Why Is My Damage Allowance So High? A Guide for Amazon Vendors
Amazon provides an excellent platform for vendors, giving them access to a huge marketplace to sell their products. But on the flip side, there are lots of fees vendors must contend with as Amazon seeks to pass along many of its costs. The damage allowance is one of those fees, and depending on the vendor, this allowance can be quite large.
If you think that your damage allowance may be too high, it’s time to investigate. This guide will help you understand why it is so high, and what you can do about it.
Related article: 5 Amazon Coop Agreements: What Vendors Should Know
Why Is the Damage Allowance So High, and How Do I Lower It?
If your damage allowance is high, that means you are sending a lot of items to Amazon that the retailer deems as damaged. Unfortunately, the only way to lower your damage allowance in the short term is if the damages should not be that high. In that case, you will have to contact Amazon with evidence of the improper charges.
In the long term, the good news is that you can get the damage allowance lowered by making improvements to your process.
Related article: 5 Tips for Negotiating Amazon Coop Agreements
How Is Damage Allowance Calculated?
When it comes to how Amazon calculates your damage allowance, typically they will take a percentage of how much they purchase from you. For example, if they see that for every $100 worth of product they purchase from you, $5 of it is damaged on average, they will take a 5% damage allowance on future orders.
Related article: Amazon Freight Allowance: How to Get the Best Terms
What Typically Causes High Rates of Damage
If you are dealing with a high damage allowance, that means high rates of damage, and there are three potential culprits that you should look into.
The Packaging Is Inadequate
Packaging that doesn’t adequately protect the product is the most common cause of damages. The inadequate packaging could cause a book to become dog-eared in transit, or put glass at risk of breaking when it is handled in the warehouse (remember, as a vendor, you must account for not only shipping but handling in the warehouse).
By proactively preparing the product for any abuse it is likely to take, you can reduce the likelihood of it getting to the customer in less-than-perfect shape.
The Product Is Packaged With Other Items
Amazon likes to bundle orders so the customer gets everything all in one box. Sometimes, vendors don’t adequately package their items with that in mind. Vendors should understand their product may get jostled around in a box with several other products, and that alone could result in damage to products that would be just fine if shipped alone.
Products Susceptible to Damage Aren’t Identified
If you’re facing a high damage allowance, chances are you’ve got one or two problem products that are driving the damages. Take a look in your catalog and see which products have the highest returns.
Then, you need to get into a mindset of what special measures you need to take to protect that product. Ask yourself, what if it goes into a box with, say, a bowling ball? You never know what Amazon will ship it with, so change up your packaging to see if you see improvement.
Red Flags That Indicate High Damage Rates
Sometimes, there are early signs that you will be paying Amazon a high damage allowance. One strong indicator is a high level of returns, which suggests that items are getting to the customer damaged, and the customer is then sending it back to Amazon. However, this by itself is not necessarily an indicator it is your fault – the damage could have occurred before the items were shipped to the customer (i.e., within Amazon’s warehouse).
Another way to spot problems with damages is through reviews. If you are seeing an influx of customers mentioning in their reviews that their product arrived damaged, that’s a sign you should take action or risk seeing your damage allowance raised considerably.
What Steps Should I Take Next?
There are two main steps to take next:
Identify what is driving the damages and fix it
Reach out to your vendor manager
Even before you’ve fixed the damage issue, it’s a good idea to try being proactive with your vendor manager. Tell them you’ve noticed your damage allowance is a little high and you’d like to take some steps to lower it, and then outline the steps you will take to improve your damage rates. Try to get buy-in first, and then you will be more likely to get them to lower it once you have made those adjustments.
Related article: MDF Coop Agreement: Amazon Vendor Tutorial
The Best Way to Keep Your Damage Allowance in Check Is Through Data
The reality is that you can’t spot issues like this without adequately tracking your data. By staying on top of damage rates, returns, and other relevant metrics, you can take proactive actions that will prevent your damage allowance from rising. But this data is not easy to gather, because Amazon posts reports that must be manually downloaded and combined, which is time-consuming.
There are third-party services that can help you better access and analyze your data. We’ve put together a whitepaper on the various methods to help you choose the one that is right for your business. It’s available for free download below.
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Turn Amazon Data into a strategic Asset
The breadth of Amazon sales, marketing, and supply chain data lets brands find patterns and insights to optimize their Amazon business and other e-commerce channels. But only if you have a plan for extracting the data from Amazon systems, storing it, and preparing it for analysis.
This guide will help you take ownership of your Amazon data—by preparing your business for a data-driven future, and analyzing the most common methods for extraction, automation, storage, and management.
