocity of money in the US and directly contribute to economic slowdowns as well as increasing income inequality within the US society. It's the biggest reason why, despite being relatively anti-tax, I'm also very much pro buying things made in the US, locally if possible, because it's important that a dollar coming into the community gets spent many times over in the same community to actually improve community welfare. As soon as that dollar exits the community, it's likely lost.
- mistrial9 3y ago
  This is why centralization of ordinary retail is not great.
  - endisneigh 3y ago
    How would decentralized retail prevent this? If anything it would be worse.
tyingq 3y ago
The way credit cards put the burden of refund fraud on the seller enables a fair amount of this. I lost an appeal on a chargeback even after I hired a "task rabbit" type person to take a photo of the item sitting in the buyer's shop window. A custom-made item that was very clearly the item claimed as "did not arrive", in a window, with the customer's street address visible in the same photo. Accompanied with Google Street view pictures and links corroborating the location. So, often, sellers just refund these because they know fighting it is fruitless. Oh, and you get to pay a chargeback fee on top of losing the item value and cost of shipping if you choose to fight and lose.
- stronglikedan 3y ago
  This is known as "the cost of doing business" and used to be baked into business models. Granted, business models have changed significantly with the rise of the internet and direct individual sales, so maybe it's time for a change. As long as that change still protects consumers from larger businesses with the edge against them.
  - konschubert 3y ago
    You could have efficient legal systems to take care of companies that defraud their customers. And then use payment methods that do not allow chargebacks (And don't cost more than 0.01$ per transaction.)
    - londons_explore 3y ago
      The current legal system allows a business to take a customer to court after a customer issues a chargeback and the business loses. I'm actually surprised businesses don't do it more often as a deterrent. At a minimum, they could go win a few easy cases, then tell future customers threatening chargebacks about those cases and the outcome. They could send a simple letter saying "We see you have initiated a chargeback against us. After investigation, we believe this chargeback not to have any merit. In cases of false chargebacks, it is our policy to take clients to court to reclaim our costs, which in past cases have averaged $X on top of the value of the goods.".
avree 3y ago
This website's automatic "subscribe" popup/prompt, which appeared in the center of the screen, covered all content, and had "404" in the middle of it, made me think I had clicked a broken link. Awful design.
- mk89 3y ago
  I agree. With noscript enabled I could not see anything but this popup, and the giant 404 in it made me think for a second that the article didn't exist anymore or was behind a paywall.
- sleepyhead 3y ago
  I don't disagree but the brand is called 404.
endisneigh 3y ago
I guess this is why we’ve seen much shipping companies include photos of the item in the past few years as part of the delivery notification.
- rootusrootus 3y ago
  That's a nice feature, I can immediately tell which of my neighbors' houses UPS left my package at.
chankstein38 3y ago
It's this kind of garbage bs that makes it hard for me to get a refund for a legitimate problem I'm having with a product. I want to be all "Yeah! Stick it to em!" but the general population suffers because of this too. Amazon used to be great about refunds, letting you keep cheap things because they weren't worth sending back. Now they want me to send back even the smallest most insignificant things.
- swatcoder 3y ago
  It’s not because of scammers like these. The loss for them is minuscule compared to their revenue. It goes much deeper. Amazon is being less generous with customers because they’re an aging company built around a technology solution (automated listing, searching, and service) that couldn’t actually satisfy global scale in the face of automated listing spam; because they’ve largely won as many customers as they ever will and have few radical growth avenues; and because now they’re facing these challenges in a world where money is much more expensive and needs to be more carefully allocated. Amazon’s giving you grief with your refunds because their whole 2000’s-era style of online retail is past it’s peak and is starting to crumble beneath its titans, just like search is for Google and graph-centered social media did Facebook. While we can hope exciting new retail approaches take hold, the experience with Amazon is only going to get worse, regardless of little scams like this.
  - MichaelZuo 3y ago
    > The loss for them is minuscule compared to their revenue. Source?
  - cy_hauser 3y ago
