The Amazon Base Reserve Policy Cash Grab: Amazon’s Seller Stranglehold
Have you had the “Changes to your Base Reserve policy” email from Amazon?
Amazon, the titan of the online retail landscape, has instigated a policy change that reverberates profoundly throughout its vast seller community. This new policy involves holding onto a reserve of sellers’ money for over a week on a rolling basis, under the guise of a Delivery Date Based Reserve policy.
For veteran Amazon sellers, this policy represents not only a potential financial setback but also a concerning indication of Amazon’s increasing self-interest. This comprehensive analysis delves into the perspective of long-established Amazon sellers, unraveling the far-reaching implications of this policy shift and unearthing how it dovetails with Amazon’s overarching propensity to favor its own profits above all else.
Seller Financial Stranglehold
The ostensibly innocuous email from Amazon heralding the transition to a Delivery Date-Based Reserve policy conceals a weighty reality for experienced Amazon sellers. This email serves as a reminder of Amazon’s tightening grip on sellers’ financial well-being. The prolonged retention of a segment of sellers’ funds affords Amazon not merely a buffer against potential chargebacks or returns, but a potent financial tool to wield for its own benefit.
Here is the email we received:
Starting [redacted], 2023, to unify Base Reserve policies for all selling partners, your Base Reserve policy will change to Delivery Date Based Reserve policy.
A Base Reserve policy is one of the factors that determines your account level reserve, which is the amount of money that Amazon reserves to ensure that you have enough funds to fulfil any refunds, claims or chargebacks from buyers. The Delivery Date Based Reserve policy is our worldwide standard for selling partner accounts since 2016 and determines when your funds become available for disbursement.
While your current Base Reserve policy uses the shipment confirmation date to determine how long funds are held in reserve, the Delivery Date Based Reserve policy uses the delivery date of an order. When you use an integrated shipping provider, we will use the actual delivery date of the order. In the absence of valid tracking data, we will use the latest estimated delivery date. This policy change may cause a one-time cash-flow disruption until the new reserve is built up and funds become available for disbursement according to the estimated or confirmed delivery date.
Changing to Delivery Date Based Reserve policy will allow you to run non-Prime deals in the European stores, which are currently limited to sellers on Delivery Date Based Reserve.
Note: Other eligibility criteria for non-Prime deals still apply.
The policy change will not affect your disbursement frequency, your ability to use the Disburse Now feature or the total amount of funds received. This policy change will only defer the availability of your funds according to the delivery date of the order plus seven days.
No action is required from you; the policy change will automatically be initiated on September 6, 2023. To prepare for this change, we recommend you to evaluate if this change could impact your processes for handling payments from Amazon. We also recommend that you ensure that you have enough funds to cover the one-time cash-flow disruption and evaluate possible financial support options, if required.
This subject has already attracted media attention, and this article in the Guardian highlights it too: Small firms fear going bust as Amazon extends wait time for sale proceeds
A Forced, Uncompensated “Loan”
The concerns shared by Amazon sellers we have conversed with echo the sentiments of countless others and even the Guardian. This policy shift is seen as a blatant manoeuvre to capture funds, enabling Amazon to essentially accrue interest on the significant sums held back from sellers. These sellers cogently argue that if they are effectively extending a short-term loan to Amazon, there should be compensation for this financial arrangement. After all, lending money in any context typically entails an expectation of returns.
Speaking of free loans, the Amazon Base Reserve Policy cash grab isn’t the only cash grab. Frequent “account freezes” aside, Amazon’s imposition of a mandatory 30-day free credit policy for business sellers stands as a significant source of concern too. This policy forces sellers to extend credit terms at their own expense, inhibiting their financial fluidity. Amazon Business customers, empowered with the “Pay by Invoice” feature, benefit from terms like “net 30,” dictating that invoices are due within 30 days of the bill date. This effectively permits customers to defer payments for up to a month.
What magnifies the frustration is that this policy is universally applied to all sellers, with no avenue for opting out. This one-size-fits-all approach further compounds the financial strain on sellers, undermining their ability to manage cash flow effectively and raising questions about Amazon’s commitment to fostering a fair and equitable marketplace.
Many sellers routinely increase prices on the platform every time there is a cash grab, account freeze, or another unreasonable rule leading to more administration work or payment delays. Indeed, there is a growing trend for sellers to further develop their own websites and trumpet how much money buyers can save over Amazon, and why.
A lot of sellers are now also refocussing their attention on eBay and eschewing Amazon.
