By John W. Collins, Co-Founder & CEO — chargeguard
To put it bluntly, Amazon is the best marketplace for online vendors and sellers. According to Statista, “As of June 2022, Amazon accounted for 37.8 percent of the U.S. e-commerce market, making it by far the leading online retailer in the country. Second place was occupied by the e-commerce site of retail chain Walmart, with a 6.3 percent market share.”
Unfortunately, Amazon charges fees that can make or break any company, sometimes reducing payments to vendors and sellers due to their own internal mistakes. By challenging erroneous penalties, retailers can claw money back from the platform. This increases profits, which may then be reinvested in advertising, expansion, end-of-year bonuses, or used for other purposes.
It’s also why online vendors should dedicate time and resources to obtaining refunds from Amazon.
The most common Amazon fees
Amazon’s fees cannot be avoided outright. Due to Amazon’s current business practices, fees can only be mitigated reactively. Contrary to popular opinion, having a good relationship with your Amazon Vendor Manager (AVM) or the paid for Strategic Account Manager (SAS) doesn’t save you from fees, since they still work for Amazon. Every retailer that does business with Amazon will incur fees in one way or another.
One of the most common fees Amazon levies against vendors are called shortages. In these cases, Amazon claims that the vendor failed to send in as many items as they accepted and confirmed on the PO, though in many cases, the vendor actually shipped the agreed upon amount. These are also commonly known as Purchase Quantity Variance (PQV).
Price claims, also known as Purchase Price Variance (PPV), are common as well. These typically occur when Amazon vendors invoice for a certain dollar amount based on the price of the SKUs that are shown in the catalogue. When Amazon does not feel they owe the dollars that they are being invoiced and owe a lesser amount instead — which can be for many reasons — they will only pay for what they think the item should be priced at. This leaves an open, unpaid amount that, contractually, the vendor is owed.
In addition to the PQV and PPV, Amazon levies chargebacks against vendors. Chargebacks are small amounts that are charged when Amazon believes that the vendor did not follow their Vendor Guidelines accurately. There are over 48 types of chargebacks. Some chargeback types are due to lack of proper prep on an item; others are related to the on-time and fill requirements. You also have some that have to do with the containers you ship in. The list goes on and on.
Mitigating Amazon fees
While these fees are unavoidable to some extent, retailers should set parameters on how much loss they are willing to take as the cost of doing business with Amazon. Expectations need to be set internally so that fees are monitored and action is taken on erroneous types of fees to ensure they don’t spiral out of control.
To eliminate these fees as much as possible, I advise a number of best practices. First, make sure to follow tight shipping practices that comply with Amazon’s guidelines. Each step of the process requires promptness and care, from packaging your product correctly to tracking shipments.
Clean invoicing practices will help reduce fees, as well. A full suite of Enterprise Resource Planning (ERP) software can track manufacturing, inventory, shipments, and finances. Update any cost concessions in order to bill Amazon for the correct prices.
If this sounds overwhelming, this is why hiring a professional team who can help guide this process is sometimes necessary. Amazon’s fees present a constantly evolving challenge that needs focused attention.
How to secure refunds from Amazon
One of the most important things to keep in mind when trying to recover dollars from Amazon is to never give up when the evidence supports your side. Amazon’s automation is far from perfect, and sometimes their flawed process creates erroneous fees.
There is no single, clear method for securing recovery from Amazon, as all negotiations with the platform need to be specific to a particular case. Dealing with the platform involves continual learning and adaptation, as well as many hours of labor.
To the extent that a vendor wants to tackle this themselves, I make several recommendations. First and foremost, become familiar with all of Amazon’s rules and regulations. The most important being to do a pre-validation before initiating a dispute. While these are complicated, once you have mastered them, you can better and more easily dispute fees. In addition, since Amazon constantly revises its policies, staying up to speed is critical for success.
Next, gather as much evidence as you can. Toward this end, it’s advisable to track the relevant data from the beginning and store it each day. Set your data warehouse up to flag possible errors from Amazon, then dissect the information to determine whether improper charges were made. Then, maintain a paper trail for every protest you log with the platform, updating statuses as the cases advance. And finally, be sure to be as compliant as possible with the guidelines given by Amazon. Not only will compliance help your case as a vendor, but you will see less impact across other fee types if you can clean up processes on another.
When doing business with Amazon, ensure you learn how to speak their language. When building your case, make sure to align your grounds with their current view on how disputes should be handled. For instance, bills of lading and proofs of delivery are no longer accepted as evidence, so other proof should be provided in its place.
Lastly, after each attempt to challenge a fee, determine the campaign’s effectiveness. Recovery can be received as early as a few days, but for the most part take as long as a few months. Successful outcomes validate your strategy, while defeats should lead you to recalibrate your approach.
When you pursue erroneous fees with these principles in mind, you will be surprised how much money you can recover.
About the author
John W. Collins is the co-founder and CEO of chargeguard. Previously, he launched his own private label brands on Amazon, becoming a top 1% Amazon seller. Collins followed that by founding OmniiX, one of the first Amazon brand-management agencies, where he managed more than $500M cumulative Amazon GMV and directed $50M of ad spend. Collins delivered a 37% average annual growth rate across more than 200 brands on Amazon.
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