Amazon Vendor Central is a step up from Seller Central. You receive larger orders, you financial future is more secure and thanks to the Amazon brand, your products reach further across the market than ever before. But that doesn’t mean you can afford to become lax. You still need to be on look out for Vendor Central fees.
But that shouldn’t bother you right? As long as your products are good, the extra business should cover any Vendor fees?
Well that’s the downfall of many Amazon Vendors. They are so caught up in the larger order and scaling up production that they fail to account for the Vendor Central fees. If they aren’t careful, Vendors can actually lose money.
There are a range of fees called chargebacks and shortages, and each one of them can cut a significant chunk out of your overall profits. A three percent chargeback on each unit here, a five percent shortage charge there, and before long these Amazon chargebacks run into the thousands.
And if you incur these fees too often, your performance score drops lower – Amazon will then charge you even more for each infraction.
So let’s break down these Vendor Central fees. We’ll show you what to look out for, and how to avoid each one. You could start saving thousands of pounds in profits every month, so there’s no time to waste!
What are Vendor Central Fees?
The fees for Vendor Central serve one purpose – to keep you compliant.
If you’re only interested in the explanation, scroll down to our types of Vendor Central fees. If not, we have a very brief history lesson for you.
Vendor fees are not exclusive to Amazon. In the 1970’s, mass retail channels of big block chains introduced them. These enormous companies realised that their supply chains required a tremendous amount of logistics and organisation to handle and an even larger volume of inventory to ensure maximum profits. Every unit of every delivery required manual checks and organisation.
But technology advanced.
Automated warehouses and software could effortlessly track and manage product flow with minimal human intervention. Scannable labels and shipping notifications detailed what, where, when and how many of each product. This provided timetabled organisation and a more expedited supply chain.
This system streamlined the entire process and made burgeoning systems more efficient – but only if it worked perfectly.
How could they fix labelling issues and missed delivery slots? Vendor mistakes required manual labour and oversight, both of which cost time and money. These enormous companies were now faced with a conundrum – they needed Vendors who sold a variety of products across different industries to comply with their rules. The only way to enforce these rules was via financial sanctions.
And so, Vendor fees were created.
These charges for Vendors would ensure that they adhered to strict business guidelines, or face recriminatory sanctions. On paper, they appeared as small fees, but as Vendors supplied greater amounts, the fines would continue to grow.
Amazon continues this trend today. The Amazon Supply Chain is a thing of immense capacity and Amazon do everything that they can to ensure its optimisation.
Types of Vendor Central Fees
Essentially, Amazon fees for Vendor come in two main categories.
You incur shortages if you fulfil a Purchase Order (PO) from Amazon, but you fail to provide the units specified. Vendor chargebacks are… well, everything else!
Maybe you used unscannable barcodes, or you failed to prepare and package your units correctly. Either way, you lose profits. But don’t worry, we are here to stop that happening!
For the sake of organisation (because we like to make it simple) we are going to refer to Shortages as a type of Amazon Chargeback. So let’s break down all of these Vendor Central fees into 5 distinct categories.
- Purchase Order Chargebacks
- ASN Chargebacks
- Preparation / Packaging Chargebacks
- Receive Process Chargeback
- Direct Fulfilment Chargebacks
These chargebacks relate to your Purchase Order (or PO) that comes directly from Amazon.This document contains the order information for your products, including quantity and expected delivery dates. These Purchase Order Chargebacks can be broken down into 3 sections:
- Not On Time
- Down Confirmed
- Not Filled
Not On Time
The first is the most simple. Perhaps your Carrier Requested Delivery Date (CRDD) was outside the window set out on your PO. Or maybe your Freight Ready Date (FRD) was set outside the ship window.
Either way, if your products are not on time, then Amazon will charge you 3% of the cost of every non-compliant product.
The second type of PO chargeback is down confirmed. If you reduce the confirmed number of units as stated on the PO five calendar days after the start of the ship window, you are down confirmed.
Any alterations made after this time incur Vendor Central fees of 3% of the total cost of the missing units.
Obviously your business is so reliable that this will never happen (we hope!)
However, you should know that not filled are the worst form of PO chargeback. If you fail to send the products confirmed on the PO before the auto-cancel date, Amazon charges you a full 10% of the cost of each product that is cancelled.
Most spouses agree that communication is key to a successful relationship, and so too does Amazon.
ASN Chargebacks are due to miscommunications between yourself and Amazon. An ASN is an Advanced Shipment Notification. This is how Vendors and Amazon report to each other about shipment content and carrier tracking.
These types of Vendor Central fees incur when items arrive at the fulfillment centre before the centre receives an ASN, or by submitting an ASN with missing or incorrect information. An example of discrepancies include:
- Incorrect quantities
- No Expiry Dates
- Progressive Tracking Number (PRO) and Bill of Landing (BOL) do not match each other
These chargebacks vary a great deal from between 1% – 6% of item cost. This chargeback amount can vary even more depending upon your levels of previous compliance as well.
