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Amazon forces sellers to divulge COGS, won't reimburse other costs

sellercentral.amazon.com

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Re: Amazon forces sellers to divulge COGS, won't reimburse other costs

#51

Post by scherlock »

dwallin wrote: post #40

From an amazon employee reply in the thread: "When we say “Manufacturing cost”, it means your cost to source a product from a manufacturer/wholesaler/reseller, or produce the item if you are the manufacturer. You can provide the proof of your cost of sourcing and we will reimburse you accordingly. If you do not wish to provide your cost, we will provide our cost estimate and we will reimburse you for it. We calculate…

That was my first thought. Create an import or manufacturing entity. That entity then sells the product to the retail entity for a markup. It's the retail entity that has the relationship with Amazon and can then show the invoice from the import/manufacturing entity.

Re: Amazon forces sellers to divulge COGS, won't reimburse other costs

#52

Post by kardos »

ActionHank wrote: post #45
tikkun wrote: post #13

I was confused about this, here's how I understand it now: Previously when Amazon lost or damaged items in their warehouses, they would reimburse sellers the full sales price. Starting March 2025, Amazon will only reimburse the manufacturing cost of lost or damaged items. Sellers have to either accept Amazon's estimated manufacturing cost or provide documentation of their actual manufacturing costs.

This is brutal. Amazon pays less in all outcomes. Amazon gets to reimburse you based on equivalent drop shipped item costs. Alternatively Amazon gets a breakdown of your costs which they can use as insight for their house branded alternatives and even negotiations with suppliers. I suspect many premium brands are going to leave Amazon with this change.

> I suspect many premium brands are going to leave Amazon with this change.

That sounds like a win for Amazon, they get to fill the void with their house brand

Re: Amazon forces sellers to divulge COGS, won't reimburse other costs

#53

Post by bdndndndbve »

alpinisme wrote: post #10
raldi wrote: post #2

Amazon was previously reimbursing other costs?

If I understand correctly, if Amazon lost your product before a sale, they reimbursed you the sale price. Now they will only reimburse you the manufacturing cost.

Besides the antitrust issue, this also creates a perverse incentive for Amazon to "lose" consigned products and then pay the cost, then resell them at full price.

Re: Amazon forces sellers to divulge COGS, won't reimburse other costs

#54

Post by HDThoreaun »

echoangle wrote: post #50
lupire wrote: post #44

Earlier quoted context omitted.

Police aren't showing up for this. The law generally puts responsibility on the party that should know better, which is the professional.

Are we talking about the US now? Because I’m pretty sure that where I live (Germany), if the stuff you break is valuable enough, police will definitely arrest you if you try to leave without paying after breaking something. Is that not the case in the US?

Depends on where you are. Many cities have under resourced police departments that have reputations for ignoring and refusing to investigate non violent crime.

Re: Amazon forces sellers to divulge COGS, won't reimburse other costs

#55

Post by HDThoreaun »

AnthonyMouse wrote: post #35

This seems like an invitation to file an LLC that pays your other LLC 99.7% of the price and resells it for a 0.3% margin, then show them that invoice when asked for COGS.

Yea this pretty obviously just leads to another layer of middle men between Amazon and the manufacturer.

Re: Amazon forces sellers to divulge COGS, won't reimburse other costs

#56

Post by m_ke »

DannyBee wrote: post #24
m_ke wrote: post #5

I had one of the largest retailers to reach out to my company with an interesting problem. Given a weight and ingredients of packaged food they wanted to predict the content of each ingredient so that they could calculate the suppliers COGS so that they could use it as negotiating leverage against the suppliers...

Interesting - seems like you might just be able to throw an multi-ILP solver at it? (maximize individual ingredient weights given ordering on package must be in weight order, must add up to total end weight, and must be in the following rough proportions in order to be anything like the end product) Curious what you did.

