Amazon’s complex terms, conditions, and fines have hindered brands’ financial clarity, and the consistent influx of Vendor Central chargebacks and shortages compromises account profitability. While many sellers believe they have low chargeback and shortage rates, they often lack the appropriate data to identify and report errors and claim refunds. Moreover, there is a significant disconnect between Vendor Central finance and Amazon Direct teams, as neither party communicates about financial discrepancies and the associated dispute opportunities.
How can you verify overcharges to your Vendor Central account and manage your finances to ensure optimal profitability?
Amazon charges are separated into three distinct categories: chargebacks, shortages, and excess trading terms. Amazon reports shortages and chargebacks under the belief that you made a shipping error, and excess trading terms are undisclosed fines that brands often overlook. Trading terms fees occur when Amazon bills product units they claim not to have received or charges trading terms on orders never placed. Hannah Blackburn, Co-founder and Director of The Hawkers Club, explains Amazon’s systematic accounting errors, stating, “So even if you deliver right; even if you do everything right, there are glitches in their accounting system, which means they’re overcharging you on trading terms accidentally…there hasn’t been a single Vendor Central account…that I haven’t found this issue.”
Sellers should also acknowledge the SIOC (ships in own container) incentive program, where Amazon allows you to claim incentives for each SIOC unit. However, these are not granted automatically, so you must contact Amazon within 9-12 months to request these rewards. Similarly, Amazon monitors and fines errors made when fulfilling SIOC deliveries, making the incentive pivotal to your annual revenue.
Before filing disputes with Amazon, sellers should conduct quarterly meetings with internal teams. This ensures you remain informed of upcoming incentives, trading terms, and expenses. For instance, Amazon no longer allows sellers to reject returns, despite prior no-return agreements. Consequently, the platform invoices brands that don’t adhere to these guidelines. Yet by referencing previous no-return contracts, Amazon will fully refund these charges. Collaborating with departments empowers you and your teams to take the appropriate actions to recover funds.
Sellers may avoid disputes based on the false but common belief that Amazon allows only 60 days to file claims. Rather, you have 24 months to address overcharges on trading terms which can be extended another year for excessive fines. Conversely, the time limit on shortage disputes is not specified. Amazon is also likely to reject claims, further disincentivizing brands from addressing unnecessary expenses. But even if the time limit has expired, you can still request rejection evidence from Amazon since the statute of limitations only applies to shortages that have not been disputed yet. This evidence may prove that Amazon didn’t review your disputes, permitting you to resubmit them for additional consideration.
When preparing for disputes, compiling data and documentation is critical for maximizing returns. During team meetings, you should prepare a gross margin agreement to ensure Amazon doesn’t overcharge on guaranteed profitability. It’s ideal to address this with Amazon monthly to demonstrate that you’ve met the platform’s required profit margin. Accounting and finance teams should also understand drop shipping trading terms and establish price-per-vendor code requirements. Ultimately, sellers should comprehensively examine Amazon’s audit claims to mitigate oversights.
