Amazon’s New Reimbursement Policy Starting March 10 2025 - How To Prepare
Amazon has announced significant changes to its Fulfillment by Amazon (FBA) inventory reimbursement policy, set to take effect on March 10, 2025.
This update shifts the reimbursement calculation to the "manufacturing cost" of lost or damaged products. While the change aims to provide greater transparency and predictability, it also raises concerns among Amazon sellers. Let’s dive into the details of the new policy and how you can prepare for these changes to minimize losses.
Key Updates to the FBA Reimbursement Policy
Reimbursement Based on Manufacturing Cost
Starting March 10, reimbursements for items lost or damaged before a customer order will be calculated based on the product’s manufacturing cost. “Manufacturing cost” refers to the cost you incur to source or produce the item—excluding shipping, handling, customs duties, and Amazon-related fees.
Determining Manufacturing Costs
Amazon provides two options for determining manufacturing costs:
- Amazon’s Estimate: Amazon will calculate an estimate based on comparable products sold by Amazon, other sellers, and wholesale channels. Amazon will also regularly review "manufacturing costs" so they stay relevant.
- Seller-Provided Costs: Sellers can provide their own manufacturing costs via the new "Manage Your Manufacturing Cost" page in the Inventory Defect and Reimbursement portal, available starting late January. If sellers do not provide evidence of their manufacturing costs, Amazon will automatically apply its own estimate.
Automatic Reimbursements
Amazon will continue to offer automatic reimbursements for items lost in fulfillment centers, eliminating the need for manual claims. However, the calculation for these reimbursements will also align with the new manufacturing cost standard.
Reimbursement for Customer Orders
For items lost or damaged after a customer order, Amazon will still reimburse sellers for the original sales price minus applicable fees.
What This Means for Sellers
While Amazon claims the policy will bring consistency and predictability, it introduces challenges that sellers must navigate:
1. Significant Financial Losses
Under the new policy, sellers will no longer be reimbursed based on the retail value of their products. Costs such as shipping fees, Amazon fees, and other related expenses will not be included. For example, if a product retails for $50 but the manufacturing cost is $10, sellers could face a substantial shortfall—especially for high-margin items.
This change places a heavier burden on sellers, particularly those with low-cost manufacturing but high shipping and handling costs. The exclusion of these costs means that losses from lost or damaged inventory may no longer be adequately covered, forcing sellers to absorb the difference.
2. Amazon’s Control Over Reimbursement Estimates
If sellers fail to provide accurate documentation of their manufacturing costs, Amazon will apply its own estimates. These estimates are based on an evaluation of comparable products, but there’s no guarantee they will reflect the actual cost of your specific product. Relying on Amazon’s assessment could result in lower reimbursements that don’t align with your actual expenses.
3. Time-Consuming Administrative Tasks
Providing evidence of manufacturing costs will require additional record-keeping and documentation from sellers. While this gives sellers some control, it also adds an administrative burden to ensure costs are accurately reported and up-to-date.
How Sellers Can Prepare for the Changes
To minimize the impact of these policy updates, Amazon sellers should take the following steps:
Audit and Document Manufacturing Costs
Start gathering invoices, receipts, and any other documentation that proves the cost of sourcing or producing your products. This information will be critical for inputting accurate data into Amazon’s system.
Use the Manage Your Manufacturing Cost Tool
Familiarize yourself with Amazon’s new portal, which will be available in late January. Enter your manufacturing costs as soon as possible to avoid Amazon’s estimates being applied automatically.
Forecast Financial Impact
Analyze how the new reimbursement policy will affect your bottom line. Calculate potential losses by comparing retail prices with manufacturing costs and identify high-risk products that could suffer the most under the new rules.
Increase Inventory Accuracy
The fewer items lost or damaged, the less you’ll need to rely on Amazon’s reimbursement system. Implement strict inventory tracking and quality control processes to minimize issues in your supply chain.
Review Your Pricing Strategy
Consider adjusting your pricing to account for the potential losses caused by the new policy. While price increases should be approached cautiously, they may be necessary to offset the financial impact.
Consult with Supply Chain Experts
Partner with logistics providers or consultants who can help streamline your supply chain and reduce risks. Minimizing shipping, damage, & handling errors will be more critical than ever. Reach out to Proboxx HERE if you would like additional advice on this.
Final Thoughts
Amazon’s new FBA reimbursement policy represents a major shift that could significantly impact sellers’ profitability.
By basing reimbursements on manufacturing costs and excluding additional expenses, sellers may face considerable financial losses if they’re unprepared. Moreover, allowing Amazon to estimate manufacturing costs without your input could result in undervalued reimbursements.
The good news is that sellers can take proactive steps to mitigate the impact of these changes. By documenting manufacturing costs, utilizing Amazon’s tools, and optimizing supply chain processes, you can better navigate the challenges ahead. Start preparing now to ensure you’re ready for March 10, 2025—and protect your business from unnecessary losses.