Amazon’s New COGS Requirement: Why Sellers Aren’t Happy

Amazon recently announced a policy update requiring sellers to enter their Cost of Goods Sold (COGS) for FBA inventory. While it’s framed as a step to improve transparency and streamline inventory reimbursement processes, many sellers are raising concerns about the drawbacks of this mandate.

What’s Changing?
Under the new policy, sellers must input their COGS for every product in their inventory. This figure will determine how reimbursements are calculated for lost or damaged inventory. Sellers who fail to comply risk inaccurate reimbursements or penalties.

Here’s a brief summary of the policy:

We’re updating our Fulfillment by Amazon (FBA) inventory reimbursement policy to help provide you greater transparency and more predictability in how reimbursements are calculated for items that are lost or damaged before a customer order. This will help drive a more consistent approach that works as we support sellers with supply chain services across their sales channels.

Effective March 10, 2025, we’ll reimburse you based on the product manufacturing cost of the affected inventory. “Manufacturing cost” means your cost to source a product from a manufacturer, wholesaler, reseller, or produce the item if you are the manufacturer. It excludes costs such as shipping, handling, customs duties, or other costs.

Why Sellers Are Concerned

1. Sensitive Data Exposure
   COGS data is a critical aspect of a business’s financial strategy. Many sellers worry about sharing this sensitive information with Amazon, a company that directly competes with its third-party sellers through its private-label products. Inputting this data could provide Amazon with insights into seller margins, which feels like an unfair advantage.
2. Inflexible and Inaccurate Reimbursement Calculations
   Reimbursements based on static COGS figures can be problematic. Costs often fluctuate due to supplier changes, seasonal demand, or shipping rates. If sellers can’t frequently update their COGS or account for these variables, reimbursement amounts may not reflect the actual financial loss.
3. Increased Administrative Burden
   Many sellers already use external tools or software to track their profitability. Inputting COGS into Amazon’s system creates an additional step, adding to the workload without offering substantial value in return.
4. Unequal Application of Policy
   Not all sellers may have detailed or easily accessible COGS data, especially those working with dynamic pricing or handmade products. These sellers could face disproportionate challenges in compliance.

In summary, while the update aims to streamline reimbursements, the risks—data exposure, inflexibility, and increased workload—might outweigh the benefits. Sellers should tread carefully, ensure compliance, and evaluate how to protect their business data in light of this policy change.

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