(qlmbusinessnews.com Wed, 9th Aug, 2023) London, UK —
Amazon Sellers Fear Financial Strain as Funds Withheld
Numerous Amazon sellers have raised concerns about the platform withholding their funds, leading some to fear for the viability of their businesses.
Mario, a seller of vinyl records and CDs, revealed that Amazon has frozen £5,000 of his funds, leaving him “shaken and panicked” and casting doubt on his ability to continue trading.
The predicament has prompted certain sellers to approach their MPs for assistance.
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Amazon explained that its policy is designed to ensure that adequate funds are available to address returns or customer claims.
According to Amazon's policy, money is held for seven days following the delivery date after a sale.
Although the policy was introduced for new sellers in 2016, it was extended to EU and UK sellers registered before that date in August of this year.
Amazon acknowledged the likelihood of a “one-time cash flow disruption” due to this policy change and emphasized that impacted sellers were notified three months ahead. However, some sellers indicated that they did not receive a clear email notification or found it in their spam folder.
Mario, who has been an Amazon music seller for seven years, noted that the frozen funds on 3 August prevented him from renewing stock or fulfilling existing orders.
Daniel Moore, owner of Ink Jungle, a business selling ink cartridges, reported that £170,000 of his funds are reserved and accumulating by £40,000 daily.
Michelle, a pet products seller, expressed that Amazon was withholding £16,000 of her earnings. She relied on an £18,000 loan from Amazon Lending to sustain her business, but Amazon informed her that the loan would only be accessible after two weeks, causing considerable cash flow challenges.
The issue has prompted sellers to write letters to MPs, voicing their grievances about Amazon's reserve system.
Liz Barclay, the Small Business Commissioner, highlighted that Amazon has been offering loans to sellers at approximately 14% interest rates to assist with cash flow during the waiting period for funds.
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Barclay emphasized that “big firms” need to understand the significant adverse consequences of delaying payments to small businesses, which could lead to insolvency.
Similar challenges were faced by Etsy sellers when the platform withheld 75% of sellers' funds for around 45 days. Following a news report, Etsy reduced the withholding amount.
An Amazon spokesperson explained that the policy alteration was intended to “standardize this policy for European sellers to ensure they have sufficient funds to cover any financial obligations, like product returns or customer claims.”
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