Amazon has been reimbursing sellers too much — and they’ve decided it’s time for a change.
With the rollout of a new policy, Amazon is cutting back on reimbursements for lost or damaged inventory. And as you can imagine, Amazon sellers are furious.
Let’s dive into the context behind this policy change, how it impacts Amazon sellers, and what it means for the future of reimbursements on the platform.
Why Amazon Is Changing Its Reimbursement Policy
Amazon has long had a practice of reimbursing sellers for lost or damaged inventory in their Fulfillment by Amazon (FBA) warehouses. The standard expectation for many sellers was to receive full retail value (Cost of Goods Sold + Margin - Fees) when Amazon lost their product. Essentially, it amounted to a “free sale” that never happened.
For sellers, this reimbursement was often more profitable than an actual sale, especially when customer returns could have led to losses on the original sale. In fact, many sellers found it more lucrative to have Amazon lose their inventory than to have it sold. However, this system wasn’t without its costs, including time and effort spent pursuing these reimbursements.
But why should Amazon pay for a sale that never happened? According to Amazon’s accountants, it simply wasn’t fair. And so, the reimbursement system is being revamped.
The Amazon Seller Reimbursement Story: A Personal Perspective
I’ve had firsthand experience with Amazon’s reimbursement process. In 2016, I was running an Amazon business that generated $50 million in revenue. Reimbursements from lost and damaged FBA inventory amounted to over $100k — a huge windfall.
By 2018, I created a service, Valence, to help other sellers audit their reimbursements. It became a thriving business that helped many Amazon sellers recover what they were owed. But even back then, I knew this model could change at any moment.
In fact, in 2019, we successfully exited the business, in part due to the looming uncertainty around Amazon’s policies. The reimbursement model was a ticking time bomb — and now, it’s ticking even louder with this new policy shift.
This is the second policy change in six months that directly affects reimbursements. And, just like the first, it reduces the amount sellers receive. While reimbursements have never been 100% fair, this shift seems to tilt the scales even further in Amazon’s favor.
The Impact of Amazon’s New Policy on Sellers
So, what’s the new policy all about? The key takeaway is that Amazon will no longer reimburse full retail value for lost products. Instead, they’ll reimburse based on cost of goods sold (COGS) — which means sellers are only getting paid for the cost to produce the product rather than its market value.
But there’s more to the story than just COGS:
What’s Missing From COGS-Based Reimbursements?
- Shipping costs: The cost of getting inventory into Amazon’s FBA centers.
- FBA prep fees: The costs of preparing products for fulfillment.
- Time lost: The weeks it takes to ship and get inventory into Amazon’s system, only for it to be misplaced or damaged.
If Amazon reimburses only the COGS, many sellers will find the reimbursement amount far below what they expected.
For example, for my Amazon business, a COGS-only reimbursement would likely only cover the cost of manufacturing, with a dollar or two on top. That’s much closer to what I think is fair than the previous model — but still, it doesn’t cover the full cost of doing business on Amazon.
Seller Reactions: The Rage and the Reality
If you’re an Amazon seller reading this, you’re probably feeling frustrated.
Many sellers are angry at Amazon for this change, with some even saying they feel like they’re being taken advantage of. The announcement has sparked massive backlash, with a 99% negative vote reaction on news outlets and social media. The common sentiment is clear: Amazon is squeezing margins even further, and sellers feel left behind.
But let’s be real — this isn’t the end of the Amazon seller dream. Amazon is still the largest eCommerce marketplace, and despite policy changes, the platform remains a major source of revenue for many businesses.
If you’re thinking about leaving Amazon, just know that other marketplaces can have their own challenges, too. It's a competitive landscape everywhere—so don’t just jump ship without a strategy.
The Bigger Picture: What’s Next for Amazon Sellers?
Amazon’s reimbursement policy shift is part of a broader trend of tightening margins and increased scrutiny of sellers. While it’s frustrating for many, it also reflects the reality of the platform—Amazon is a dominant marketplace, but it’s not as seller-friendly as it once was.
However, this doesn’t mean all hope is lost. Sellers who adapt and focus on efficiency, optimization, and reducing costs will still thrive.
Here are a few strategies for moving forward:
🔹 Optimize your supply chain: Keep your costs low by sourcing and shipping efficiently.
🔹 Diversify your business: Explore other channels like Shopify, eBay, and Walmart to reduce dependency on Amazon.
🔹 Focus on your brand: Building a strong brand presence can help reduce your reliance on reimbursements and increase customer loyalty.
Amazon’s new reimbursement policy may feel like a blow, but it’s just one more challenge in a long series of hurdles that sellers face. The key to success on Amazon—or any marketplace—is adapting to change and finding ways to stay profitable.
Final Thoughts: Should You Be Worried About Amazon’s New Policy?
✅ Yes, this policy change will sting for some sellers.
✅ Yes, Amazon is tightening the screws and pushing sellers to be more efficient.
✅ No, it’s not the end of the Amazon dream.
The pendulum of Amazon’s policies has swung back in the company’s favor—but sellers who can adapt and find ways to cut costs and improve margins will still find success.
