Amazon FBA Inventory Reimbursement Policy Update
As your trusted Amazon account management agency, we want to keep you informed about an important update to Amazon's Fulfilment by Amazon (FBA) inventory reimbursement policy.
Amazon released their announcement this week and this change will affect how you're compensated for lost or damaged inventory before customer orders.
Let's break down the key points and what they mean for you as an Amazon seller.
What is FBA?
FBA is Fulfilment by Amazon which is where Amazon handles the complete fulfilment process for you. From storing your products, to packaging and sending them to your customers, Amazon takes the pressure out of selling your products online. They even handle customer support and returns.
This is different to FBM, which stands for Fulfilment by Merchants. With FBM, the merchant, or seller (you), is responsible for storing, packing, shipping and delivering products to customers.
The FBA Inventory Reimbursement Policy changes only affect FBA sellers.
What is the FBA Inventory Reimbursement Policy?
Amazon’s FBA reimbursement policy is designed to compensate sellers for items that are lost, damaged, or rendered unsellable while stored in Amazon’s fulfilment centres (FC) or during shipping. This policy reflects Amazon’s commitment to addressing mishandled products and protecting sellers from financial losses caused by factors beyond their control.
While losing or damaging an item can be frustrating for sellers, the reassurance of a reimbursement policy provides an added sense of security. However, the process isn’t automatic—sellers must actively identify eligible claims and ensure they are filed within the required timeframe.
A copy of the FBA inventory reimbursement policies can be found here:
- FBA lost and damaged inventory reimbursement policy .
- FBA inventory reimbursement policy: Shipment to Amazon claims
- FBA inventory reimbursement policy: Fulfilment centre operations claim
- FBA inventory reimbursement policy: Removals claims
- FBA customer returns reimbursement policy
- FBA shipping label reimbursement policy
What are the eligibility criteria for making a claim?
At the time of writing, under the FBA inventory reimbursement policy, for the product or item to be eligible, all of the following must be true. At the time it is lost or damaged:
- the item must be registered in FBA;
- the item must comply with FBA product restrictions and with FBA inventory requirements;
- the items and quantities stated in your shipping plan are the exact items and quantities you have sent;
- the item is not pending disposal or was not disposed of at your request or because we have exercised a right to do so.
- the item is not defective and was not damaged by a customer.
- Your selling account is in normal status when you file a claim for a lost or damaged item.
Always check the latest eligibility criteria when making a claim.
How to make a claim:
If your item is eligible under this policy and you haven't already been reimbursed, you can file a reimbursement claim. The process to a file a claim varies depending on where in the fulfilment process your item is lost or damaged.
- Shipment to Amazon claims
- Fulfilment centre operations claim
- FBA customer returns reimbursement policy
- Removals claims
What does the policy currently say?
Amazon currently calculates your reimbursement using a specific formula that generally considers the average price of your product over the past 90 days to estimate its market value. If your product has been listed at different prices, Amazon might use the lowest price.
Currently, the reimbursement takes into account shipping fees, fulfilment costs, and other applicable charges.
It’s important to understand that Amazon won’t always reimburse you for the exact retail price of your product. Factors such as the product’s age, market demand, and other relevant considerations can influence the reimbursement amount. For example, if your product is discontinued, or has a high return rate, the reimbursement might be lower than anticipated.
New Policy Changes
As part of the Amazon reimbursement policy update, Amazon is revising its reimbursement calculation method for FBA inventory. The main changes are:
- Reimbursement based on manufacturing cost: Amazon will now reimburse sellers based on the product's manufacturing cost rather than the sales price.
- Manufacturing cost definition: This refers to your cost to source a product from a manufacturer, wholesaler, reseller, or produce the item if you're the manufacturer. It excludes shipping, handling, customs duties, and other additional costs.
Implementation Date
The new policy will take effect on 10th March 2025. This gives sellers a few months to prepare and adjust their strategies accordingly.
Impact on Sellers
This change will likely have significant implications for your business.
The biggest impact will be potentially lower reimbursements. Since the reimbursement will be based on manufacturing cost rather than sales price, you may receive lower compensation for lost or damaged items. This manufacturing cost, as defined above, does not include the additional costs that may have been incurred, such as shipping to the FCs, handling and even merchant branding. Often the manufacturing cost is a small percentage of the over cost of the product.
Amazon state that these changes will provide a more consistent approach when it comes to reimbursements. Amazon aims to provide greater transparency and predictability in reimbursement calculations across various sales channels. At the moment, Amazon uses a calculator to work out how much to reimburse a merchant. By simplifying it to the manufacturing cost, it is clearer what reimbursement a merchant will receive.
Amazon are allowing 2 ways of providing manufacturers costs, giving merchants greater control. These are:
- You provide your own manufacturing costs;
- You can use Amazon's estimates of the manufacturing costs.
Preparation Steps for Sellers
To prepare for this change, we recommend the following actions:
- Review manufacturing costs: Start gathering accurate data on your product manufacturing costs.
- Explore the new tool: In late January, Amazon will introduce a "Manage Your Manufacturing Cost" page in the Inventory Defect and Reimbursement portal. Familiarise yourself with this tool.
- Decision on cost provision: Decide whether you want to provide your own manufacturing costs or use Amazon's estimates.
- Resolve outstanding reimbursements: if you are owed any reimbursements before 10 March 2025, get them resolved as quickly as possible to avoid being negatively impacted by the change in policy.
Consequences of not taking action
If you take no action, or if you decide not to provide your own manufacturing costs:
- Amazon will automatically apply their manufacturing cost estimate to your products.
- You may receive reimbursements that don't accurately reflect your true manufacturing costs.
Our Agency's Advice
As an Amazon account management agency, we strongly recommend the following:
- Proactive approach: Don't wait until March. Start preparing now by reviewing your manufacturing costs for all FBA products.
- Accurate cost submission: When the tool becomes available, provide accurate manufacturing costs for your products to ensure fair reimbursements.
- Regular updates: Keep your manufacturing cost information up-to-date, especially if you change suppliers or production methods.
- Monitor reimbursements: After the policy takes effect, closely monitor your reimbursements to ensure they align with your expectations.
- Optimise inventory management: This change emphasises the importance of minimising lost or damaged inventory. Review your packaging and handling processes to reduce potential losses
By taking these steps, you'll be well-prepared for the policy change and can minimise its potential negative impact on your business.
Remember, we're here to help you navigate these changes and optimise your Amazon selling strategy.