Amazon seems to have a new rule every week. And none of them are good news for sellers. The Amazon Base Reserve Policy cash grab isn’t the first. It’s the latest of many. Amazon is increasingly seen by many sellers, not as a mere business partner or trading hub, but as a hostile predatory vulture hovering over their business like a malevolent force.
Many sellers report selling on Amazon is like working for a very angry and cruel boss. Nobody chooses self-employment to be treated like that.
Nobody seems to have these problems with eBay.
Cash Flow Crunch: A Double-Edged Sword
The lifeblood of any successful business is a consistent and smooth cash flow. Amazon’s abrupt decision to freeze a portion of funds disrupts this delicate equilibrium, introducing unforeseen obstacles to everyday operations. While Amazon seeks to mollify sellers by asserting that this disruption is temporary and will normalize as the reserve accumulates, the reality is that this policy alteration leaves many established sellers in an uncomfortable and precarious position. Moreover, the email’s tone, seemingly indifferent to sellers’ financial worries, compounds the frustration and trepidation pervading the seller community.
Risk Mitigation or Profit Maximisation?
Amazon’s rationale for this policy pivot allegedly centres around risk mitigation. Nevertheless, long-standing sellers, especially those who have navigated the e-commerce landscape for an extended period, remain sceptical of this assertion.
The Amazon marketplace sellers have long confronted challenges such as fraudulent chargebacks, returns, and account suspensions. This policy, however, appears less like a prudent response to risk and more like an instance of overreach. The stance of Amazon sellers we have conversed with reinforces the notion that most sellers do not grapple with an overwhelming volume of chargebacks or returns that would warrant such a drastic measure.
We just want to sell our stuff, and get paid in a timely manner without silly rules and cash grabs, right?
Eroding Trust: An Imbalanced Relationship
Trust serves as the cornerstone of any fruitful business partnership. Amazon’s ascent to e-commerce supremacy hinges on the trust of its sellers, who have been instrumental in its growth. However, the introduction of this reserve policy, akin to prior policies, corrodes this trust.
The unilateral implementation of the policy, without consultation, and the opacity surrounding decision-making, signal a disregard for sellers’ concerns and financial welfare. This erosion of trust leads sellers to question their loyalty to a platform that seemingly treats them as expendable pawns in its quest for greater profits.
Exploring Alternatives: Unintended Outcomes
In the wake of this policy alteration, an unintended outcome emerges – a surge in interest among sellers to explore alternative platforms and strategies. The sentiment voiced by Amazon sellers we have interacted with mirrors this burgeoning trend. Amazon’s actions are steering sellers towards more seller-centric platforms such as eBay, where such restrictive policies are notably absent. This migration not only tarnishes Amazon’s reputation but also poses a substantive challenge to its long-term status in the realm of e-commerce.
While Amazon maintains its seemingly unassailable position in the e-commerce domain, its ascendancy is underpinned by the countless sellers that contribute to its success. Well-established sellers, who have stood as loyal partners for years, now find themselves grappling with a reserve policy that threatens their financial stability.
Amazon’s choice to withhold a portion of sellers’ funds for over a week on a rolling basis goes beyond a mere procedural shift – it signifies a profound change in the equilibrium between the platform and its sellers.
This policy reflects a broader tendency in which Amazon prizes its own financial interests over the well-being of its sellers, casting a shadow over the company’s reputation and prompting many sellers to explore alternative platforms.
As the landscape of e-commerce continues to evolve, it is imperative for Amazon to reassess its approach, listen to the voices of its sellers, and cultivate a more collaborative environment that acknowledges and respects the symbiotic relationship between the platform and its sellers.
Neglecting this imperative could precipitate far-reaching consequences, destabilising the foundation of Amazon’s marketplace and fundamentally reshaping the trajectory of e-commerce on a grand scale.
But they are not interested in doing that.
Any seller who has ever encountered Amazon’s dire so-called “seller support” understands that they are just voices screaming in the dark. “Support” consists of AI bots and/or people for whom English is a second language just copying and pasting pre-written drivel over and over. You can’t speak to a real person who has any knowledge or power. There are no account managers.
That isn’t the case with eBay. If you are a big seller on eBay, you can get through to proper seller support in Ireland.
Are you an Amazon seller? Do you see Amazon as a hostile predatory vulture hovering over your business like a malevolent force seeking to delay and freeze your money by any method they can? Use the comment section below to tell us.