Starting March 10, 2025, Amazon will begin reimbursing sellers based on the manufacturing cost of their damaged or lost FBA inventory instead of the retail price as it's historically done — specifically for items that are lost or damaged before a customer order.
For items that are lost or damaged after a customer order in Amazon’s store, Amazon says it will continue to reimburse sellers for the sales price on the original order minus applicable fees.
To calculate the revised payouts, sellers can either let Amazon determine the manufacturing cost based on a “comprehensive evaluation of comparable products,” or provide their manufacturing costs directly to Amazon, which raises privacy concerns over how their private manufacturing cost data will be used.
Here's what's wrong with that new policy:
- It excludes seller costs outside of COGS such as branding, packaging, customs duties, handling, and shipping costs.
- It also takes away a seller's profit margin on lost items, which could be used to fund future inventory (and other business expenses).
- Basically it penalizes sellers for Amazon's inability to properly care for or keep track of items sent to its warehouses.
Many experts see the change as Amazon's latest effort to extract more money from third-party sellers and tighten its control over their businesses.
Jon Elder calls it a “secret fee for 2025,” despite the company claiming it wouldn't be imposing any new fees next year on sellers.
One seller commented on Amazon's announcement post:
“So, if I purchase my products wholesale directly from a brand, is Amazon saying they will only reimburse for the brand's manufacturing costs?”
An Amazon representative replied:
“Updating for further clarification: ‘Manufacturing cost' means your cost to source a product from a manufacturer/wholesaler/reseller, or produce the item if you are the manufacturer. You can provide the proof of your cost of sourcing and we will reimburse you accordingly. If you do not wish to provide your cost, we will provide our cost estimate and we will reimburse you for it. We calculate our estimate by evaluating the sourcing cost of comparable products sold by Amazon, by other sellers, and through other wholesale channels.”
Okay, so how about this Amazon? I'll start a separate company that acts as a middle-man between the manufacturer and my brands sold on Amazon that marks up the the cost to my Amazon business to include branding, marketing, shipping, customers, etc — thus becoming my new COGS. Then you can reimburse me for that.
Yeah, a nice thought, but it wouldn't work. As Elder noted in his LinkedIn post, “They will have full unilateral power to deny your manufacturer cost submissions and go with their own evaluation.”
Yoni Mazor of Getida (one of our News Partners) wrote:
“With ‘no FBA fee increase planned for 2025′, this policy shift might explain why. The financial impact of this change could outweigh many years’ worth of FBA fee hikes…”