How do FBA liquidations work in 2025 and what’s the impact on cash flow?

We recently worked with an Amazon seller staring at his dashboard, half-tired, half-confused. His sales looked fine, but something else caught his eye—unsellable inventory sitting quietly in the corner. At first, he ignored it. "It's just a few units," he thought. But what he didn't realize was that Amazon had already made the decision for him. By default, those products were headed for FBA liquidations and donations.

That's when the shock hits most sellers we work with. You don't always choose; Amazon does. Products you've paid to source, ship, and store—products you thought you still owned—can end up liquidated for pennies on the dollar or donated without you even knowing. Sounds convenient on paper, but for your cash flow, it's a silent leak.

This isn't just about a misplaced box or a damaged return. It's about inventory management and about staying in control. Because for Amazon sellers, every unit matters. Losing track of what happens to your stock is like handing over the keys to your business profits.

In this blog, we at PDMG will break down what these new defaults really mean, why they can cost you more than you think, and the simple action plan to protect your margins. Because sometimes, it's not the big mistakes but the quiet defaults that drain your business.

What Are FBA Liquidations and Donations?

We've spoken to countless Amazon sellers who laugh nervously when we ask them about their unsellable stock. They say, "Oh, I didn't even notice… Amazon handled it."

Handled it how? Through FBA Liquidations and Donations—the default path most sellers don't realize their products are quietly walking down.

FBA Liquidations

We see this scenario play out repeatedly with our clients: sellers spend months sourcing a product, calculating margins, paying storage fees. Then one day, it lands in the "unsellable" bucket. You'd think it would just sit there until you decide, right? Nope. By default, Amazon sends it into FBA liquidations—sold off in bulk to liquidators for scraps of its worth.

Sellers don't even see the customer. They don't control the price. They just get back 5–10% of the ASP—pennies for something they once valued. It feels less like a strategy and more like watching hard work walk away without even saying goodbye.

FBA Donations

Then there's the softer side: FBA donations. Amazon doesn't destroy your stock—it donates it to charities. Noble, right? Yes. But here's the thing: you don't earn a cent. That inventory, which you poured money into, becomes goodwill in someone else's books. For you, it's a line of cost.

Sure, it aligns with the Amazon donation program for sellers, maybe even paints your brand in a kind light. But when your cash flow is already tight, kindness doesn't pay invoices.

Why Amazon Pushes It

Amazon says it's about sustainability—less waste, more giving, a stronger ESG story. And maybe that's true. But look closely: it's also about shifting responsibility off their shoulders and onto yours. Because at the end of the day, whether through liquidation bins or donation boxes, it's your Amazon inventory management that takes the hit.

And that's the quiet danger of FBA liquidations and donations. You don't lose everything in one blow—you lose it drip by drip, unit by unit, until the numbers stop adding up.

The 2025 Default Setting Change in FBA Liquidations and Donations

The thing about defaults is—they feel harmless until you realize what they’ve cost you. One seller told me he assumed his unsellable units would always be returned to him, like before. That’s how it worked for years. You paid the fee, got your products back, maybe resold them elsewhere, maybe bundled them differently. At least the choice was yours. But in 2025, Amazon quietly moved the goalpost.

What Changed in Seller Central

Now, the default removal setting is no longer “Return to Seller.” Instead, it automatically routes to FBA Liquidations or Donations. Unless you go into Seller Central and manually update your FBA inventory removal policy, Amazon decides what happens next. Miss that small checkbox, and your inventory may already be liquidated for pennies or donated without your direct say. The result? A silent leak in your Amazon FBA cash flow.

Why Amazon Made This Change

Amazon, of course, has its reasons. Their fulfillment centers are bursting at the seams, so liquidating or donating helps cut warehouse congestion. Then there’s the legal side. Across regions, new regulations push retailers to reduce waste. Donations and liquidations look cleaner on paper than disposal. Add to that the sustainability PR boost—headlines about Amazon donating goods sound far better than stories about landfill waste. So yes, for Amazon, it’s logistics, compliance, and optics. But for sellers? It’s margins slipping away.

