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Amazon’s new FBA reimbursement policy, effective March 10, 2025, changes how the platform pays sellers back for lost or damaged inventory: instead of the retail selling price, Amazon will reimburse only the manufacturing cost, and only Amazon’s own estimate of that cost unless you hand over your supplier invoices. On this solo episode of the My Wife Quit Her Job podcast, I walked through what the policy actually says, what it will cost you per unit, and why it creates a dangerous incentive for Amazon to lose your inventory on purpose.
The math is brutal. If you sell a handkerchief for $10 that cost $2 to manufacture and Amazon loses 100 units, the old policy paid you $1,000. The new policy pays you $2 per unit, minus shipping, customs, and prep fees that Amazon refuses to count, so you actually see about $1.40 per unit.
Below is what changed, the AWD warehouse disaster that made 2024 the worst FBA year in memory, and the two-part game plan for sellers who want to survive the squeeze in 2025.
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Table of Contents
Key takeaways
- Starting March 10, 2025, Amazon reimburses lost or damaged FBA inventory at the manufacturing cost of your goods instead of the retail selling price. Shipping, handling, customs duties, and prep fees are all excluded.
- Amazon sellers lose approximately 1 to 3 percent of annual revenue to inventory discrepancies each year, according to Getida. Under the old policy this was painful; under the new one it is a direct hit to your cost of goods.
- You have two options for how Amazon determines your cost: accept Amazon’s own “comparable-product” estimate, or submit your actual invoices, which hands Amazon full visibility into your suppliers and margins.
- Amazon Warehousing and Distribution (AWD) had a disastrous 2024 holiday season, running out of capacity and stalling inventory transfers into fulfillment centers. Amazon still raised AWD prices for 2025 right after promising no new FBA fees.
- Amazon has a documented pattern of launching private-label knockoffs of top-selling FBA products at ~30 percent below the seller’s price. Handing over your supplier list accelerates that risk.
- Only high-margin sellers will survive long term. Every mid-margin FBA business needs a serious diversification plan (DTC, Shopify, wholesale, other marketplaces) starting now.
What is Amazon’s new FBA reimbursement policy?
Amazon’s new FBA reimbursement policy, effective March 10, 2025, reimburses sellers for lost or damaged inventory based on the manufacturing cost of the product rather than the retail selling price. Amazon’s stated goal is “greater transparency and more predictability” in how reimbursements are calculated, but the practical result is a large drop in what sellers get paid when Amazon loses their inventory.
Under the old policy, Amazon paid the full retail selling price of the lost unit. Under the new policy, Amazon pays only what it costs you to source the product from a manufacturer, wholesaler, or reseller.
Shipping, handling, customs duties, and prep fees are explicitly excluded, even though they are a real part of your landed cost.
How much money will Amazon sellers actually lose under the new policy?
Under the new policy, the average FBA seller loses roughly 70 to 90 percent of the previous reimbursement amount on a lost unit. A concrete example: if you sell a handkerchief for $10 with a $2 manufacturing cost and 30 percent shipping and customs on top ($0.60), Amazon used to pay $10 per lost unit and will now pay $1.40. Shipping, customs, and prep are all excluded from the “manufacturing cost” definition.
On 100 lost units, that is $1,000 under the old policy versus $140 under the new one. On 500 units (the size of a shipment Amazon has lost on my account before), the delta is $5,000 versus $700.
Amazon sellers lose approximately 1 to 3 percent of annual revenue to inventory discrepancies each year, according to Getida. On a $1 million per year FBA business, that is $10,000 to $30,000 in revenue at risk from lost, damaged, or missing inventory alone. The reimbursement gap now hits your bottom line directly.
How does Amazon determine “manufacturing cost” under the new policy?
Amazon offers two options for determining your manufacturing cost: Amazon can generate its own estimate based on comparable products sold on the platform and through wholesale channels, or you can submit your actual manufacturing invoices. Amazon’s estimate is almost certainly going to be lower than your real cost, because the comparable-product data set includes lower-priced competitors and Amazon’s own private-label pricing.
