Amazon Updates: Changes to Chargebacks

Zanoma

Anyone who has sold on Amazon knows that chargebacks can be daunting. When it comes to chargebacks, even seasoned vendors with strong processes and a tech-savvy, well-trained staff can be hit with them. So when Amazon announces they’re changing the way chargebacks are calculated, it’s certainly worth taking notice to learn how it can possibly affect your business.

In this instance, we’ve learned that Amazon is changing how they calculate “overage PO units.” This occurs when a fulfillment center receives more units than were confirmed in the purchase order.

Below is a summary of the changes, effective September 21, 2018.

How are the chargebacks calculated?

Effective September 21, 2018, Amazon will calculate your overage percentage by dividing the number of excess units received (in an overage PO) by the total number of units received for the same PO.

For example, if you had one overage PO during the previous two months, with 10 units confirmed, but Amazon receives 15 units from you, the overage percentage is 33% (5 divided by 15), which falls into the first tier and results in a chargeback rate of 10%. (Source: Amazon Vendor Central).

How will I be charged?

The above percentage will place you into one of three tiers (assessed weekly) and the amount is based on your Cost of Goods Sold (COGS). Amazon will only consider overage POs from the previous two months.

Tier Level Chargeback Rate (COGS)
1: 40% overage 10%
2: 41-90% overage 50%
3: 91% and above 80%

Exceptions

From Amazon:

  • If your products are categorized by Amazon as Baby, Health and Personal Care, Apparel, Beauty, Shoes, Luggage, Grocery, Pantry, or Luxury Beauty, a *30% standard price reduction applies to the first tier of overage percentages.* However, if the overage percentage exceeds 41%, tier 2 or 3 rates will apply.
  • The amount charged for overage Fresh products is charged at 100% of cost of product for any overages sent.

Final Thoughts

It’s clear that the penalty for higher overages can be costly, even more so if you’re in Fresh, which has the potential to be extremely damaging, financially. As a Vendor, accuracy with your POs and how they’re shipped not only ensures smooth logistics and supply chain operations but where Amazon is concerned, it can also help to avoid paying steep chargebacks.

Questions about chargebacks? Curious how Zanoma can help your brand succeed on Amazon? Contact us today, we’d love to hear from you.

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