Amazon sellers are in revolt over a new policy they say hurts profits and gives up guarded business data
Starting March 10, 2025, Amazon will only pay back sellers for the product manufacturing cost, not the full retail cost, which is how the e-tailer currently reimburses sellers for lost or damaged items. Merchants are bracing for cuts to their earnings as a result.
What’s more, in order to calculate the payouts, sellers have one of two options. They can let Amazon determine the manufacturing cost. In the announcement, Amazon said such estimates would be “based on a comprehensive evaluation of comparable products sold by Amazon, by other sellers and through wholesale channel.” Still, sellers who spoke to Modern Retail said they’re worried that this could lead to inaccurate or low-ball estimates.
Alternatively, sellers can provide their manufacturing costs, such as proof of cost of sourcing, directly to Amazon. For sellers, this raises serious privacy concerns over how exactly their private manufacturing cost data will be used.
“Any inventory that’s lost or damaged at Amazon for which sellers are only reimbursed their manufacturing cost is an immediate net operating loss on that product because sellers are going to have to foot the bill for or essentially eat all those logistics costs and imports and duty costs,” Derkits said. “Those are costs that sellers aren’t getting back.”
I think this is simply a codification of a practice which was the same in some FCs and not others.
I could be wrong, but I experienced it in my limited use of FBA, and on items which I could not document my cost. I lost nothing because Amazon always found my missing items and back-charged the reimbursement. (Of course, I did lose the sale when they could not find the item).
My manufacturing cost are payments to my brother-in-law, Fred, who runs my manufacturing plant. That’s all I know. He arranges worker salaries, materials, utilities, etc.
What are his costs? I don’t know.
It sounds like Amazon is preparing for a substantial increase in lost and damaged FBA inventory, possibly due to bunch of new, poorly trained warehouse workers.
This suggests that Amazon is going to the mattresses in preparation for a fight with the teamsters.
The problem is “revolt” means fighting back, or at least changing something. But the frogs will simply continue to grumble as the water slowly boils, instead of switching to FBM (and losing the buy box), or switching platforms (hard, now that you’ve allowed the monopoly to entrench itself, even contributing to its victory by accepting blatantly illegal practices in exchange for some silver), or taking up arms (or at least protesting, lawyering up, telling people not to shop on the platform, etc.).
It is just a matter of time before the platform becomes unusable for all but a very thin slice of huge volume, low margin sellers of knock-off garbage. The fact that you haven’t been destroyed yet – the same way some mom-n-pop stores held on for a long time in the face of WalMart moving to town – doesn’t mean you’ve won.
In the spring I was so grateful for my 2 local, conveniently located Party City stores. I had an unexpected graduation celebration to put together very quickly. I could order online for in-store pick up. I was so grateful for their selection, stock, and specialty-ness. Plenty of staff, well-stocked and organized stores.
I remember thinking, “I’m so thankful this specialty brick-and-mortar store survived the pandemic and Amazon!”
I hadn’t read the article.
I worked for a while in a store that sold party goods, and Amscan (the company that owns Party City) was both a supplier and competition. They made a lot of decisions I found… weird.
