FBA Sellers – If I’m looking at this right, Amazon owes my business over $25,000, and there’s a good chance they could owe you money, too.
Amazon appears to be short-changing sellers when customers initiate a return but never actually return the item.
If a customer changes their mind and decides not to return the item, Amazon reimburses sellers 60 days after the customer originally initiated the return.
However, I believe the reimbursements are not for the correct amount, and I have an example below to prove it.
Let’s dive in…
When a customer initiates a return on Amazon, Amazon reverses the sale and charges the seller for the refund to the customer.
However, the customer typically doesn’t get refunded until they actually return the item.
It appears Amazon is taking the money from the seller to hold onto until the customer returns the item. This results in Amazon essentially getting free financing from sellers until the customer returns the item or 60 days pass.
This isn’t ideal, but it gets worse.
Customers generally have 30 days to return the item after initiating a return.
If the customer does not return the item, Amazon will reimburse the seller for the refund after 60 days. This happens as the customer still has the item, so it’s as if the original sale occurred.
However, that’s not how the payments side of things works. Amazon is not giving back the full amount owed to the seller.
Here’s an example:
Here’s the timeline for this order:
August 2: Customer places an order, and I get a deposit of $78.88.
August 13: Customer initiates a return, and $87.96 is withdrawn from my account.
October 13: Amazon issued a $78.88 reimbursement to me as the customer never returned the item.
Things generally went as planned here, except you’ll notice that the reimbursement amount is less than the amount deducted for the refund.
I believe my reimbursement should match the amount initially deducted from my account.
In this case, it’s not, and I lost $9.08 on this order. There doesn’t seem to be any good reason for this, but I dove deeper to understand what is happening here.
Here is the original payment for this transaction:
All good. The fees and payout of $78.88 are exactly as expected. But an important note: this is where I already paid the $6.08 fulfillment fee to ship the item to the customer.
Now, here’s the refund to the customer:
Here we can see that $87.96 was deducted from my seller account balance. We were originally paid $78.88, so we are eating an additional $9.08 in costs.
$3 of this is the refund administration fee, which is 20% of the original referral fee paid. The other $6.08 is the fulfillment fee to give the customer all their money back as they got free shipping on the original order.
All is as expected here as well.
Now, here’s where things don’t add up. This is the reimbursement from Amazon:
You can see that I’m reimbursed $78.88, which matches the original amount I was paid.
However, does that make sense?
I’m losing $9.08 on this order due to a customer initiating a return and then not actually returning this item.
Nothing really happened here. I sold an item, and the customer said they would return it and decided not to. So my assumption would be the payout should be the same as if I sold it and the customer never initiated a return.
Let’s get into the specifics of this.
The $9.08 comes from $6.08 in the fulfillment fee and $3 as the refund administration fee. Let’s evaluate each one.
First, the $6.08 fulfillment fee. I already paid this on the original order when this order was shipped to the customer. Amazon calculates the reimbursement as if the item has to be shipped to the customer again, which it does not! So this $6.08 should definitely be included in the reimbursement.
Then comes the question of the $3 refund administration fee. I believe the theory behind this fee is to cover the payment processing fees, so Amazon doesn’t lose anything when a customer is refunded.
The refund administration fee is 20% of the referral fee, typically 15%, so the refund administration fee is 3% of the original sale price.
That’s in the ballpark of normal payment processing rates. However, I’m sure Amazon has negotiated rates quite a bit lower than that, so they make a small amount even when customers are refunded on items purchased by 3rd party sellers.
Now, back to whether Amazon should reimburse the refund administration fee in addition to the fulfillment fee.
I know as a customer that when I initiate a return on Amazon, I am not refunded until Amazon receives the item. Here’s a screenshot showing this by walking through the process of returning an item:
From the information I have, this clearly shows that Amazon does not refund the customer when they initiate a return. To be refunded, the customer actually has to return the item, not simply initiate it.
But Amazon takes the money out of the seller’s account balance as soon as the customer initiates the return.
When the customer doesn’t return the item after 60 days, Amazon reimburses the seller from Amazon’s bank account. They don’t need to charge the customer again for not returning the item.
If they actually had to process another transaction and pay the transaction fees again, it would potentially be reasonable to withhold the refund administration fee from the reimbursement.
But that’s not the case, so the $3 should also be reimbursed.
Here’s where we’re at: We’ve determined that both the fulfillment fee and the refund administration fee should have been reimbursed. The reimbursement amount is $9.08 too low. Our total reimbursement should have been $87.96.
$9.08 might not seem like a huge deal, but this happens often. Especially if you sell in a category with high return rates like we do in my business.
This has happened nearly 1,500 times in 2022 in my business alone! If the average additional reimbursement on these were $9, we’d be owed an additional $13,500!
Amazon policy allows going back up to 18 months for this type of reimbursement, so we’re potentially looking at around double that amount in my business.
I’ve been going back and forth with seller support to no avail to resolve this.
FBA sellers – let me know in the comments if you see the same thing on your accounts. And if you think I’m missing anything in this.
If you’re impacted, consider engaging with this Twitter post where I’m working to draw attention to this issue.
If anyone from Amazon is reading this and is able to help, please reach out in the comments or to my email: firstname.lastname@example.org.
Want to stay in the loop on any updates I find on this issue?
Sign up for my weekly email newsletter, where I share critical updates (like this one!) in the world of selling on Amazon. Sign up here: https://onlinesellingexperiment.com/ecommerce-insider/