Amazon's New Reimbursement Policy: What Changes and How To Navigate it

Amazon's new Fulfilled by Amazon (FBA) reimbursement policy, effective March 31, 2025, introduces significant changes to how you are compensated for lost or damaged inventory. Here are the key updates and their implications:

Key Changes in Amazon FBA Reimbursement Policy

1. Shift to Manufacturing Cost-Based Reimbursements:

   • Previously, reimbursements were calculated based on the estimated sale proceeds (final selling price minus referral and fulfillment fees).

   • Under the new policy, Amazon will reimburse sellers only for the manufacturing cost (or sourcing cost) of the product. This excludes additional expenses like shipping, handling, and duties.

2. Proactive Reimbursements:

   • Amazon will now automatically issue reimbursements for certain lost items without requiring sellers to file claims. However, manual claims are still necessary for specific cases, such as removal claims.

3. Shortened Claim Windows:

   • The timeframe for filing reimbursement claims has been drastically shortened from 18 months to a 60-day deadline for most claims mostly, with some exceptions.

     • FBA Customer Return Claims:

       • Sellers can file claims between 60 and 120 days after the customer refund or replacement date.

     • Removal Claims for Items Lost in Transit:

       • These claims must be filed within 15 to 75 days from the shipment creation date.

     • Other Removal Claims:

       • Claims for items lost during removal processes must be submitted within 60 days of the shipment being delivered back to the seller.

4. Increased Administrative Work:

   • Sellers must ensure accurate documentation of their manufacturing costs to avoid underpayment. They may need to upload invoices to correct Amazon’s cost estimates, potentially exposing sensitive supplier information.

Financial Implications

• Reduced Reimbursement Amounts: Sellers will receive significantly less compensation compared to the previous model. For example, a product that sold for $30 might now only be reimbursed at its $5 manufacturing cost.

• Impact on Profit Margins: every business using Fulfillment by Amazon (FBA) will feel a significant negative impact on profitability as reimbursements no longer cover potential profits or additional operational costs.

• Example Calculation:

  • Old Policy: Selling Price ($45) – Fees ($12) × Units Reimbursed = $8,250

  • New Policy: (Selling Price – Fees – Sourcing Cost ($15)) × Units Reimbursed = $4,500

  • Annual Impact: A reduction of $3,750 in reimbursements.

To minimize the financial impact of Amazon's new FBA reimbursement policy, which bases reimbursements on manufacturing costs rather than sales prices, sellers can adopt the following strategies:

1. Document Comprehensive Costs

• Provide detailed cost data to Amazon, including:

  • Material and production costs.

  • Labor, packaging, and labeling expenses.

  • Any other costs tied to preparing the product for sale.

• Ensure invoices include all relevant expenses to avoid underpayment based on Amazon's default cost estimates.

2. Leverage Amazon’s Tools

• Use the new Inventory Defect and Reimbursement Portal to submit accurate manufacturing cost data proactively.

• Regularly review Amazon’s cost estimates for your products and challenge inaccuracies by providing your own data.

3. Maximize Reimbursements Before the Policy Change

• Submit outstanding claims for lost or damaged inventory before March 31, 2025, to benefit from the old reimbursement model based on sales price.

• Conduct an audit of past losses to identify missed opportunities for reimbursement claims.

4. Optimize Inventory Management

• Track inventory discrepancies closely and file claims promptly within the reduced 60-day window.

• Implement tools or third-party services to automate tracking and claim submission.

5. Diversify Fulfillment Channels

• Reduce reliance on Amazon FBA by exploring alternative fulfillment methods such as leveraging a Third Party Logistics Center (3PL) or expanding to platforms like Walmart Marketplace or direct-to-consumer channels. This diversification can help mitigate risks associated with Amazon’s policy changes but will add additional complexity to your operational structure and decrease the benefits offered by Amazon such as Prime badging.

6. Adjust Financial Forecasts

• Factor in reduced reimbursements when planning budgets and profit margins for 2025.

• Use historical data to estimate how the policy will affect overall profitability and adjust pricing or sourcing strategies accordingly.

• You can leverage 3fin to understand what percentage of net revenue is allocated to Amazon FBA reimbursements and forecast that figure using your manufacturing costs rather than your adjusted payout.

7. Consider Insurance for High-Value Products

• Insure high-value inventory to cover potential losses that exceed Amazon’s reimbursement limits under the new policy.

By adopting these measures, sellers can mitigate revenue losses, improve operational efficiency, and adapt effectively to the new reimbursement framework.

While these changes aim to standardize reimbursement processes and reduce potential abuses of the system, they place a greater financial burden on sellers. Careful planning and adaptation will be critical to maintaining profitability under this new framework.