What happens when an Amazon FBM customer requests a return/refund?

- Amazon FBM customer purchases a product.

- Some % of customer (for example 5%) will return.

* [1] Amazon gives seller option of refunding purchase (without returning product). End of the transaction. Amazon refunds you the FBA commission fees, you are out-of-pocket for shipping fees and your COGS.

OR

* [2] Amazon gives a pre-paid shipping label to customer to return product to get refund. If [2], then you will have to pay for the shipping label for the customer to return it to your address (you can specify the address). Amazon will charge you Seller Central account directly. Some % of the returned units will not be sellable. So you will be out-of-pocket for the shipping label and also have a "non sellable" unit to dispose of. This costs you more than just refunding the purchase because you have the additional shipping label fee and a returns/disposal handling fee (your labor and time).

Depending on your product, your return rates, and the value of your product, you can decide which option is worth it to you.

Sellers with cheap COGS find it better to just refund the customer purchase and move on, spending their time/attention on improving the product and driving more sales rather than salvaging each returned unit.