As Amazon sellers prepare for the busy holiday season, a major policy update from the e-commerce giant has sparked outrage across the community. This announcement (Seller Central Login Required)  focused on changes to FBA inventory reimbursements, is leaving third-party sellers frustrated and uncertain about the future.

Amazon’s new approach to lost inventory reimbursements is set to take effect on March 10, 2025, and it’s already making waves on platforms like LinkedIn, Facebook, and Reddit. Let’s break down what’s happening, why it matters, and what sellers can do to navigate these changes.

What Has Changed in FBA Inventory Reimbursements?

Historically, if Amazon lost your inventory, they would reimburse you based on what you would have earned selling the products. This meant factoring in the retail price, deducting Amazon’s fees, and compensating sellers accordingly. However, that’s no longer the case.

Here’s the new policy in a nutshell: Amazon will now reimburse sellers only for the manufacturing cost, also known as the Cost of Goods Sold (COGS). These costs exclude all additional expenses, such as:

• Shipping
• Handling
• Customs duties
• Tariffs

For many sellers, this shift represents a significant financial hit. Losing inventory is a common issue that sellers face with Amazon’s Fulfilled by Amazon (FBA) program, and the new policy drastically limits the value of reimbursements.

Why Is This a Problem?

Amazon’s revised policy raises several red flags for sellers:

1. Determining Manufacturing Costs
   Amazon is giving sellers two options:

   • Provide your manufacturing cost yourself.
   • Accept Amazon’s estimate, which they calculate based on “comparable products” sold by other sellers.

   Relying on Amazon to estimate costs introduces significant risks. The estimate method could favor competitors like overseas manufacturers, whose costs are much lower due to different production and logistical setups.

2. Excluding Key Expenses
   By excluding shipping, duties, and other logistics costs, Amazon is effectively ignoring the realities of modern supply chains. Sellers often invest heavily to move their inventory efficiently, and these expenses make up a critical piece of the true cost.

3. Lack of Trust
   Many sellers are skeptical about sharing their cost structures with Amazon, fearing it could be used against them. There’s a perception that Amazon could leverage this data to improve its own private-label products or support other sellers.

Real-World Impact on Sellers

To understand how this affects sellers, consider this scenario:
A seller spends $9 per unit for production, $1 per unit for shipping, and another $3 on tariffs. If Amazon loses the inventory under the new policy, sellers could only be reimbursed $9, leaving out $4 in other costs. Meanwhile, competitors based in the same manufacturing region, like China, enjoy lower production and freight costs, creating an uneven playing field.

Amazon’s decision to base reimbursement estimates on similar items sold by other sellers exacerbates this disparity. Sellers producing in higher-cost regions, like the United States, could be unfairly penalized due to assumptions about their costs.

Is This Shift Justified?

Some sellers argue that the old system, where Amazon reimbursed the seller’s full selling price (minus fees), was overly generous. In cases where inventory was lost, sellers didn’t incur advertising costs, yet still enjoyed full compensation. Amazon may view the update as aligning reimbursements with actual out-of-pocket expenses.

Still, this policy comes off as exceptionally harsh because it overlooks the complexities of modern e-commerce. Sellers must now absorb additional losses, including lost advertising or marketing investments, that won’t be reimbursed.

A Broader Pattern of Frustration

This announcement follows other controversial updates from Amazon, including new fees for AWD (Amazon Warehousing & Distribution) and increased MCF (Multi-Channel Fulfillment) costs. These decisions contradict Amazon’s recent pledge not to raise FBA fees in 2025, leaving many sellers feeling misled.

Adding insult to injury, Amazon re-sent an email shortly after the reimbursement announcement, touting its earlier promise of no new fees. The response from the seller community has been overwhelmingly negative, with many calling the timing tone-deaf during the critical holiday season.

Why Sellers Are Staying Despite the Challenges

Frustrated as sellers may be, most acknowledge Amazon remains an unparalleled marketplace for reaching millions of buyers. The platform’s scale and traffic make it nearly impossible for most brands to walk away, even in the face of rising fees and unfavorable policies.

Selling through alternative channels, like a standalone e-commerce website, provides more control but comes at a steep cost. Competing for traffic and acquiring customers independently often requires significant investments in marketing and logistics, which many small businesses can’t afford.

How to Prepare for March 2025

Here are practical steps sellers can take to adapt to this change:

1. Clarify Your Manufacturing Costs
   Document your COGS accurately and ensure the data is compliant with Amazon’s new requirements. This can minimize disputes.   One of our favorite tools to track your manufactured COGS and overall profits on Amazon is SellerBoard.   We highly recommend this software for every Amazon seller.  

2. Review Inventory Management Practices
   Proactively monitor your inventory before it gets lost in the system. Consider using third-party logistics (3PL) services to reduce your dependency on Amazon’s facilities.   Although Amazon promises to “automatically” reimburse you for lost inventory, we strongly suggest utilizing a third party platform such as SellerInvestigators to has ways to easily identify and catch where this happens and get your money back quickly.

3. Connect With the Community
   Join discussions on platforms like LinkedIn and Reddit to share insights and strategies. Sellers working together often uncover effective solutions.

4. Diversify Sales Channels
   While Amazon remains important, expanding your sales footprint to other marketplaces or direct-to-consumer platforms can reduce risk.

Closing Thoughts

Amazon’s new FBA inventory reimbursement policy represents another challenge for sellers in navigating the complexity of the platform. While it’s frustrating, it’s important to devise strategies that reduce financial exposure and manage risks effectively.

Amazon continues to dominate the e-commerce world for good reason—it’s the best place for brands to access a massive, ready-to-buy audience. Despite setbacks like these, sellers should weigh the pros and cons carefully before making any drastic decisions.

Feeling annoyed about the change? Share your thoughts in the comments. Let’s keep the conversation going as we adapt together. For those looking for support managing their Amazon business, check out Ecom Catalyst’s services for expert guidance.