📦 Amazon’s FBA Refund Update
Starting March 10, 2025, Amazon will only refund sellers the manufacturing cost of lost or damaged items under its Fulfillment by Amazon (FBA) service. Previously, sellers were reimbursed the retail value. Amazon claims the change improves "transparency and predictability." For items lost after a customer order, retail refunds still apply, minus fees. Sellers can enter their manufacturing costs or rely on Amazon's estimate, adjustable via the Inventory Shortages and Refunds Portal launching in late January.
📊 What Are Manufacturing Costs?
Amazon defines manufacturing costs as the price paid to produce or acquire an item but excludes shipping, duties, and other expenses. If sellers don’t provide data, Amazon estimates based on comparable products. Critics argue this narrow definition underrepresents actual costs. The change disproportionately affects sellers of low-cost, high-margin items, like imported goods from the Far East, where production costs are mere cents compared to retail prices. This shift could make many business models unviable.
💰 Margins Under Pressure
Experts warn of significant financial implications. Joel MacPherson, co-founder of TrueOps, described it as "the biggest fee increase ever," as damage and loss are routine. Sellers of fragile or cheap goods face the hardest hit. Some believe Amazon is consolidating control over third-party sellers. Others highlight data privacy concerns, fearing manufacturing cost submissions may be misused. Many feel blindsided by the holiday timing of this announcement.
🛠️ What Sellers Should Do
Sellers must know their manufacturing costs precisely and update them regularly in Amazon's portal. Accurate documentation ensures fair reimbursement. To mitigate losses, sellers should audit supply chains, tighten margins, and explore alternatives to FBA for vulnerable items. This policy could redefine seller strategies, especially for those relying on low-cost imports. Keeping up with Amazon’s changes is now more critical than ever.
Will Amazon’s policy force sellers to rethink strategies?