The second option, submitting your real invoices, means handing Amazon your supplier information, unit costs, and negotiated pricing. That is exactly the data Amazon needs to bypass you and source directly from your manufacturer.
Neither option is good. One underpays you; the other underpays you and gives Amazon the blueprint for a private-label knockoff.
Why is the AWD warehouse debacle relevant to this policy change?
The AWD debacle is relevant because it shows Amazon’s operational reliability is already failing, and the new reimbursement policy shifts the entire financial cost of that failure onto sellers. Amazon Warehousing and Distribution (AWD) had a disastrous 2024 Q4: capacity blew up, Amazon ran out of warehouse space, pickup schedules got delayed or canceled, and inventory sat stalled instead of moving into fulfillment centers in time for the holidays.
Many friends of mine on AWD ended up stocked out during the biggest shopping season of the year through no fault of their own. If the new reimbursement policy had been active during that mess, sellers would have absorbed the full inventory loss at manufacturing cost, not retail.
Amazon then raised AWD prices for 2025, right after publicly promising there would be no new FBA fee increases. The fee promise was technically kept; the reimbursement policy change and the AWD hike more than offset it.
Why does the new policy create a conflict of interest for Amazon?
The new policy creates a serious conflict of interest because Amazon now stands to profit from losing your inventory. When Amazon loses 10,000 units of your product and reimburses you at manufacturing cost with no shipping or duties, Amazon has 10,000 free units of a proven best-seller with no import cost of its own, which it could theoretically list under its own brand at a lower price.
That is not hypothetical. In 10 years of selling on Amazon, I have had products shipped under the wrong listing, customers receiving items my store does not sell (a weighted vest returned instead of our linen towels this past Christmas), and hundreds of units Amazon claimed were lost later reappearing for sale under my own listing from other sellers.
Under the old policy, Amazon lost money on operational mistakes and had a financial reason to fix them. Under the new one, Amazon’s cost of losing inventory drops by 70 to 90 percent, which removes the internal pressure to run a tight ship.
Old vs new FBA reimbursement policy: what actually changed
| Aspect | Old policy (before March 10, 2025) | New policy (from March 10, 2025) |
|---|---|---|
| Reimbursement basis | Full retail selling price | Manufacturing cost only |
| Shipping costs reimbursed | Included in retail price | Excluded |
| Customs duties reimbursed | Included in retail price | Excluded |
| Prep and handling fees reimbursed | Included in retail price | Excluded |
| How Amazon knows your cost | Retail price is public on the listing | Amazon estimates OR you submit supplier invoices |
| Supplier visibility handed to Amazon | None | Full, if you want accurate reimbursement |
| Effective loss on a $10 item costing $2 to make | $10 reimbursed | $1.40 reimbursed |
How does Amazon’s private-label copycat pattern make this worse?
Amazon’s private-label pattern makes this worse because handing over your supplier and cost data (the only way to get an accurate reimbursement) gives Amazon everything it needs to knock you off. Amazon has a long documented history of launching its own private-label version of top-selling third-party products at roughly 30 percent below the seller’s price.
A friend of mine was selling hundreds of thousands of dollars of Emu oil per year on Amazon. Amazon launched its own version, priced it 30 percent lower, and then advertised its branded Emu oil directly on her product listing page. Her sales tanked overnight.
Mike Jackness used to sell gel packs on Amazon at millions of dollars per year. Amazon knocked off the product at 30 percent cheaper and even copied his packaging and photo layouts.
Once Amazon has your supplier, unit cost, and margin data, they can go direct to your manufacturer, negotiate a better price with their volume, and take the market. The reimbursement policy is one more push in that direction.
What should Amazon FBA sellers do to protect their business in 2025?
