Amazon Squeezes Vendors Tighter

wholesale merchandise amazonI know that many retailers have been squashed by Amazon over the last few years and it has hurt many an independent brick-and-mortar store, which is why we have been extensively reporting on news to keep you abreast of what is happening with the mega-retailer.


LAST month we shared investigations regarding how Amazon has infiltrated the apparel business and will be THE leading provider of apparel within the next few years by generating sales with their own brands which are competing head-to-head with their merchants. We went on to warn that if you’re in the apparel business you need to take safeguards now for your future, as many businesses will be decimated as Amazon claws more of the industry at such a rapid pace.


THE thing with companies like Amazon is that in the beginning everything is wonderful as they start their selling platforms. They open their platforms to small businesses and offer vast exposure to the markets with small percentages for sales made. Retailers start out loving it and find it a great way to stay solvent in trying retailing times. And while you’re selling on Amazon, they are collecting data and watching the trends and popular products, which seems innocent enough until they start to roll out competition to the very small businesses who propelled their platform to success.


YES, you, the small independent retailer have the greatest hand in putting your business out of business when you teamed up with Amazon. They’re rolling out their own house brands to compete with you, they’re allowing sellers from China to compete with you on many items (a battle you simply cannot win) and now they’ve rolled out a new payment policy which will destroy your businesses cash flow.


THE new Amazon payment policy is called “Pay By Invoice” so business customers can buy on the marketplace and have more time to pay their bills. Many sellers are worrying that waiting thirty days for payment as opposed to one or two weeks will put them in a serious credit crunch.


THIS new policy is aimed to corporate buyers to encourage them to shop on the broader marketplace and not be restricted to only using Amazon Business.


LENGTHENING the cash payment cycle will create a cash crunch for sellers who rely on fast payments in order to buy inventory and fund their operations. Cash flow is always a key factor for small companies and if they are in a bind from this new payment policy it will affect their ability to pay supplies and employees which will in turn not only create large financing problems but ultimately could put them out of business entirely.


WHEN Amazon notified sellers about the change they touted the opening of the new revenue stream from corporate buyers that will be happening. They also offered an option to sellers who want their cash faster that they would oblige them, at an additional 1.5% of the invoiced amount. Some Amazon sellers are complaining that they are being used to finance the growth of Amazon at no cost to Amazon. Gee, shocking! Go back to the beginning of this story and remember Amazon’s kick-off years ago, everything was flowers and unicorns as small retailers grew their businesses on Amazon while Amazon built their empire, only to change the playing field when the timing was right to make more money.


THE truth is that many Amazon sellers are operating on an already small margin of 2-5% and changes like this will make it very difficult to stay in business if they are small operators. Honestly, I understand why retailers have taken to Amazon for the exposure and platform, but seriously, making such small percentages is almost like being out of business already when a simple 1.5% increase in sales fees would put you over the cliff. Really, just temporary fixes and hanging on while Amazon continues to dominate and take over almost every facet of retailing.