Amazon and Etsy are unhappy with sellers for delayed payments! Amazon: We are changing it.

Amazon and Etsy have softened their stance on the policy of delaying payment for sales after thousands of sellers complained that the new rules could put them out of business.

As the world's two largest online retail giants, Amazon and Etsy have millions of small sellers. As many sellers complain that delayed payment may lead to serious consequences, the delayed payment policies introduced by these two platforms have caused dissatisfaction among buyers.

Small sellers who sell on Amazon or Etsy are most vulnerable to the new policy as they grapple with how to finance operating costs within limited funds.

Last month, Simply Business’ SME Insights Report found that 1.5 million UK entrepreneurs were considering using personal savings to prop up their businesses in the face of rapidly dwindling cash reserves .

Amazon and Etsy’s reserve system policies

Etsy first introduced the reserve fund policy in 2021. The policy allows the platform to withhold up to 75% of a merchant's sales revenue for up to 90 days. Etsy said this is to ensure that sellers have enough funds in the bank to cover potential customer returns and claims.

Meanwhile, Amazon's policy update in May enabled the e-commerce giant to withhold up to £5,000 from sellers for up to a week after the estimated delivery date.

Seller's complaint

Both platforms gave affected sellers three months’ notice of the delayed payments policy, but Connor Campbell, a business finance expert at NerdWallet, said the warning was “too soon for them to take any countermeasures to protect their funds.”

“Sellers rely on a steady stream of revenue to manage their operations and pay their employees ,” Campbell added.

Affected business owners complained about how the reserve system affected them in the Etsy Seller Support Community Facebook group.

Some sellers said they are now struggling to pay their bills after their sales were delayed, and some even said they have lost confidence in Amazon after spending hours discussing with chatbots why their funds were withheld.

After a backlash on social media, Etsy reversed its policy last week, saying it would "significantly reduce" the amount of money sellers could reserve.

This week, Amazon also softened its stance after similar incidents, confirming that it would return part of the sales revenue to sellers. However, financial expert Connor Campbell believes that both platforms should completely cancel the policy.

"If this policy is not overturned, it is likely to result in many sellers having to cease operations as they can no longer rely on sales revenue to cover operating costs," he said.

Experts: Late payments may put small and medium-sized sellers in trouble

The reserve system has been in place for years. However, both Etsy and Amazon have tightened their policies in the past few months, resulting in significant payment delays and cash flow disruptions for small and medium-sized sellers at a time when their finances are already strained.

Supply chain issues are exacerbating the problem. Manufacturers and suppliers are struggling to cover the rising costs of doing business as inflation hits partners end-to-end, which is causing small and medium-sized sellers to take longer to receive sales payments.

Barclays told Startups that large companies like Etsy and Amazon may have good reasons to hold onto cash reserves, but simply don’t realize the severe adverse impact this could have on small businesses.

“We are trying to get their big customers to understand the small sellers better and make them aware that a one-week delay in paying a small business £100 could even put a small seller out of business,” she explained.

Barclays said that while late payment issues have plagued small sellers for decades, there are steps that small and medium-sized sellers can take to strengthen their balance sheets to cope with the adverse effects.

Barclays has provided advice to startups, recommending that small and medium-sized sellers invest in the best invoicing and cash flow management systems to avoid spending valuable time tracking payments through the supply chain.

Editor ✎Estella/

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