The action plan is a two-part hedge: cut your Amazon exposure where you can and build alternate channels immediately. Diversification is no longer optional for anyone whose Amazon margin cannot absorb a permanent step-down in reimbursement recovery.
- Model the new reimbursement math on your top 20 SKUs and decide which ones are still viable at Amazon’s new economics.
- Do not casually opt into “let Amazon estimate my manufacturing cost” without checking the estimate against your actual invoices. Amazon’s estimate will almost always be lower.
- Think hard before submitting supplier invoices for accurate reimbursement. The margin recovery on lost units may not be worth handing Amazon your sourcing playbook.
- Aggressively grow a DTC or Shopify store you control, plus a second marketplace (Walmart, TikTok Shop, or wholesale via Faire).
- Track your discrepancy rate obsessively. Consider reimbursement-recovery tools like Getida to file every eligible claim, because the smaller per-unit payout means volume matters more than ever.
- If you are still doing FBA-only, treat this policy as the wake-up call. Amazon’s advertising costs already climbed roughly 20 percent year over year, inbound placement fees appeared this year, and AWD price hikes are baked into 2025.
What else is squeezing Amazon sellers right now?
Beyond the reimbursement change, Amazon sellers are getting hit from multiple directions in 2025. Advertising costs on Amazon rose approximately 20 percent year over year. New inbound placement fees charge sellers per unit just to accept inventory into the fulfillment network.
Amazon Haul, Amazon’s answer to Temu and Shein, is a dropshipping-style marketplace that directly undercuts existing FBA sellers on price. Temu and Shein themselves sell direct from China to US consumers without paying most import duties, which puts a permanent price ceiling above many FBA product categories.
Meanwhile Prime delivery reliability has slipped noticeably. This past holiday I received about 50 percent of my Prime orders inside the promised delivery window. Sellers pay for the Prime badge on the assumption Amazon is holding up its end, and that end is fraying.
Frequently asked questions
When does Amazon’s new FBA reimbursement policy take effect?
The new FBA inventory reimbursement policy takes effect on March 10, 2025. From that date, Amazon will reimburse sellers based on the manufacturing cost of lost or damaged items rather than the retail selling price. The policy was announced in late 2024 and applies to all FBA sellers.
How much less will sellers get paid under the new Amazon reimbursement policy?
Most sellers will receive 70 to 90 percent less per lost unit than they did under the old policy. On a $10 product with a $2 manufacturing cost, the old policy paid $10 per lost unit and the new policy pays about $1.40 after shipping, customs, and prep are excluded from the definition of manufacturing cost.
Should you send Amazon your supplier invoices to get accurate reimbursements?
Submitting your actual supplier invoices does get you an accurate reimbursement, but it gives Amazon full visibility into your suppliers, negotiated unit costs, and gross margins. Given Amazon’s documented history of launching private-label knockoffs of successful third-party products, most sellers should think carefully before handing over that data.
Are Amazon warehouse fees going up in 2025?
Amazon Warehousing and Distribution (AWD) fees are increasing in 2025 despite Amazon’s earlier claim that FBA fees would not rise. Amazon Haul, new inbound placement fees, and advertising cost inflation of roughly 20 percent year over year are also stacking pressure on seller margins.
What is Amazon Warehousing and Distribution (AWD) and why is it failing?
AWD is Amazon’s upstream storage service, positioned as a way to hold inventory before transferring it into FBA fulfillment centers. During the 2024 Q4 holiday season it failed at capacity, with delayed pickups, canceled pickups, stalled inventory transfers, and sellers running out of stock during peak season through no fault of their own.
Should you stop selling on Amazon FBA in 2025?
Stopping Amazon FBA entirely is rarely the right move, but every FBA seller needs a serious diversification plan in 2025. High-margin sellers can absorb the new reimbursement math; mid-margin sellers will struggle. The safest path is to keep your Amazon channel running while aggressively building a DTC store and a second marketplace (Walmart, TikTok Shop, or wholesale) that you control more directly.
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