Amazon is shaking things up again with its Fulfillment by Amazon (FBA) inventory reimbursement policies. Starting March 10, 2025, the way Amazon handles reimbursements for lost or damaged inventory will change significantly.
The updated policy shifts reimbursements for damaged or lost inventory to be solely based on the product’s manufacturing cost. This excludes additional expenses such as shipping, handling, branding, and packaging, leaving many sellers frustrated and undervalued.
For many, this policy update is the latest indication of Amazon prioritizing its profits over the businesses that make its marketplace thrive.
Here’s a deeper look into why both sellers and customers are unhappy and what this could mean for small businesses.
Key Highlights of the FBA Reimbursement Changes
- Exclusions of Major Costs
The new rule excludes pivotal costs like shipping, handling, customs duties, and packaging, which have a massive financial impact on sellers—especially those dealing with handmade goods or custom products.
- Amazon's Manufacturing Cost Valuation
Sellers have two choices when it comes to determining their product’s manufacturing cost:
» Amazon’s Estimate
Amazon offers to estimate the manufacturing cost based on data from other sellers, wholesalers, or similar products sold on the platform.
» Seller-Provisioned Data
Sellers can submit their own manufacturing cost data directly to Amazon.
- Complexity Around Reimbursements
Providing accurate manufacturing cost information is no small task. Sellers often worry about disputes, delays, or undervaluation in reimbursements. Many are skeptical of Amazon’s willingness to reimburse an amount that fully reflects the true cost of their inventory.
Amazon FBA Reimbursement Updates: Overview
The primary shift in Amazon’s reimbursement policy is the transition from a percentage-based reimbursement model to one that focuses on the manufacturer’s cost. This shift has raised several concerns among sellers, particularly about how these costs are assessed and the policy’s broader implications on their businesses.
Under the new policy, sellers will have two options for determining their manufacturing costs:
- Amazon's Estimated Manufacturing Cost
Amazon offers to calculate a manufacturing cost estimate for sellers, which is based on comparisons with similar products available on its platform and through wholesale channels.
However, this method has raised concerns among sellers. Many worry that Amazon’s estimates might undervalue their items, especially high-priced or specialty products like handmade goods and unique collectibles. These products often involve substantial investments in branding, design, and craftsmanship — factors a basic manufacturing estimate might overlook.
- Seller-Provided Manufacturing Costs
Sellers can input their own manufacturing costs, offering greater control over pricing. While this provides greater control, many are wary of potential risks.
A key concern is whether Amazon will use this data to its competitive advantage, such as refining its private-label strategies to undercut seller offerings.
Additionally, sellers fear that Amazon may challenge submitted costs, leading to disputes or delayed reimbursements. There is also the question of whether some sellers might feel pressured to inflate costs in an attempt to recover some of the additional expenses excluded under the policy, such as shipping, packaging, or storage.
Why Amazon Sellers Are Concerned?
1. Sellers Feel Undervalued
One of the biggest concerns raised about this new policy is the exclusion of costs like import duties, freight charges, and warehousing fees, which Amazon used to cover. Sellers now have to absorb these losses even when inventory issues stem from Amazon’s systems.
For example, if Amazon misplaces an entire shipment, sellers are no longer reimbursed for their total investment. A business owner who calculated their total product cost — manufacturing plus logistics — at $15 per unit might now only receive $7-8 in compensation, taking a major hit.
For sellers with expensive or custom products, this change is particularly important. High-value items typically carry significant costs beyond just manufacturing. Branding, packaging, and the logistics of getting products to Amazon’s warehouses are often substantial and no longer reimbursed under the updated policy. Handmade sellers, who already operate on tight margins, are particularly vocal about how this new model fails to reflect the true value of their products.
One seller in the community said, “Amazon is basically saying they will give next to nothing, excluding all your branding, packaging, handling, and shipping costs, and then sell that inventory for their profit.”
Handmade sellers and small businesses are particularly vulnerable. For creators who pour resources into custom designs and premium materials, this policy threatens the very foundation of their operations.
This leaves them facing losses every time Amazon loses or damages inventory — an issue sellers claim happens frequently within its fulfillment network. Many sellers might have to hike up prices or risk going out of business entirely.
2. Data Misuse and Competition Risks
The most controversial aspect of the policy is Amazon’s potential abuse of seller-provided manufacturing data. Over the years, multiple sellers have accused Amazon of using collected information to launch competitive products under its own brands.
Some sellers recalled how Amazon copied their product packaging, photos, and even listing text to introduce a cheaper knockoff. Such predatory practices, coupled with access to detailed supplier information, leave third-party sellers at a disadvantage.
3. Amazon's Accountability Erosion
This policy shifts financial responsibility away from Amazon. Whether it’s lost shipments or damaged items, sellers are now expected to bear the brunt of Amazon’s inefficiencies. This lack of accountability, combined with repeated operational mishaps—like the AWD (Amazon Warehousing and Distribution) failures reported in 2024—has left sellers feeling abandoned.
Several sellers revealed instances where entire shipments went missing during high-demand seasons like Q4. Under the new policy, reimbursement would fail to cover the full financial loss.
4. Potential Price Impacts
For small businesses, which already operate on thin margins, this policy shift threatens profitability like no other.
Handmade sellers are especially impacted by this change: they dedicate significant resources to creating unique designs, sourcing high-quality materials, and crafting personalized packaging — factors that the reimbursement model does not adequately address.
Their products are not mass-produced factory items but are instead the result of meticulous craftsmanship and customization. For them, this policy shift is more than just an inconvenience — it’s a potential breaking point that could force them to either absorb consistent losses or increase their prices to survive.
The Larger Implications for Sellers
A Decline in Trust
For over a decade, Amazon cultivated an image as an ally to sellers. This latest move has shattered much of that goodwill. Repeated fee hikes, inefficient fulfillment programs, and policies like this demonstrate what many view as Amazon’s growing monopoly and dismissive attitude toward its seller community.
From handling inventory losses to absorbing increased FBA fees, sellers are being squeezed in every direction, leaving some to question whether selling on Amazon is even worth it anymore.
A Dangerous Conflict of Interests
By controlling everything from seller data to logistics, Amazon has created a dangerous systemic conflict of interest. When sellers report “lost” inventory, what guarantees exist that this isn’t being mismanaged, resold, or even flagged unfairly within the Amazon ecosystem itself?
One seller shared a jaw-dropping story of “missing” units reappearing on their own product listing but sold by Amazon itself. Without accountability mechanisms in place, the new reimbursement policy only amplifies fears of exploitation.
Final Thoughts
Amazon’s shift to manufacturing cost-based reimbursements is part of its efforts to reduce expenses in its fulfillment network. However, sellers argue that this comes at their expense. By reimbursing less for lost or damaged inventory, Amazon places more financial risk on small businesses, leaving them to either absorb these costs or raise their prices.
This policy also raises concerns about transparency and fairness. Some sellers believe Amazon might use cost data to gain an unfair competitive advantage. These changes risk increasing distrust between Amazon and its seller community, prompting many small businesses to reconsider their long-term reliance on the platform.
While the policy promises more “predictability” for reimbursements, it remains to be seen whether this shift will achieve the intended balance between Amazon’s operational efficiencies and fair treatment of its sellers.
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