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Amazon is trying to lure business buyers onto its fast-growing marketplace, offering them extended periods to pay for things like heavy equipment and office supplies. Sellers fear the change is coming at their expense.
In an email to sellers earlier this month, Amazon said that third-party merchants, which utilize the company's fulfillment centers and logistics system, would be part of a new policy that gives qualified businesses 30 days to pay their bills. For consumer products, sellers are used to getting paid within a week or two.
By applying the "Pay by Invoice" service to the broader marketplace, corporate customers no longer have to rely on the specialized Amazon Business to get the benefit of a longer payment period. Starting August 8, products from general marketplace sellers would "automatically become eligible for invoiced purchasing," according to the email, which was viewed by CNBC.
Lengthening the cash payment cycle could create a cash crunch for sellers who rely on speedier payments to buy inventory and fund their operations, said Jerry Kavesh, the CEO of 3P Marketplace Solutions, a consulting firm for Amazon marketplace sellers.
"Cash is always tight and challenging for small companies," said Kavesh. "This policy could put sellers in a cash bind, where they may not be able to pay suppliers and employees, which is problematic at best, and worst could put them out of business."
An Amazon spokesperson declined to provide a comment for this story.
Amazon told sellers in the email that the change is meant to draw more corporate buyers to the marketplace, and could open up a new revenue channel from customers who wouldn't otherwise shop with them. Sellers that want the cash faster than 30 days can pay an additional 1.5 percent of the invoiced amount.
"Pay by Invoice represents a new growth opportunity for sellers by encouraging Amazon Business customers to use the Amazon Marketplace as their primary channel for B2B purchases," Amazon wrote.
But sellers are skeptical. One seller, who asked to have his name withheld out of fear of retribution, said Amazon should have given merchants the choice to participate because cash management is such a sensitive part of their business.
Amazon is "using you, the seller, to finance the growth" of its business customers, the seller said.
Amazon first announced plans for the new policy in May, sparking debate across the seller forums as to whether it would be a benefit or hindrance.
One merchant wrote, "This might work for big distributors with enough budget to cover any terms, but not for me or any small business owners." Another post said, "Just a single order for $5,000 of gear not paid for 30 days is enough to put many small businesses in a cash flow pinch with their suppliers, who are NOT going to wait 30 days."
Abraham Chomali, founder of XP Strategy, a marketplace consultant, said the new payment program has created more anxiety for sellers than actual problems.
He noted that qualified business customers account for a tiny percentage of overall volume. Additionally, Amazon is taking on some of the risk by guaranteeing payment on late or default invoices.
"Amazon wants the sales pie to be bigger," Chomali said.
The new policy could also force sellers to become smarter with their cash, said Kiri Masters, founder of Bobsled Marketing, a firm that helps companies sell on the marketplace. Amazon's weekly and biweekly payment cycles are much more generous than some big box retailers, which typically ask for 60- to 90-day terms, she said.
"Some sellers have become reliant on these fast payments, and don't have a cash flow model to be able to accept these terms," Masters said.
But Kavesh said that this is yet another big hurdle for small sellers who already survive on thin net profit margins of 2 percent to 5 percent. It's going to potentially make it difficult for some to stay in business, he said.
"This new policy at least doubles the cash a small seller needs to have on hand in order to operate, which many small firms simply do not have and do not have the ability to access," Kavesh said.