Impact on Sellers Who Don’t Act

The biggest issue isn’t that these options exist—it’s that they’re now the default. Sellers who don’t act risk seeing their inventory auto-liquidated or donated, with no chance to redirect it back. That means permanent loss of recovery, unpredictable hits to your cash flow, and in the case of liquidation, your branded products floating around in secondary markets where you have zero control over how they’re priced or presented. And that’s where the sting lies. Not in one big blow, but in quiet drips—products leaving your control, profits thinning out, and your brand slowly slipping from your hands.

Financial Implications for Sellers in FBA Liquidations and Donations

When Amazon flipped the switch in 2025 and made FBA Liquidations and Donations the default removal method, most sellers didn’t notice right away. It just looked like another backend tweak in Seller Central. But the deeper you dig, the clearer it becomes—this wasn’t a small update. It was a profit-and-loss disruptor.

At PDMG (Palmetto Digital Marketing Group), we’ve seen firsthand how this single setting can create ripple effects across cash flow, margins, taxes, and brand control. And the scary part? If sellers don’t act, Amazon decides the outcome for them.

Let’s break down what’s really at stake.

The Cash Flow Crunch

Imagine you’ve got $50,000 in unsold inventory sitting at an Amazon warehouse.

In a perfect world, you’d reroute that inventory—maybe bundle it for Amazon clearance, or move it to Shopify where you could push through targeted ads and recover most of its value.

But with FBA inventory removal defaults set to liquidation?

Amazon hands your stock to wholesalers. You get a recovery check for $2,500–$5,000.

That’s it.

Compare that to a managed return strategy where you could have saved $20,000+ in value.

For small sellers, this isn’t just a paper loss. It’s ad spend, payroll, and cash needed for the next production cycle. One auto-liquidation could slow down growth for months.

Margin Erosion

Here’s the truth no one wants to hear:

1. Liquidation = you recover pennies on the dollar, usually at a loss.

2. Donations = you recover nothing.

And yet, your costs—manufacturing, shipping, FBA fees—don’t vanish.

Competitors who manage their FBA unsellable inventory solutions differently (clearance deals, bundles, private warehouse storage) get to retain margin and even capture new customers.

You? You get stuck watching profits leak away.

Accounting & Tax Implications

This part is sneaky.

1. Liquidation proceeds count as taxable income, even if it’s tiny.

2. Donations may be deductible, but that depends on local laws and whether Amazon’s program qualifies.

In the U.S., yes, certain donations may ease your tax burden. In the EU, however, rules are tighter. We’ve seen sellers panic during audits because they didn’t track how Amazon FBA liquidations

showed up on their books. Our advice at PDMG? Never wait until tax season. Sync with your accountant early.

Brand Control Risks

Now, let’s talk brand.

When inventory is liquidated, it doesn’t vanish—it reappears in grey markets and discount resellers’ hands.

Suddenly, your $50 premium item is showing up online for $15. Loyal customers feel cheated. New buyers assume your brand is cheap. Years of careful positioning collapse in weeks.

Donations sound cleaner, but even they aren’t foolproof. Sometimes donated products end up resold, damaging your brand narrative.

That’s why we tell clients: FBA Liquidations and Donations aren’t just about inventory—they’re about long-term brand equity.

Operational Risks Beyond Cash Flow in FBA Liquidations and Donations

At PDMG, we always tell sellers: managing FBA inventory isn’t just about sales. It’s about control.

FBA Liquidations and Donations may sound straightforward on paper, but the operational risks often sneak up on sellers.

Inventory mismanagement is the first challenge. Without careful monitoring, products can be

liquidated or donated before the seller even realizes it. That leads to unexpected losses—money that wasn’t planned for.

Next comes the replenishment cycle. Your top-selling ASIN could be out of stock simply because Amazon decided to liquidate or donate it. Sales drop. Rankings slip. And competitors gain the advantage.

Poor planning only makes things worse. Storage fees pile up. Inventory sits stranded. And before you know it, Amazon’s default removal settings trigger again—more liquidation, more donations.

And then there’s brand reputation. Liquidated stock hitting discount channels can make a premium product look cheap. Even donations aren’t risk-free—some items eventually resurface in resale

markets, subtly affecting your brand positioning.

