What is Amazon’s next plan?
Amazon is known as “the everything store” and this is for good reason. The company provides exceptional business opportunities for third-party individuals and they also work on improving the present while inventing the future. What more could you want? With new innovations set to take over uncharted markets for the tech-giant – the grocery sector being the most recent – the question arises: what can’t Amazon do? Just when you were about to answer that question we found another example.
Financial reports have shown that Amazon is expanding its role into money lending. More and more sellers have been approached by Amazon to borrow money to increase their businesses.
How much debt has Amazon placed with Amazon sellers? The company recently announced that over a 12-month span it has issued in excess of $1 billion in business loans to third-party Amazon sellers. This number almost equals up to the entirety of loans granted to sellers from the calendar years of 2011 to 2015.
When Amazon launched its lending initiative in 2011, the ensuing four years only totaled $1.5 billion in loans. That’s encouraging considering the fact that the last 12 months have provided an effort of four years in one calendar year. The Vice President of the Amazon Marketplace said that sellers have used the money very well and have focused on expanding their brands.
Amazon Loans for Amazon Sellers – Great For Amazon Sellers
By providing monetary assistance to a group that makes up most of the company’s units sold, it is nice to see third parties able to grow previous inventory counts and boost customer discount incentives. Amazon already charges third-party merchants with commission fees on sales, so it makes sense for the world’s third-richest man to shore up seller support and help these important pieces flourish.
To date, it is estimated that about 20,000 small businesses have taken loans in excess of $3 billion total. The loans are exclusive and an Amazon seller must receive an invite from Amazon to participate. The range varies in terms of how much a seller has been allotted to take out. Some figures have been between the $1000 to $750,000 range. Amazon’s loans have interest rates that are said to be about 6% and 14% respectively, but it also provides the company with an oversight role in the seller’s business venture.
Amazon has real-time access to the chosen seller’s customer reviews, analytics, and profitability. With such information, the tech-giant is able to make a calculated decision as to whether or not they can issue a loan to the independent seller. Stability is important to Amazon, so before issuing any money they want to have confidence that the seller is going to help them and grow as well.
Amazon Loans to Amazon Sellers – Can Be Awful for Sellers
While Amazon loans to Amazon sellers can be great for sellers, taking on significant debt can also be awful for sellers. Amazon’s one-sided agreement with its sellers can immediately put Amazon sellers out of business. Any seller, large or small, can have their Amazon account suspended at any time. If an Amazon seller has recently accepted an Amazon loan, the problems when an Amazon account suspension comes can be even more devastating.
The problems of an Amazon account suspension with an Amazon loan can be worse for many reasons including:
- Even though your Amazon account is suspended, you are still responsible for your Amazon loan payments;
- Even though Amazon refuses to release your money from prior sales for ninety (90) days, you still are responsible for your Amazon loan payment;
- Amazon reserves the right to seize your money from your account: your distribution to pay your bills, suppliers, and payroll may never show up;
- If you used your Amazon loan to purchase more inventory and shipped the goods to Amazon, your storage fees will be higher;
- If you have to place a removal order because your Amazon suspension is not resolved quickly enough, your removal costs are going to significantly higher….more inventory means higher removal costs.
- If you are an Amazon seller who accepted an Amazon loan, your losses will be significantly higher because you will have to find alternative storage and liquidation of more goods.
A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.
–Mark Twain
Amazon Loans and Amazon Arbitrations if Amazon Refuses to Reinstate Your Account
In addition to the good and the bad aspects of an Amazon seller accepting an Amazon loan, there is odd. As a law firm focused on Amazon sellers, we have seen cases where Amazon has loaned sellers money then quickly suspended the Amazon seller.
At arbitration, we have argued that Amazon sellers should be reinstated because Amazon cannot say at the same time:
You are an awesome Amazon seller worthy of an Amazon loan and
You are an awful seller worthy of an Amazon suspension at the same time.
When Amazon suspends a seller shortly after approaching and loaning the seller money, we argue that Amazon is either writing about the seller being bad or Amazon is a predatory lender.
When Amazon lends an Amazon seller money and then cause the seller to suffer the hurricane of an Amazon account suspension, you should speak with an attorney immediately.