    > because their whole 2000’s-era style of online retail is past it’s peak and is starting to crumble beneath its titans So what is the modern style of online retail that is/has taken its place?
    - tobias2014 3y ago
      Right, I can't follow the crumbling argument either. Past peak can simply mean that it stays where it is, a saturation curve.
shmatt 3y ago
>The person who ordered the item would get to keep the product and receive a refund Everyone seems to be ignoring this part. Retailers have adopted a new "just keep it" return policy[1]. Which is pretty obviously causing this fraud. "Item never arrived" can be fixed by adding $1 to the shipping label to force a signature With no bad intent - about 80% of my Target returns are "just keep it", about 10% for Walmart and 0% for Amazon. But I have neighbors with about 50% on Amazon. No idea how the algorithms work but perhaps these groups have also figured that part out. Stop the "just keep it", require some sort of security on delivery (lock box, signature) and this problem disappears overnight [1]https://www.cnn.com/2022/06/26/business/retail-returns/index.html https://www.cnn.com/2022/06/26/business/retail-returns/index...
- BobaFloutist 3y ago
  A lot of the time the cost of the return is worth more than the possible value of getting the object back to the company.
  - shmatt 3y ago
    Then they actually profited, and didnt lose $700k
- fallinghawks 3y ago
  It's too costly to ship the item back. For small items this is a no brainer, and for very large items as well. There's a sweet spot where the return cost not so high as to kill the profit and the item can still be resold - packaged electronics come to mind.
- mk89 3y ago
  And how much would it cost in terms of delivery time? For me it's really all about it. Your delivery service costs $1B per year with the current throughput (without considering peaks etc.). Imagine now adding those constraints such as signature: it means that for each package you add another 1-2-3 minutes at least. For 100 packages a day it's almost 2 hours. With a salary of 7$ per hour = 14$ per day just to have signatures. And that's 100 packages, which is probably a joke for a delivery person. 14$ per day = almost 5K per year. Basically 700K is peanuts. The problem of course starts when everyone believes "oh I am smarter than you, I can also do it". And then you lose not 700K but 50 millions or more. Another way is to build up your own delivery company, measure performance of the delivery people (with feedback) and fire/sue them when you notice a continuous loss of packages and reward the good ones.
mindslight 3y ago
Speaking of refunds, has anyone been able to wrap their head around how it's possible that the generous/overused return dynamic has continued to be sustainable? It seems that retailers frankly just don't care about the level of returns, whether it's routinely packing things terribly to make a ball mill that damages items, or playing price games that directly create more returns - eg Amazon's continually volatile prices that encourage clicking buy and then deciding 30 days later, or Home Depot's combo deals that result in half the combo being predictably returned. At this point I would have thought retailers would have fixed their own shipping processes to pack things so they're less likely to get destroyed. But nope, the best I've found is to break up orders on my end, assuming I don't forget and the shipping minimums allow. I'm just waiting for the other shoe to drop and retailers to start "cracking down" somehow. It seems like the classic Silicon Valley approach where they set up a poor process, planned to make it up on volume, and now have no visibility into the actual problems causing inefficiency. But yet somehow it's still working out financially. The best I've been able to figure is that price fixing ("minimum advertised price") keeps margins high enough that retailers can eat multiple shipping costs, and retailers have gotten manufacturers to eat the cost of "defective items", creating at least a stable situation (although an inefficient one). But it still boggles my mind, especially seeing the trade in bulk pallets of returned goods, which makes it seem like many new condition resellable items still end up being considered salvage.
- gosub100 3y ago
  my bet is on tax shenanigans. The $100 item costs us $108 due to sales tax, it cost the seller $40-$60 to produce, but it only costs them $20-$40 (possibly more) for a refund because they can write off the loss.
  - mindslight 3y ago
    That doesn't make sense. In general, "write offs" just means subtracting a cost from profit, along with the cost they pay for the items that are successfully sold. (Unless you know some special tax result that allows them to deduct more than the price of the damaged item) I'd guess it's something to do with the margin being much much higher than we imagine. Like it's sold for $100, but it only costs $10-$20 incremental cost to produce. Hence why I'd think the manufacturer would be eating returns, because that allows them to keep their margin higher.
deleted 3y ago
[deleted]

