It's not flawed from their perspective, it is an intrinsic part of their business model. It crushes small business in every direction. If small business doesn't offer the same policy, they lose business. If they do, a refund "run" can equally destroy their business. It's devastating for small clothing companies.

What's worse, Amazon just bans anyone they feel is undermining the ROI of the refund policy, which I suspect, rarely includes e-Products like e-Books.