Preparation / Packaging Chargebacks
Vendors must prepare their products according to explicit guidelines stated by Amazon. If you don’t check both the guidelines and your production line, then the cost will be on your business.
These Vendor Central fees occur because the manpower involved to repackage and prepare your shipments is costly on their end, and it delays customers being able to order your products.
These Amazon Vendor guidelines must be adhered to if you want to avoid Vendor chargebacks.
|Bubble Wrap –
|Ensuring fragile objects are bubble wrapped for safety
|Loose items must be taped
|Easily damaged and loose products must be boxed
|Products in danger of dust or leakage must be bagged
|Opaque Covering –
|Products with vulgar language or nudity must be opaquely covered
|Suffocation Warning –
|Bagged packages require a suffocation warning
|Set Creation –
|Multipack items must be packaged together securely and labelled as a set
|Hanger Removal –
|All clothes require removal of hangers before shipment
If your products are not packaged correctly, you incur fees. They are a varying charge of the cost per unit, and each error decreases your Amazon compliance score. The lower your compliance score, the higher Vendor Central fees can go!
Receive Process Chargebacks
The Amazon chargebacks incurred during the receive process occur from a range of mistakes and the Amazon fees reflect this. This is the moment when your products are within the Amazon warehouse, yet experience errors with Amazon’s automated systems.
These Vendor Central fees include:
- Missing PO Labels
- Missing / Incorrect / Unscannable barcodes
- Unapproved packaging materials
- No Carton Content Labels
- Overweight / Oversized Cartons
- Expired products
These Amazon Vendor Chargebacks can up to 25% of the cost of each carton! These expensive chargebacks can build enormous costs on your Amazon Vendor account. It eats into your profits and is highly damaging. Especially when ensuring all your barcodes are GS1-approved is a cost-effective prevention method.
Direct Fulfillment Chargebacks
These Vendor Central fees are only applicable if you use a direct fulfillment method (shipping orders directly to a customer via your Vendor Central account without first sending your product to an Amazon warehouse.)
There are two types of this Amazon fee:
- Cancellation charges
- Incorrect shipping method charges.
You receive a $10 chargeback for each cancellation of an existing order or for a denial of an incoming one (another reason to make sure that your inventory is up to speed!) Amazon charges an extra $10 for each delivery that is made via a different method or carrier than that which is stated in the original order.
Mistaken Vendor Central Fees
While the idea behind Amazon fees is sound, and they can increase supply chain processes exponentially, that doesn’t mean that they are always correct.
As technology gives, so too does it take away.
The automisation of supply chains benefits both Vendors and Amazon, but it can be a little glitchy. Unfortunately it takes more than Windows Task Manager to solve these problems. These large scale automated systems can often trigger errors that are wrongly attributed to Vendors. Their automated systems only track exceptions in the process, even if it is the system itself that is the cause.
So are these Vendor Central fees simply “the price of doing business” on a large scale?
Avoid Incorrect Vendor Central Fees
Deny, contest and provide evidence at every step on the way.
You have 30 days to dispute most chargebacks and, depending upon your performance it is absolutely worth it. If you can successfully contest your chargebacks and prove that it is not the fault of your business, then you can save thousands every single month.
Thousands in profits that you would otherwise lose.
There are two methods to this drawback. The first is that you must provide recorded evidence. If you don’t have everything recorded and collated in one place, this can be an issue for certain Vendors.
The second is time management.
It is easier said than done after all. The hours required to manually review, process and refute these chargebacks requires time and effort and can become a drain on resources. Beyond that, if you want to analyse your operations and identify potential chargeback causes before they become problem it can pull away from more vital aspects of your business.
VC Managed Service Tool
A Managed Service tool is every vendor’s swiss army knife (without the lucrative price tag!)
It automatically challenges chargebacks and shortages and doesn’t cost you time or effort. Automatically logged disputes are sent directly to Amazon. When it comes to disputing chargebacks, if you don’t ask, you don’t get. Thanks to automation, it’s one less job for you to worry about.
It records and collates all the evidence from your supply chain and sends it off with each dispute, and with a 75% success rate at recovering shortages – that’s a huge chunk of profits back in your pocket.
But it doesn’t stop there.
While VC Managed Service can’t package your units by itself, it can highlight potential issues within the preparation process. This means even fewer chargebacks to dispute.
It can also automatically implement corrective actions that will strengthen your operational process, reduce your PQV and maintain compliance with Amazon’s performance requirements.
To Sum Up Vendor Central Fees
Vendors everywhere are losing profits due to Vendor Central fees.
These are easily reclaimable with the VC Managed Service tool. You can strengthen your supply chain, maintain operational compliance and get back your profits all in a single tool.
Best of all, it operates on a rolling monthly basis. No tie-in and no hidden fees, you can leave whenever you want. Our VC Managed Service tool also offers a free audit of your Vendor Central account so you can get an idea of how much you can save.
Sign up for a free audit below and one of our representatives will contact you!