71 points by lsllc 3y ago

seanw444 3y ago

This is why we can't have nice things.

doublerabbit 3y ago
> This is why we can't have nice things. A gang steals, we can't have nice things. When amazon steals from us, that's perfectly fine?
- endisneigh 3y ago
  When did they say it’s perfectly fine for Amazon to steal?
- seanw444 3y ago
  Just gonna end up making it harder for the rest of us to return our crap. This is an organized theft setup, not some random Joe trying to get a heater for the winter because his furnace gave out.
  - doublerabbit 3y ago
    Maybe stop buying the cheap-mass produced crap in the first place, that way you wouldn't need to return the crap. Amazon is an organized theft too, Amazon is no saint with their recent exposed tactics plus their historic controversies.
    - seanw444 3y ago
      Like the other person said, I never said Amazon was a saint. And guess what: stuff breaks. It happens. Returns are necessary. Making them even harder to do helps nobody. I wish decent brick and mortar stores weren't getting stomped on too, but this approach to "fighting the man" isn't going to have the effect you think it will.
- chollida1 3y ago
  > When amazon steals from us, that's perfectly fine? Maybe I missed it, but where in the article did amazon steal from "us"?
  - lm28469 3y ago
    https://itep.org/amazon-avoids-more-than-5-billion-in-corporate-income-taxes-reports-6-percent-tax-rate-on-35-billion-of-us-income/ https://itep.org/amazon-avoids-more-than-5-billion-in-corpor...
    - lotsofpulp 3y ago
      Avoidance is not evasion, and equating it with stealing in this context is fruitless. One could claim it is legalized theft via political corruption, but Amazon alone did not write the rules, and it does not seem relevant to a situation where businesses have to change policies/increase prices/reduce offerings due to theft.
    - alphanullmeric 3y ago
      Refusing to give you something of mine is not taking something of yours. There would also be less refusal in the first place if taxes were actually proportional to the percentage of public services you use, but some people are against paying their fair share.
      - tristor 3y ago
        > but some people are against paying their fair share. You're right, but you also left it as an exercise to the reader about who the "some people" are. Those "some people" are mostly large corporate entities, like Amazon, that do all sorts of tricks to keep their losses inside the US and their gains outside the US so they can avoid paying taxes on income that was made from US consumers. While I'm more anti-tax than the average person, it's important to understand that anything which sends US consumer spending outside the US en masse is ultimately a detriment to the US society because it enriches other countries while depriving the US of that money continue to flow through the economic cycle. Dead money sitting in accounts in Ireland, Cayman Islands, Switzerland, Hong Kong, Singapore, and Macau reduce the velocity of money in the US and directly contribute to economic slowdowns as well as increasing income inequality within the US society. It's the biggest reason why, despite being relatively anti-tax, I'm also very much pro buying things made in the US, locally if possible, because it's important that a dollar coming into the community gets spent many times over in the same community to actually improve community welfare. As soon as that dollar exits the community, it's likely lost.
mistrial9 3y ago
This is why centralization of ordinary retail is not great.
- endisneigh 3y ago
  How would decentralized retail prevent this? If anything it would be worse.

tyingq 3y ago

The way credit cards put the burden of refund fraud on the seller enables a fair amount of this. I lost an appeal on a chargeback even after I hired a "task rabbit" type person to take a photo of the item sitting in the buyer's shop window. A custom-made item that was very clearly the item claimed as "did not arrive", in a window, with the customer's street address visible in the same photo. Accompanied with Google Street view pictures and links corroborating the location. So, often, sellers just refund these because they know fighting it is fruitless. Oh, and you get to pay a chargeback fee on top of losing the item value and cost of shipping if you choose to fight and lose.

stronglikedan 3y ago
This is known as "the cost of doing business" and used to be baked into business models. Granted, business models have changed significantly with the rise of the internet and direct individual sales, so maybe it's time for a change. As long as that change still protects consumers from larger businesses with the edge against them.
- konschubert 3y ago
  You could have efficient legal systems to take care of companies that defraud their customers. And then use payment methods that do not allow chargebacks (And don't cost more than 0.01$ per transaction.)
  - londons_explore 3y ago
    The current legal system allows a business to take a customer to court after a customer issues a chargeback and the business loses. I'm actually surprised businesses don't do it more often as a deterrent. At a minimum, they could go win a few easy cases, then tell future customers threatening chargebacks about those cases and the outcome. They could send a simple letter saying "We see you have initiated a chargeback against us. After investigation, we believe this chargeback not to have any merit. In cases of false chargebacks, it is our policy to take clients to court to reclaim our costs, which in past cases have averaged $X on top of the value of the goods.".

avree 3y ago

This website's automatic "subscribe" popup/prompt, which appeared in the center of the screen, covered all content, and had "404" in the middle of it, made me think I had clicked a broken link. Awful design.

mk89 3y ago
I agree. With noscript enabled I could not see anything but this popup, and the giant 404 in it made me think for a second that the article didn't exist anymore or was behind a paywall.
sleepyhead 3y ago
I don't disagree but the brand is called 404.

endisneigh 3y ago

I guess this is why we’ve seen much shipping companies include photos of the item in the past few years as part of the delivery notification.

rootusrootus 3y ago
That's a nice feature, I can immediately tell which of my neighbors' houses UPS left my package at.

chankstein38 3y ago

It's this kind of garbage bs that makes it hard for me to get a refund for a legitimate problem I'm having with a product. I want to be all "Yeah! Stick it to em!" but the general population suffers because of this too. Amazon used to be great about refunds, letting you keep cheap things because they weren't worth sending back. Now they want me to send back even the smallest most insignificant things.

