Amazon Sellers In UK & Europe Face Cash Flow Crunch With Delivery Date Reserves
As Amazon starts to extend Delivery Date Based Reserve policies, sellers in the UK and Europe worry about cash flow crunch.
The Guardian
Amazon has told thousands of marketplace sellers in the UK and continental Europe it will hold on to sale proceeds for more than a week in a move that small businesses say could force them to go bust.
The company has written to sellers to inform them it will no longer credit their accounts as soon as a sale is made online but will do so a week after an item has been delivered...
...Businesses told the Guardian the move could “cripple” their operations, and the cashflow crunch could force them to go bust.
Some said they had thousands of pounds held back. One said they had just over £100,000 “locked in Amazon”.
BBC News
Hundreds of Amazon sellers have complained that the online marketplace is withholding their money, with some saying they could go out of business.
Vinyl and CD seller Mario told the BBC Amazon is holding £5,000 leaving him "shaken and panicked" and fearing he can no longer continue trading.
Some sellers have written to their MPs to ask for help.
Amazon said its policy was designed to make sure there were sufficient funds to cover returns or customer claims.
Under the policy Amazon said it was holding money for seven days after the delivery date following a sale.
It introduced the policy for new sellers in 2016, but extended it to EU and UK sellers registered before that point in August of this year.
Amazon said it recognised the policy change could lead to "a one-time cash flow disruption" but that it had notified affected sellers three months in advance. However some sellers told the BBC this email was not clear - or in many cases went to their junk mail folder.
UK small business commissioner, Liz Barclay has been contact by many sellers concerned about how this change will impact their businesses, according The Guardian:
The UK’s small business commissioner, Liz Barclay, said she had been contacted by a number of Amazon sellers and feared the problem was widespread among domestic sellers.
One seller told Barclay: “I am currently owed £10,000. I expect that closer to £25,000 will be owed before we see any cashflow again. We are a business that sells only on Amazon, we have no other income.”
Another seller told the Guardian he would be owed about £35,000 after seven days and would not be able to pay staff or loan repayments on time because of the delay in receiving funds, putting the future of his business at risk. “[This move] will cripple our operation,” he said.
A separate retailer, who sells aquatic supplies, said he was already owed £6,000 and expected that to rise to £10,000 by the time funds were cleared, nearly two weeks later than expected. He said: “We’re fortunate to have a shop as well, which is subsidising the online business. If we didn’t have this other income we wouldn’t be able to pay suppliers and staff.”
The BBC says Barclay has also been informed by many sellers they have received offers for high interest loans offered by Amazon to "help" bridge the cash flow gap - a predatory move that puts sellers in an untenable position.
The small business commissioner Liz Barclay said many sellers had told her office they were being offered loans by Amazon at interest rates of around 14% to help them manage cash flow while they waited for funds to come through.
"They say they are being lent their own money at high interest, but for some the alternative is insolvency. We need big firms to understand that delaying small payments to small firms can have a massive negative impact and everyone loses," she said.
She added that with bank processing times, many sellers are facing a 14 days window with no income.
Sellers are discussing the policy expansion, and impact on their businesses, in the Amazon Seller Forums.
Amazon Seller Forums
This is crippling to Amazon sellers, we have bills to pay, postage to buy, suppliers to pay, HMRC to pay. Amazon does NOT need to hold our money it’s just ruining small business
Between now and our next disbursement (if in fact the date shown is accurate) just in Royal Mail bills we have 17k to come up with from fairy dust.
Margins from sales on Amazon are notoriously low so even if we did achieve 15% (which we don’t) business loans are around 10 - 12% (Amazon lending currently 14.99%) interest it would be pointless as we’d never make enough to pay all the previously listed bills.
Food bank here we all come
All our ad fees and Amazon fees are deducted from the reserve. As a result, when the disbursement date arrives, we’ll actually owe money to Amazon because they invoice our ads and fees faster than the reserve released. Despite all our hard work and expenses on stock, staff, and bills, we might end up with nothing and face the risk of going out of business by the end of the month. This Monday I will likely need to send 2 people from the business. Nicely done Amazon.
Just to add to this. We took out an Amazon lending loan to try to help with our cash flow during this period. Loan got approved and it said disbursement would be initiated. But no disbursement was done and we are unable to disburse that as well (disbursement button is just greyed out). The money is just sitting in our seller central awaiting disbursement.
Just something to beware of if anyone is thinking of taking out the Amazon lending loan to help during this period. Hopefully just a glitch that will be sorted quickly. We’ve raised a ticket with Amazon about this but had no response
Etsy has also received similar seller backlash and critical media coverage recently for their payment reserve policies, which ultimately pressured the company to reverse course and lower the amount of money being held for most sellers.
Value Added Resource
Will similar complaints about Amazon have the same result?
If you're an Amazon seller in the UK or Europe, we'd love to hear about how this change is impacting your business!
Leave a comment below or contact VAR.