We told them we didn't have time to work on something custom like that

Re: Amazon forces sellers to divulge COGS, won't reimburse other costs

#57

Post by m_ke »

AnthonyMouse wrote: post #27
m_ke wrote: post #5

I had one of the largest retailers to reach out to my company with an interesting problem. Given a weight and ingredients of packaged food they wanted to predict the content of each ingredient so that they could calculate the suppliers COGS so that they could use it as negotiating leverage against the suppliers...

Not very obvious how this is even helpful. You're getting an approximation at best, meanwhile most suppliers will have a net margin of something like 5% to begin with. If you're trying to figure out if it's currently 2% and you can't squeeze them anymore or they'll balk, or it's currently 7% and you can get some more, that kind of approximation doesn't tell you. Also, how's it better than the strategy of just putting…

When you have over half a trillion of revenue a year the fractions of a percent add up.

Doing this allows them to negotiate a lower price from the manufacturer or get the manufacturer to adjust the ingredients to lower the COGS. So either it increases their own margins or allows them to have lower prices than the competition.

Re: Amazon forces sellers to divulge COGS, won't reimburse other costs

#58

Post by edmundsauto »

AnthonyMouse wrote: post #27
m_ke wrote: post #5

I had one of the largest retailers to reach out to my company with an interesting problem. Given a weight and ingredients of packaged food they wanted to predict the content of each ingredient so that they could calculate the suppliers COGS so that they could use it as negotiating leverage against the suppliers...

Not very obvious how this is even helpful. You're getting an approximation at best, meanwhile most suppliers will have a net margin of something like 5% to begin with. If you're trying to figure out if it's currently 2% and you can't squeeze them anymore or they'll balk, or it's currently 7% and you can get some more, that kind of approximation doesn't tell you. Also, how's it better than the strategy of just putting…

It’s not obvious that all suppliers have these low margins. It’s also possible that some very clever people could do better than just approximations. This feels like a comment dropped from an outside view, id bet someone who has tackled this problem could identify opportunities where it works really well.

Re: Amazon forces sellers to divulge COGS, won't reimburse other costs

#59

Post by AnthonyMouse »

m_ke wrote: post #57
AnthonyMouse wrote: post #27

Earlier quoted context omitted.

Not very obvious how this is even helpful. You're getting an approximation at best, meanwhile most suppliers will have a net margin of something like 5% to begin with. If you're trying to figure out if it's currently 2% and you can't squeeze them anymore or they'll balk, or it's currently 7% and you can get some more, that kind of approximation doesn't tell you. Also, how's it better than the strategy of just putting…

When you have over half a trillion of revenue a year the fractions of a percent add up. Doing this allows them to negotiate a lower price from the manufacturer or get the manufacturer to adjust the ingredients to lower the COGS. So either it increases their own margins or allows them to have lower prices than the competition.

> When you have over half a trillion of revenue a year the fractions of a percent add up.

The issue is that the estimate doesn't get you the fraction of a percent because it isn't accurate to within a fraction of a percent, so you don't know if it implies you can squeeze them for much more or not.

Re: Amazon forces sellers to divulge COGS, won't reimburse other costs

#60

Post by AnthonyMouse »

edmundsauto wrote: post #58
AnthonyMouse wrote: post #27

Earlier quoted context omitted.

Not very obvious how this is even helpful. You're getting an approximation at best, meanwhile most suppliers will have a net margin of something like 5% to begin with. If you're trying to figure out if it's currently 2% and you can't squeeze them anymore or they'll balk, or it's currently 7% and you can get some more, that kind of approximation doesn't tell you. Also, how's it better than the strategy of just putting…

It’s not obvious that all suppliers have these low margins. It’s also possible that some very clever people could do better than just approximations. This feels like a comment dropped from an outside view, id bet someone who has tackled this problem could identify opportunities where it works really well.

For the few that have higher margins there's a reason for it, generally that they have limited competition, because otherwise the retailers would just go to the competition. But then knowing their costs doesn't help because you still don't have an alternative to them.
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