Amazon Lost Thousands of Pounds of Stock! How/Why does Amazon Lose your Inventory?
I’ve always said that the worst thing you can do when you’re looking to start an Amazon FBA business is read the Amazon seller forums – it seems that only unhappy sellers go there as it’s full of negativity and horror stories!
Which makes sense, after all most of us are too busy selling and making money to post about it on the seller forums. And that’s just how it is with online reviews a lot of the time. Just take a look at PayPal’s Trustpilot score for evidence of that.
So that’s why I always recommend steering clear of those forums as they can be very off-putting and most of all misleading.
Now one of the more common horror stories you see on there is about lost inventory and that can be very scary for new sellers. After all we’re sending stock into Amazon to sell it and make money, not for them to lose it!
So in today’s post let’s cover how and why Amazon lose stock and what you can do about it.
How do Amazon lose FBA inventory?
Obviously, this problem only occurs with FBA inventory as that’s sent to Amazon to store and fulfill, unlike if you’re fulfilling orders FBM which Amazon never handles.
FBA Stock can be lost by Amazon at 4 different times:
When you initially ship it to them and it’s checked in
This is usually an incorrect quantity, such as you sending 100 units in a box and Amazon checking in 90. Or it could be part of the order going missing, such as you sending in 3 boxes of 30 units each and 1 box going missing.
During fulfilment centre operations
When it’s being stored or transferred between fulfilment centres. You’ll be informed of any inventory damaged or missing in this way via the Inventory Adjustments Report.
From customer returns
When Amazon refunds a customer or replaces an item before receiving the return.
When you request a removal of stock from Amazon back to you and it’s either lost or damaged during shipping.
What to do if Amazon loses Amazon Seller’s inventory?
If you’re in the unlucky and rare position of Amazon losing your inventory, then you have to make a claim to them for reimbursement.
“If an item you send to us as part of the Fulfillment by Amazon (FBA) service is lost or damaged at a facility or by a carrier operated by Amazon or on behalf of Amazon, we will replace that item with a new item of the same FNSKU or we will reimburse you for it.”
Now immediately this rings alarm bells as how much do Amazon reimburse you? What value do they place on your inventory?
Because if it’s your cost price then of course that means you’re losing money, at least potential money, from the sale.
But thankfully that’s not the case and Amazon says they will “reimburse you for the estimated proceeds of a sale of that item” for a shipment to Amazon or a fulfilment centre operations claim.
What exactly does estimated proceeds mean? Well put simply it’s the net amount you would’ve received had you sold the item on Amazon. So:
Sale Price – (Referral Fee + Fulfilment Fee) = Estimated Proceeds
You’ll actually be slightly better off as Amazon doesn’t charge VAT on top of the fees BUT they also apply some of their own calculations to the sale price and it might not be exactly what you’re expecting.
From my experience for private label products it’s a lot more consistent as there’s normally just one seller and a fairly constant price. For other branded products with multiple sellers then Amazon takes a few factors into account to work out a fair selling price.
- Your current list price for the item on Amazon
- The average price at which you have sold the item on Amazon over the past 90 days
- The average current list price for same item by other sellers on Amazon
- The average price at which other sellers have sold the same item over the past 365 days
If there’s not enough data for these 4 points then Amazon will instead estimate a sale price using a “comparable product”.
Of course this sale price reimbursement only applies to inventory lost when Amazon are checking it in, while it’s being held in their fulfilment centres, or for a removal order where the inventory was in perfect sellable condition. If you were removing inventory due to faults or damage of some kind (not through Amazon’s fault) then Amazon will apply a discounted sale price.
If you ask me that’s all fair enough and to be expected. If for whatever reason you don’t agree with Amazon’s valuation amount, you can file a claim to dispute it within 90 days.
And that brings us to an important point:
When can Amazon Seller make a reimbursement claim? And what’s the process?
The exact process and timeframes for making a claim to Amazon for lost inventory depends on which one of the 4 options it falls under. We’ll quickly run through them one by one.
Shipment to Amazon claims
You can only make a claim once your shipment is eligible for investigation, which generally will be at least 30 days after it’s received (as Amazon ask for time to be able to locate all inventory). You can check this by going to your shipment summary and checking the reconcile tab.
You also can’t make a claim after 6 months from the date your shipment is received, but I don’t think anyone is going to wait that long to get their money!
So to sum it up, for shipment to Amazon claims the claim window is after 1 month but before 6.
Fulfilment centre operations claims
There’s a very simple claim window for any items reported lost or damaged by Amazon. You can submit a claim from 30 days to 18 months after it’s reported in your inventory adjustment report.
Customer return claims
You can make a claim for a refund or replacement that Amazon issued on your behalf 45 days after the refund / replacement, up to 18 months after. Of course this only applies if the item is never returned to your inventory.
Lastly we have:
For inventory lost during transit, i.e. after it’s left Amazon’s fulfilment centre but before reaching your return address, you can make a claim 14 days after the last confirmed movement of your removal shipment, which basically means 14 days with no update to the tracking / shipment at all.
For inventory that you receive damaged, you can and should make a claim immediately.
Again, the upper limit is 18 months for removals claims.
So there you have it. A fairly simple and straightforward process in theory but of course we all know it can turn into a big headache in practice, as is sadly the case with a lot of times where we have to contact Amazon seller support.
However despite what the seller forums will make you believe this is still a very rare occurrence and I personally haven’t had any problems at all after sending in and selling thousands upon thousands of units.
But is there anything an Amazon Seller can do to prevent it happening in the first place?
Sadly no, these types of things do happen in fulfillment and there’s not a lot you can do to avoid it. It occurs more commonly in Q4, which is obvious, as that’s the busiest season with longer wait times to check-in inventory, and maybe anecdotal but I also suspect it happens more commonly when you ask Amazon to prep and label your inventory.
I don’t have any hard data to back this up, only what I’ve seen from my blog readers. I do always suggest labelling yourself anyway as it’s not worth the fee Amazon charge, especially when you can usually always get this done via your supplier for free!
I’ll end today’s post with one final warning – always put the correct weight and units for any shipment to Amazon’s FBA centres.
I see people saying “oh they never check that anyway” so often, but why risk it? If you do have to make a claim and any such info is incorrect, Amazon can use that to dispute your claim. They’re very much like an insurance company with this – anything wrong with the details you’ve given them, even if it seems completely unrelated to stock going missing, and they can refuse to pay out.
So please make sure you enter everything correctly when creating a shipment to Amazon and save yourself possible headaches in case something goes wrong.
As always, if you have any questions or comments then get in touch with me at EMAIL and I’ll personally get back to you.
Otherwise, until next time!
All the best,