Sellers blossom on Amazon’s Marketplace, but face Working capital challenges

My colleague Jason Busch has talked about how Amazon will eventually own the small and medium sized business (“SMB”) market for eProcurement. But what about the other side of the equation, from the sellers perspective?

Amazon is helping small businesses and the numbers bear this out.

  • Amazon’s total revenues were $74.5 billion last year. This number includes both their own product sales where Amazon is the seller of record and service sales that represent third-party seller fees earned (including commissions) and related shipping fees, digital content subscriptions, and non-retail activities such as AWS. Amazon does not disclose the breakdown, but analysts have estimated it is roughly 50-50.
  • North American sales are $44.5 billion out of the $74.5 billion
  • Amazon has more than 2 million Marketplace Sellers, who sold more than a billion units worldwide. The company said those sales totaled “tens of billions of dollars.”
  • Companies selling via Amazon include the very big retailers like Target and Toys 'R Us and small business, and it’s hard to discern the impact on SMB sales. Amazon just doesn’t provide that data.
  • Last year, Amazon was the world’s ninth-biggest retailer ranked by sales; by 2018, Kantar Retail, a research group, believes it will be number two
  • Amazon also has a huge advantage with its’ global network of 96 “fulfilment centres”.

According to the Amazon web site, the process to become a seller works as follows:

  • You list an item in the Books, Music, Movies & TV Shows, Software, Video Games, Electronics, Home & Garden, or Sports & Outdoors store.
  • When your item sells, we let you know you have a buyer and ask you to ship the item.
  • After you confirm shipment, we process the buyer's payment for the order.
  • We deposit your earnings into your Marketplace Payments account and funds are transferred to your bank account on a 14-day cycle.

Getting paid is where it gets tricky. Amazon deposits payment into your bank account at “regular intervals” and notifies you that your payment has been sent. Disbursements can be made in Canadian dollars (CDN) to your Canadian bank account or in U.S. dollars (USD) to your U.S. bank account.

What is regular? As lucrative as the third-party-seller business is for Amazon, when do sellers get their money? Last year, some merchants filed a class action lawsuit against Amazon, alleging the company violated Washington state law by holding some sellers’ money for more than 90 days.  Amazon has certainly been called a bully by many, the Economist recently published how it has left a trail of competitors crushed by playing hardball.

Here’s a call out to Amazon to say let’s find ways to help small business. A colleague of mine, who will remain unnamed, recently moved from Ariba’s working capital group to Amazon B2B Marketplace, so I am sure there are some plans in the works.

Stay tuned!

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Source: Amazon web site; 2013 Amazon annual report

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