swatcoder 3y ago
It’s not because of scammers like these. The loss for them is minuscule compared to their revenue. It goes much deeper. Amazon is being less generous with customers because they’re an aging company built around a technology solution (automated listing, searching, and service) that couldn’t actually satisfy global scale in the face of automated listing spam; because they’ve largely won as many customers as they ever will and have few radical growth avenues; and because now they’re facing these challenges in a world where money is much more expensive and needs to be more carefully allocated. Amazon’s giving you grief with your refunds because their whole 2000’s-era style of online retail is past it’s peak and is starting to crumble beneath its titans, just like search is for Google and graph-centered social media did Facebook. While we can hope exciting new retail approaches take hold, the experience with Amazon is only going to get worse, regardless of little scams like this.
- MichaelZuo 3y ago
  > The loss for them is minuscule compared to their revenue. Source?
- cy_hauser 3y ago
  > because their whole 2000’s-era style of online retail is past it’s peak and is starting to crumble beneath its titans So what is the modern style of online retail that is/has taken its place?
  - tobias2014 3y ago
    Right, I can't follow the crumbling argument either. Past peak can simply mean that it stays where it is, a saturation curve.

shmatt 3y ago

>The person who ordered the item would get to keep the product and receive a refund Everyone seems to be ignoring this part. Retailers have adopted a new "just keep it" return policy[1]. Which is pretty obviously causing this fraud. "Item never arrived" can be fixed by adding $1 to the shipping label to force a signature With no bad intent - about 80% of my Target returns are "just keep it", about 10% for Walmart and 0% for Amazon. But I have neighbors with about 50% on Amazon. No idea how the algorithms work but perhaps these groups have also figured that part out. Stop the "just keep it", require some sort of security on delivery (lock box, signature) and this problem disappears overnight [1]https://www.cnn.com/2022/06/26/business/retail-returns/index.html https://www.cnn.com/2022/06/26/business/retail-returns/index...

BobaFloutist 3y ago
A lot of the time the cost of the return is worth more than the possible value of getting the object back to the company.
- shmatt 3y ago
  Then they actually profited, and didnt lose $700k
fallinghawks 3y ago
It's too costly to ship the item back. For small items this is a no brainer, and for very large items as well. There's a sweet spot where the return cost not so high as to kill the profit and the item can still be resold - packaged electronics come to mind.
mk89 3y ago
And how much would it cost in terms of delivery time? For me it's really all about it. Your delivery service costs $1B per year with the current throughput (without considering peaks etc.). Imagine now adding those constraints such as signature: it means that for each package you add another 1-2-3 minutes at least. For 100 packages a day it's almost 2 hours. With a salary of 7$ per hour = 14$ per day just to have signatures. And that's 100 packages, which is probably a joke for a delivery person. 14$ per day = almost 5K per year. Basically 700K is peanuts. The problem of course starts when everyone believes "oh I am smarter than you, I can also do it". And then you lose not 700K but 50 millions or more. Another way is to build up your own delivery company, measure performance of the delivery people (with feedback) and fire/sue them when you notice a continuous loss of packages and reward the good ones.

mindslight 3y ago

Speaking of refunds, has anyone been able to wrap their head around how it's possible that the generous/overused return dynamic has continued to be sustainable? It seems that retailers frankly just don't care about the level of returns, whether it's routinely packing things terribly to make a ball mill that damages items, or playing price games that directly create more returns - eg Amazon's continually volatile prices that encourage clicking buy and then deciding 30 days later, or Home Depot's combo deals that result in half the combo being predictably returned. At this point I would have thought retailers would have fixed their own shipping processes to pack things so they're less likely to get destroyed. But nope, the best I've found is to break up orders on my end, assuming I don't forget and the shipping minimums allow. I'm just waiting for the other shoe to drop and retailers to start "cracking down" somehow. It seems like the classic Silicon Valley approach where they set up a poor process, planned to make it up on volume, and now have no visibility into the actual problems causing inefficiency. But yet somehow it's still working out financially. The best I've been able to figure is that price fixing ("minimum advertised price") keeps margins high enough that retailers can eat multiple shipping costs, and retailers have gotten manufacturers to eat the cost of "defective items", creating at least a stable situation (although an inefficient one). But it still boggles my mind, especially seeing the trade in bulk pallets of returned goods, which makes it seem like many new condition resellable items still end up being considered salvage.

gosub100 3y ago
my bet is on tax shenanigans. The $100 item costs us $108 due to sales tax, it cost the seller $40-$60 to produce, but it only costs them $20-$40 (possibly more) for a refund because they can write off the loss.
- mindslight 3y ago
  That doesn't make sense. In general, "write offs" just means subtracting a cost from profit, along with the cost they pay for the items that are successfully sold. (Unless you know some special tax result that allows them to deduct more than the price of the damaged item) I'd guess it's something to do with the margin being much much higher than we imagine. Like it's sold for $100, but it only costs $10-$20 incremental cost to produce. Hence why I'd think the manufacturer would be eating returns, because that allows them to keep their margin higher.

deleted 3y ago

[deleted]