Amazon Delays Delivery Date Based Reserve Policy for Some UK Sellers After Backlash
In response to strong criticism from UK sellers who feared potential business closures, Amazon has decided to implement its revised payment schedule gradually, the Guardian reported.
Last week, the eCommerce titan announced that it would no longer provide instant credit to UK and EU sellers upon the completion of an online sale. This is to help Amazon ensure that sellers will have enough funds to cover the cost of customer returns or claims.
Under the new arrangement, however, sellers will encounter a delay of one week between the product being delivered and the receipt of their funds, also known as Delivery Date Based Reserve.
Suppose you ship an item on August 17, and the delivery date is August 20, then the sale proceeds will be available for disbursement starting August 27. Previously, sellers faced a waiting period of around three days for the money to become available in their accounts, but because of the new reserve policy, many may have to endure a 7-day (or longer) wait after delivery before gaining access to the funds.
This rule change has triggered concerns about the viability of many Amazon businesses. For small sellers, for instance, having to wait 7 days to receive their money could lead to difficulty in paying employees and loans.
In an email sent out to affected sellers four months ago, Amazon itself acknowledged that implementing the Delivery Date Based Reserve policy may result in “a one-time cash flow disruption.”
However, according to BBC, some sellers said that “this email was not clear, or in many cases, went to their junk mail folder,” leaving them totally unprepared when the new policy finally took effect on August 3.
Consequently, some UK sellers turned to their Members of Parliament (MPs) for help. A UK government minister has reportedly started demanding Amazon for answers.
Following growing pressure from both sellers and the UK government, Amazon told The Guardian it was postponing the policy change for some sellers until January 31, 2024. The retail giant specifically said it was “extending the transition date for a small number of sellers who have contacted us and need support.”
However, one seller believes that this move only delays the inevitable and that their business could still go under, thanks to the 7-day cash flow disruption.
That said, preparation is key to minimizing the rule’s impact on your cash flow. Ensure you have sufficient funds to cover any disruption to your earnings. You may also want to consider short-term financing options, if needed, though, as always, be well-informed of the terms of any funding you accept.
It would also be wise to keep an eye on your customer orders and their actual delivery dates. Depending on carrier and shipment options (standard or expedited), it might take your carrier up to 5 days to get items delivered.
In that case, if it is under your control, calculate the difference between the cost of using same-day or next-day delivery service providers and the potential impact of cash flow disruption on your business. It might be worth paying extra for faster delivery speeds than delaying inventory orders for Christmas because you couldn’t access your funds on time, for example.
It could also be worth taking a bit more action than that as, currently, Amazon is “listening to sellers’ concerns and is in contact with those who have experienced a one-time cashflow disruption,” as reported by The Guardian.
Consider reaching out to Amazon or contacting your MP to express your concerns. A large number of complaints could force the retailer to take similar action as Etsy did. The online crafts marketplace recently had to revise a policy that held back up to 75% of some UK sellers’ earnings for 45 days to appease those that initiated a boycott against the platform. Presently, Etsy expects that the standard withheld amount will now be around 30%.