Amazon Reimbursement Policy Update: From Sales Price to Cost-Based
Keren Dinkin, Copywriter
4 min read -
Published:The December 10, 2024 Amazon reimbursement update for FBA sellers marked a major change in calculating reimbursements for inventory lost or damaged before purchase. From the item’s sales price, the basis for claims has now shifted to its manufacturing cost.
Originally, the implementation date was March 10, 2025. Amazon moved this to March 31 to allow sellers enough time to adjust their respective business processes.
How will this new Amazon reimbursement policy impact the bottom line of FBA sellers?
Continue reading to learn more.
Key Changes to Expect
Periodic updates on Amazon’s policies are not new to the platform. Seasoned sellers know this very well, but this doesn’t mean taking each change with a grain of salt. On the contrary, you should make time to understand them, particularly the latest reimbursement policy. Not doing so could lead to lost profits.
Here are the aspects affected by this policy update:
Extended Implementation Deadline
Initially set to take effect on March 10, 2025, Amazon has pushed back the effective date to March 31, 2025, in an effort to better support its FBA sellers. This extension offers you extra time to adapt your systems and strategies to align with the new policy.
Use this additional time to thoroughly review and adjust your inventory management and reimbursement procedures. Then, you will be better prepared for the transition and minimize potential disruptions. It’s an important step, especially if you need to re-evaluate your operational workflows to meet the new requirements effectively.
Also, this time window can serve as a period for in-depth analysis and optimization, ensuring that you’re making the most informed decisions possible under the new guidelines.
Shift in Reimbursement Calculations
The significant alteration is poised to impact the way you evaluate potential remunerations. Previously, these were based on the sales price, which often provided higher compensation for lost or damaged items. However, the new policy dictates calculations based on the manufacturing cost, which could result in lower reimbursement amounts.
Amazon defines manufacturing cost as the “cost to source a product from a manufacturer, wholesaler, reseller, or produce the item if you are the manufacturer. It excludes costs such as shipping, handling, customs duties, or other costs.”
Studies show that with the old reimbursement policy, up to 40% of FBA reimbursements are unclaimed by sellers. Some have forfeited around 60% of money that was rightfully theirs. With this in mind, you need to reevaluate the management and documentation of your sourcing expenses.
Options for Submitting Sourcing Costs
In the Amazon reimbursement update, you have two primary choices:
1. Accept Amazon’s Estimate
This may be the quicker route but it could also mean you would be settling for a lower amount if their numbers don’t factor in all the actual expenses you incurred in producing your item. However, if you prefer simplicity and your sourcing costs are close to Amazon’s estimate, then this option is for you.
2. Submit Your Own Sourcing Cost
In this method, you will compile detailed invoices and maintain comprehensive records. While it requires more effort, your accurate documentation of expenses might be able to help you recoup more of your investment. This is especially true if the actual costs significantly exceed Amazon’s estimates.
Analysts suggest that providing actual sourcing costs may result in higher reimbursements. Choosing the best path depends on your business model and the resources available for managing sourcing data.
For some, the convenience of Amazon’s estimates may be sufficient, but others could find the potential financial gains from submitting precise costs worth the extra work. Carefully assess the situation and consider your administrative capacity to handle detailed record-keeping.
Strategies for Maximizing Reimbursements
Many sellers worry that the updated Amazon reimbursement policy can potentially reduce reimbursement amounts. Thus, achieving the best outcomes requires a thoughtful and proactive approach. Consider these action plans:
Revisit Manufacturing Cost Reporting
As per Amazon, starting January 2025, sellers should have been:
- Making entries of accurate costs in the Manage Your Manufacturing Cost page of Seller Central’s Inventory Defect and Reimbursement portal;
- Updating numbers according to current market data on a regular basis;
- Gathering support documents for claims.
Meticulously Document All Sourcing Costs
Ensure that every expense is recorded accurately and comprehensively. Maintain detailed invoices, receipts, and any other relevant financial records, as these will come in handy when submitting your actual sourcing costs to Amazon.
Analyze the Pros and Cons
Compare the potential financial outcomes of accepting Amazon’s estimated sourcing costs (also found in the Inventory Defect and Reimbursement section of Seller Central) versus submitting your own. If your actual sourcing costs are significantly higher than Amazon’s estimates, the extra effort in submitting detailed documentation can be well worth the higher reimbursements.
Invest in Robust Inventory and Relevant Tools
Financial and inventory management systems facilitate easy tracking and reporting of all sourcing-related expenses. These can save time and reduce errors, making it easier to present accurate cost data when necessary. Perform regular audits of your sourcing records as well to make sure they remain error-free and up-to-date.
Network with Other Sellers
Like minds can provide valuable insights. Sharing experiences and strategies can reveal effective practices for maximizing reimbursements. For instance, sellers of collectibles have expressed concerns that the selling price of their items far exceeds the manufacturing cost at any given time.
This means they lose a significant amount whether they accept Amazon’s estimate or submit their own. But they can turn the situation in their favor if they participate in seller discussions where many others offer advice.
Stay Informed About Further Updates
Amazon’s policies change periodically so keeping abreast of the latest news from the platform to gain a competitive advantage in navigating these shifts.
Amazon Reimbursement Update: Next Steps for FBA Sellers
To effectively navigate the revised Amazon reimbursement policy, you must be proactive and strategic. The extended deadline provides an opportunity to tweak your operations and develop an approach that maximizes reimbursement potential.
Take heed of the recommendations outlined above and consider using a reimbursement tool to automate the monitoring of inventory discrepancies and reimbursements. Likewise, never overlook Amazon’s FBA Returnless Resolution policy as refunding customers without receiving the item in return could affect your bottom line.
Approach this transition with a well-thought-out plan, leveraging the extra time provided to optimize your business processes and documentation practices for better financial outcomes.