At PDMG, we emphasize that FBA Liquidations and Donations impact more than just cash flow. They can disrupt your operational flow—sales, storage, and brand perception all get tangled up if you’re not proactive.

The solution? Stay ahead of your inventory, track removal settings closely, and plan strategically. Protecting your operations is just as critical as protecting your profits.

How to Check & Update Your FBA Removal Settings in FBA Liquidations and Donations

Where to Find Settings in Seller Central

To take control of FBA Liquidations and Donations, start by knowing where your removal settings live.

Navigate to:

Settings → Fulfillment by Amazon → Automated Fulfillable Inventory Settings

By default, Amazon sets unsellable inventory for liquidation or donation, which means your products could be removed without any cash recovery. Not ideal if you want to protect both your inventory and your profits.

How to Switch to “Return to Seller”

You can easily switch from liquidation or donation to Return to Seller:

Open the automated settings page.

1. Find the default removal method.

2. Change it to Return to Seller and select your preferred address.

Once done, unsellable or aging stock comes back to you instead of being liquidated or donated. This gives you the chance to re-list, move, or sell your inventory strategically.

Setting SKU-level Preferences

Not every product is the same, and Amazon allows SKU-level removal preferences.

1. Seasonal products → may be fine for donation to reduce storage fees.

2. Evergreen products → better returned to you so they can be sold again.

This level of control helps protect cash flow, reduce losses, and maintain your brand’s positioning.

Once your settings are updated, you’re no longer at the mercy of default liquidation or donation rules. Regularly monitoring inventory and adjusting strategies ensures your products don’t disappear unexpectedly and keeps your operations smooth while navigating the FBA Liquidations and Donations landscape.

Strategic Options to Control Losses in FBA Liquidations and Donations

The biggest mistake most sellers make is thinking inventory just sits there until someone buys it. It doesn’t.

Inventory moves, shifts, and sometimes disappears—through FBA Liquidations and Donations— without warning. And if you don’t have a plan, you lose cash, control, and even brand value.

Proactive Inventory Management

Start by watching your inventory like a hawk. Track aging stock—90 days, 180 days, 270 days. Don’t wait for Amazon to decide it’s time to liquidate or donate.

Tools like Seller Central, Helium 10, and Sellerboard are lifesavers here. They tell you what’s moving, what’s slow, and what’s about to cost you. Early action beats scrambling after the fact every time.

Smarter Clearance Strategies

Before stock hits liquidation, move it yourself. Run discount campaigns, offer bundles, coupons, or deals.

Multi-channel selling is another hack. Shopify, Walmart, even TikTok Shop—don’t let Amazon hold all your inventory fate. Selling early keeps margins intact and prevents your products from being marked down in liquidation markets.

Controlled Donations for PR

Donations aren’t always a loss. If you’re giving inventory away, do it intentionally. Communicate your story. Talk sustainability. Talk giving back.

A well-timed donation can even become a marketing edge. Customers notice brands that care. They share it. They remember it. And yes, that goodwill has value, even if cash recovery is zero.

Hybrid Strategy

Sometimes, the smartest move is a mix. Return high-value items to your control. Liquidate low-value SKUs to recover a little cash. Donate products where brand impact outweighs profit loss.

It’s about balance, strategy, and control. You want cash flow, minimal losses, and a brand that doesn’t get diluted because some random buyer picked up your liquidation stock online.

FBA Liquidations and Donations don’t have to be scary. They’re just signals—telling you to plan, act early, and stay in control. The sellers who win are the ones who position themselves, not the ones who react after the damage is done.

Long-Term Best Practices for FBA Liquidations and Donations

The thing most sellers ignore is that FBA Liquidations and Donations aren’t just a one-time problem. They sneak up over time, chip away at cash flow, and slowly erode control.

So, what do you do? First, start with regular inventory health audits. Check aging stock every month. Look at sell-through rates. Ask yourself: which products are moving, which are stagnant, and which could get hit by default removal settings next? Treat it like a monthly health check for your business—because inventory that isn’t monitored will always surprise you.

Next, align your inventory strategy with financial planning. Don’t just assume everything will sell. Build liquidation and donation scenarios into your forecasting. Keep some buffer cash ready for sudden losses. It’s not glamorous, but it saves a ton of stress when Amazon decides to liquidate without warning.

