Amazon Sellers Revolt Over New Reimbursement Policy

Amazon's latest move to change its reimbursement policy for lost or damaged inventory under its Fulfillment by Amazon (FBA) program has sparked outrage among third-party sellers, reports Modern Retail. The change, announced just before Christmas, will see Amazon reimburse sellers based on the manufacturing cost of the item, rather than the full retail price, starting March 10, 2025.

Sellers are expressing concern over the potential impact on their earnings, with some predicting significant reductions in reimbursements. The new policy offers sellers two options for calculating payouts: Amazon can determine the manufacturing cost based on "a comprehensive evaluation of comparable products," or sellers can provide their own manufacturing cost data to Amazon.

"Just before the holidays, when a lot of people shut down, they sneak in this little bombshell that has real financial repercussions for a lot of sellers," said Jon Derkits, a former Amazon employee and current consultant for sellers, to Modern Retail. "I understand the outrage."

Brandon Fishman, owner of the VitaCup coffee brand, echoes these sentiments, stating, "They said they’re not going to do a fee increase this year, but this is, in essence, their fee increase."

Third-party sellers are crucial to Amazon's success, generating over 60% of the company's sales. However, Amazon has steadily increased fees for these sellers, generating $140 billion in revenue from "third-party seller services" in 2023, according to company filings.

Despite Amazon's claim that the change aims for "greater transparency and more predictability," sellers and their agencies view it as another tactic by the company to extract more profits and tighten its control.

"Our primary focus remains on continuously optimizing our network and processes to eliminate defects altogether, thereby minimizing instances where reimbursements become necessary," said Amazon spokesperson Mira Dix in a statement. She explained that the policy change is designed to "help drive a more consistent approach as more sellers are using our supply chain services for items that are sold through off Amazon channels, where we do not have visibility into sales price."

Sellers, however, argue that the change disproportionately burdens them, forcing them to absorb costs associated with lost or damaged inventory. They are also concerned about the potential misuse of their sensitive manufacturing cost data by Amazon.

"This data in the hands of Amazon has a lot of potential applications that have me more worried than the initial cash hit," Derkits noted.

The new policy has fueled frustration among sellers, prompting some to seek alternative sales channels and reduce their reliance on Amazon.

"My margin has been so diluted that building a sustainable Amazon business in 2025, I think, is going to be near impossible," Derkits stated.

Lori Barzvi, an Amazon seller for 10 years, is actively pursuing a direct-to-consumer website to minimize her dependence on the platform.

"I don’t want to be on Amazon anymore," Barzvi said. "I just don’t want to give this company any more of my money or any more control over me."