FBA Reimbursements: Turning a Negative Into a Positive
Yoni Mazor, COO, GETIDA
FBA reimbursements can be useful in turning a negative into a positive, especially for Amazon sellers that were negatively affected by the COVID-19 crisis. Recovering FBA reimbursements on Amazon is a practical way that can assist many FBA sellers in getting more money back. Today, the meaning of the phrase, “a dollar saved is a dollar earned” has never held more truth.
Amazon allows an 18-month lookback window for sellers to audit most FBA related transactions. You are allowed to open cases with Amazon Seller Support and get reimbursed for any discrepancy under Amazon’s FBA reimbursement policy. There is a variety of logistical and financial discrepancies that an FBA seller can discover. Getting reimbursed by Amazon for such discrepancies can be greatly beneficial to the bottom-line profit of any seller. However, there is an element of challenge discovering all the types of eligible reimbursements. Being able to manage the flow of all the cases once opened with Amazon can also prove to be a daunting task.
GETIDA’s data suggests that the level of FBA discrepancies can range between 1%-3%. This means that for every 100 units sellers ship to FBA, between one to three units might get affected. On the other hand, this points out something truly remarkable. It demonstrates that Amazon does a great job handling Amazon sellers’ inventory around 97%-99% of the time. Considering the fact that Amazon is dealing with a titanic scale of tens of billions of dollars worth of inventory across its network, that’s pretty impressive. Ask any wholesaler or retailer if they would be satisfied with such a precision level when dealing with logistics, and they will reply with an overwhelming “YES.”
Nevertheless, the losses from a 1%-3% discrepancy rate for an Amazon FBA seller generating $1 million in annual sales can be valued at $10K-$30K, which is significant by any measure. Amazon will auto-reimburse sellers for some of the discrepancies. Although, it is the responsibility of sellers to conduct an audit and get fully reimbursed for all the FBA discrepancies that Amazon may have overlooked.
The inventory of FBA sellers can experience a variety of logistical discrepancies. A common discrepancy includes inventory that gets lost during the initial FBA inbound receiving. Once in the fulfillment center, some FBA inventory can get lost, damaged, or just disappear. A major financial discrepancy that assists sellers with cost reduction once resolved, is when Amazon incorrectly overcharges for FBA pick and pack fees.
Amazon charges sellers a service fee for picking and packing customer orders. This fee is based on a weight and dimensions tier system per each ASIN. If Amazon’s system overstates the weight and dimensions of a certain ASIN, it can lead Amazon to greatly overcharge a seller for each shipped unit. For example, instead of charging $3.5 per unit, Amazon will charge $10 per unit. Now if you multiply $6.5 times thousands of FBA units sold, you get an idea of the impact of such a discrepancy.
It is important to point out that Amazon allows a limited window of 90 days to get reimbursed for such a discrepancy. Therefore, today more than ever before, Amazon sellers need to keep auditing their Amazon FBA transactions every 90 days at the very least.
Turning a Negative Into a Positive
Amazon sellers must reach the maximum FBA reimbursements available for them under Amazon’s terms and conditions. If not, they essentially experience a double loss. The first loss is the cost of goods. Meaning the cost that sellers pay to source the inventory. The second loss is the loss of profit. The reason is when providing an FBA reimbursement, Amazon essentially "purchases" the affected inventory as if the seller sold the product on the platform. For most Amazon sellers, the marketplace pricing of products includes a profit.
Therefore, sellers who secure the maximum FBA reimbursements, successfully shift a double negative into a double positive. Such sellers ultimately enjoy the added liquidity of cash received from FBA reimbursements because it effectively recovers the cost of goods and profits. Now you can clearly understand how FBA reimbursements can be useful in turning a negative into positive
If you never audited your account, already have some auditing process in place, or just rely on Amazon to auto-reimburse you, it is recommended to reach out to an FBA auditing service for help. You can find authorized auditing services on the Amazon Seller Central App-Store. Such services can help you maximize your FBA recovery and make sure not leave any missed opportunity behind.
COVID-19 Assistance is Available
We’ve partnered with Prosper Show’s Route to Recovery campaign to offer help to FBA sellers get access to more funds during these troubled times. Simply click on GETIDA to activate your first $400 in free reimbursements.
Click here to watch our free Route to Recovery on-demand webinar —Minimize Amazon Fees and Increase Profit: A Practical Approach to Data Analytics.
Good luck and stay safe and healthy out there!