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3P and 1P: A Guide to Amazon Reimbursements and Recovery

Amazon reimbursements are one of the key avenues for those who sell on or to Amazon to recoup lost cash and boost profitability. But what are reimbursements from Amazon, how do they work, and just why are they so important? 

Read on to find out the answers to all this and more!

What Are Amazon Reimbursements?

Let’s start with a simple explanation: Amazon reimbursements are payouts made by Amazon to its sellers to compensate for financial losses incurred because of various reasons. These reasons typically involve issues that arise when Amazon handles a seller’s products through their Fulfillment by Amazon (FBA) service.

Here are some of the common scenarios where Amazon reimbursements come into play:

  • Amazon FBA Lost Inventory: If a seller’s products are misplaced, lost, or damaged while in Amazon’s fulfillment centers or during shipping by Amazon, the seller can request reimbursement for the product’s value.
  • Incorrect Fees: Sometimes, sellers may be charged inaccurate fees by Amazon. This could involve storage fees, fulfillment fees, or even referral fees. Sellers can request reimbursement for these overcharged fees.
  • Customer Returns: In some cases, a customer may receive a refund for a returned item but fail to actually return the product. Alternatively, a returned item might be damaged. In such situations, sellers can seek reimbursement from Amazon.

This reimbursement system serves as a way to hold Amazon accountable for mishaps that occur on their end while handling sellers’ FBA inventory and resulting in a financial loss. 

What Percentage Does Amazon Take From Sellers?

Sellers on Amazon can lose significant amounts of money from unclaimed reimbursements due to various issues such as lost or damaged inventory, incorrect customer returns, and other discrepancies. Estimates and reports vary, but here are some key points to consider.

Average Losses

It is estimated that sellers could be losing between 1% to 3% of their total sales to unclaimed reimbursements.

So, even small sellers with annual sales of $100,000 could be losing $1,000 to $3,000 annually. For larger sellers, this can amount to thousands or even tens of thousands of dollars annually. 

By not actively managing and claiming reimbursements, sellers can lose out on substantial amounts of money, impacting their profitability.

Common Causes of Unclaimed Reimbursements

  • Lack of Awareness: Many sellers are not fully aware of Amazon’s reimbursement policies or how to track discrepancies.
  • Complexity: The process to identify and claim reimbursements can be complex and time-consuming.
  • Automation Tools: Sellers who do not use automated tools to track and claim reimbursements may miss out on potential claims.

Solutions to Minimize Losses

  • Regular Audits: Conducting regular audits of inventory and transactions to identify discrepancies.
  • Third-Party Services: Using FBA reimbursement services or software to streamline the process of tracking and claiming reimbursements.
  • Staying Informed: Keeping up to date with Amazon’s policies and procedures regarding reimbursements.
  • Implement Amazon seller refund policy: Implement several strategies within your refund policy to reduce the number of returns you receive. For example, you can offer discounts or coupons for future purchases if customers decide to keep the product or create loyalty programs to reward repeat customers and reduce the likelihood of returns. These strategies can help enhance customer satisfaction, clarify expectations, and encourage buyers to keep their purchases. 

Unclaimed Amazon FBA refunds represent a significant potential loss for sellers. By understanding the common issues, regularly auditing their accounts, and utilizing automated tools or third-party services, sellers can minimize these losses and ensure they reclaim as much as possible.

Difference Between 1P and 3P Amazon Reimbursements

Typically, reimbursements refers to 3P sellers; recoveries ostensibly refers to the same system for 1P vendors. Reimbursements and recoveries serve the same purpose – to recoup lost money from Amazon – but they have some clear differences. 

1P Recoveries

Less Common: Since vendors act as wholesalers to Amazon, reimbursements are less frequent as Amazon takes ownership of the inventory upon purchase.

Process: Handled via Vendor Central or vendors can make use of services such as ChargeGuard by Carbon6.

Examples: Inaccurate purchase orders from Amazon, damaged products received by Amazon during vendor shipment.

3P Reimbursements 

More Common: Reimbursements are a more common occurrence for 3P sellers as they manage their own inventory and rely on FBA for fulfillment.

Process: Handled via Seller Central by sellers themselves or with the use of a reimbursement service like Seller Investigators by Carbon6. 

Examples: Lost or damaged inventory in Amazon warehouses, incorrect FBA fees, customer returns where the item isn’t returned or is damaged.

How do FBA Inventory Reimbursements Work?

The filing process varies depending on which category of return it falls under, and where in the fulfillment process the loss occurred. Here are some of Amazon’s guides to get you started:

To speed things up, consider using Amazon’s automated tools within Seller Central to help identify and request reimbursements in minutes. Explore features like the Automated Reimbursements tool to see if there are any eligible cases.

Better yet, let the pros do it for you. Work with an external Amazon seller reimbursement service provider that can automatically analyze your account for potential recoveries. Services like ChargeGuard (for 1P) and Seller Investigators (for 3P) specialize in identifying and claiming reimbursements on behalf of sellers.

But beware: Not all reimbursement service providers are equal. While many charge a percentage of the recovered amount — usually between 25% to 40% — a select few opt for a fixed fee structure. Choose wisely to ensure you get the most value from your Amazon reimbursement and recovery partner.

If you have specific concerns or believe that an item is eligible for reimbursement, you can reach out to Amazon Seller Support for assistance. Be prepared to provide detailed information about the specific order or issue.

Who Can Make The Most Of Reimbursements?

Now that we have a clear understanding of how Amazon reimbursements work, let’s take a closer look at how they can be used by different types of sellers to maximize profitability and prevent leakage. 

For Sellers

The easiest way for sellers to claim reimbursements from Amazon is with a reimbursement service. Most of these services will run an audit of the seller’s Seller Central account(s) and identify which claims are eligible for reimbursement.

Services like Seller Investigators by Carbon6 will file, track, and manage eligible reimbursement claims, taking away all of the stress and time-consuming paperwork. Plus they offer free, no-obligation reimbursement audits to help identify lost profits and areas of leakage. 

Automating reimbursements in this way will reduce lost profits without eating into one of a sellers most precious resources: time. Filing claims manually can bog down operations, which makes it less appealing. But the ability to recoup past profits and prevent future losses is something that should not be ignored.

For Agencies

If managing reimbursements for one brand can swallow up time, managing them for a whole client base would be endless. Agencies can streamline the process by creating bolt-on revenue streams and newfound revenue for your clients by partnering with existing, expert services, such as the reimbursement team at Carbon6

For Vendors

Utilizing a comprehensive and data-driven vendor recovery solution like ChargeGuard by Carbon6 to handle recoveries is a clear win for 1P vendors. ChargeGuard has a 5-year lookback period for most cases and conducts root cause analysis to help clients avoid future profit loss due to overages, shortages, and the like. 

Wrap Up

Amazon reimbursements are high reward, but high effort. Working with a reimbursement service that takes away the burden of work while recouping money that was otherwise abandoned makes logical financial sense.

Author picture

Shannon Curley is the Director of Marketing at Carbon6, the all-in-one Amazon growth platform. She has spent a decade crafting impactful marketing strategies and content to engage with and educate Amazon sellers and software, and is always looking for new ways to challenge the status quo.

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