Another game-changer is to build alternate exit channels. Don’t let FBA be the only option. Direct- to-consumer clearance, partnerships with third-party liquidators outside Amazon, even social commerce flash sales—they all give you control. You can move stock on your terms, rather than

letting Amazon dictate your losses.

Finally, train your team and create SOPs. Whether it’s a VA, an operations team, or your in-house staff, everyone should know how to update removal settings and monitor inventory health. A simple process or checklist can prevent months of lost revenue and brand headaches.

At the end of the day, long-term success with FBA Liquidations and Donations isn’t about reacting—it’s about positioning. Keep tabs on your inventory, plan financially, open alternate channels, and train your team to act before problems snowball. A little discipline now saves massive headaches later.

It’s not just about keeping your products safe—it’s about keeping your cash flow, your margins, and your brand intact. Because the sellers who thrive aren’t the ones chasing problems—they’re the ones preventing them before they happen.

Case Study: A Seller Who Lost $20k Overnight

The craziest thing about FBA Liquidations and Donations is how quickly they can take your hard- earned cash.

Take this seller, for example. He had $40k worth of inventory sitting in FBA. Things were moving fine, but he forgot one tiny detail—updating his removal settings.

Next morning? $40k of stock was gone. Auto-liquidated. Out of that, he recovered only $3k. Just like that, $37k vanished. Poof.

His best-selling SKUs? Gone.

Replenishment plans? Thrown off. Rankings? Took a nosedive.

And the crazy part—competitors didn’t even have to try. He handed them the advantage by losing control of his own inventory.

Here’s the real lesson: proactive settings, alerts, and constant monitoring aren’t optional. They’re your safety net. A few minutes in Seller Central could’ve saved tens of thousands of dollars and kept his brand intact.

Ignoring defaults isn’t a small slip-up. It’s like letting a tiny leak sink your ship slowly while you sleep. Silent, sneaky, painful.

So what’s the takeaway? Treat FBA Liquidations and Donations like part of your business strategy, not just a back-office chore. Set your rules. Monitor your stock. Don’t assume defaults are safe.

Because this isn’t theory. This isn’t “maybe it happens.” This is real. Painfully real. And it’s avoidable.

Action Plan for Sellers

The first thing most sellers do when they hear about FBA Liquidations and Donations is panic. Don’t. Panic doesn’t save inventory—it only makes you miss steps.

The real move? check your removal settings immediately. Log in, navigate Seller Central, and see where your unsellable stock is set to go. Is it liquidation, donation, or return? Knowing this is step one.

Next, review your aged inventory. Which SKUs are sitting too long? Which products could cost you if they get auto-liquidated? Awareness is half the battle.

Then comes the hard part—decide SKU by SKU. Some items make sense to return, some to liquidate, some to donate for PR or goodwill. One-size-fits-all doesn’t work here.

After that, align with your accounting or tax advisors. Cash recovery, deductions, and reporting— they all matter. You don’t want surprises at tax time.

Finally, put SOPs in place. Regular inventory checks, removal updates, alerts—make it a system. Not just a one-time action. Because consistency here saves thousands and protects your brand.

At the end of the day, it’s not just about avoiding losses. It’s about staying in control, being proactive, and making every FBA decision count.

Key Takeaways

Amazon defaults? They favor Amazon. Not always you.

The default setting for liquidation or donation might sound harmless. But the moment you ignore it,

your inventory value is at serious risk.

Control isn’t optional. Check your removal settings. Monitor your stock. Know what’s aging and what’s moving. Because even a single SKU left on auto-liquidation could cost you thousands.

Proactive inventory management isn’t just a suggestion—it’s a shield. Alerts, regular audits, and SKU- level decisions are what keep your cash flow intact.

And don’t rely on one channel. Diversify exit paths. Returns, controlled liquidation, or donations with PR impact—have a plan for each SKU.

At the end of the day, FBA Liquidations and Donations are more than just defaults. They’re a call to action. Treat them like part of your business strategy, not a back-office task.

Because ignoring them isn’t theory. It’s real. Painful. And fully avoidable if you stay in control.