Are You Prepared for Amazon's Delivery Date Based Reserve policy?
What We'll Discuss:
- Understanding the Impact on Sellers
- The significance of cash flow management
- Strategies to ensure demand fulfillment as Q4 approaches
There has been much coverage about Amazon’s payment timeline, giving rise to questions how sellers will be affected.
Now, with the details confirmed, a substantial modification is on the horizon for two categories of Amazon sellers, redefining their payment processes.
- Sellers currently operating under the 'shipment date' reserve system - those whose payment is tied to the shipping date.
- Sellers who have never encountered Amazon’s reserve policy before.
These sellers will transition to the post 2016 Delivery Date Based Reserve policy, which translates to an extended timeframe where their payments will be unavailable.
Amazon's rationale for this policy adjustment is rooted in the goal to "standardize base reserve policies for all selling partners," highlighting that a delivery date based reserve has been the "norm for selling partners since 2016."
In essence, while certain sellers, primarily those with longer-standing accounts, have enjoyed a more lenient payment structure, this shift will bring uniform delays to payment processing for them soon.
This policy in practice
Amazon explains that this modification will defer fund availability based on the order's delivery date plus an additional seven days. This implies that most sellers will experience a 10-day waiting period before payment is received (1-3 days for delivery, 7 days for processing), although this timeline might extend further.
However, this policy change doesn't signify an enhancement to the reserve policy. Amazon's reserve policy determines the amount withheld from sellers to cover potential refunds, claims, and chargebacks. Consequently, sellers who currently face a 14-day payment delay due to reserves could find themselves facing approximately 20 days of waiting starting next month.
Furthermore, linking payment to the delivery date introduces susceptibility to disruptions in cash flow caused by delivery delays. Factors such as incomplete package scanning, non-delivery on weekends or public holidays, and occasional postal disruptions could adversely affect the flow of funds.
This shift is bound to impact sellers' cash flow, especially during the busy Q4 period. Concerns abound among Amazon sellers that the extended waiting period might hinder their ability to restock inventory and meet escalating customer demand.
The critical role of cash flow
For ecommerce sellers, managing the cash cycle is pivotal to running a thriving business. The cash cycle denotes the time taken to convert inventory into cash.
Naturally, a shorter cash cycle is preferable, as it minimizes the duration that funds are tied up in stock, ultimately facilitating higher sales and profits.
Discussions on an Amazon seller forum regarding this policy transition have unveiled anxieties about cash flow disruptions. One business owner expressed, "The disruption to our cash flow is really worrying me," while another emphasized, "Without the cash from the sales coming in quickly, we will be missing out on sales opportunities"
Q4 readiness - are you equipped?
Adding these extra days to the pre-existing payment delays from Amazon could have severe repercussions, particularly during the pivotal Q4 season, notably in December. If your sales peak during Black Friday and Cyber Monday, the payment for those transactions might not materialize until just before Christmas. This could leave you unable to replenish inventory, resulting in missed opportunities during the year's busiest sales phase.
Consider leveraging advanced payment services like Storfund to secure payment on the day you sell, bypassing Amazon's payment delays. Storfund is available not only on Amazon but also on Back Market, ManoMano, and all Mirakl marketplaces. By expediting payment receipt for your marketplace sales, you can promptly restock, meet surging demand, and foster the growth of your business.
Carly Mures is a Marketing Manager at Storfund. With a background in financial services and journalism, she specializes in content writing and SEO.
