Amazon.com, Inc. (AMZN.US) New policy sparks seller "cash flow crisis", major merchants launch 24-hour ad boycott action.

Notice that, for sellers who sell more than 60% of their products on the massive e-commerce platform Amazon.com, Inc. (AMZN.US), it is now a difficult time no matter what. The high import tariffs imposed by the Trump administration have caused a year-long crisis, and the recent Iran war has led to a surge in energy costs, further forcing businesses to either raise prices for struggling consumers or bear the losses themselves. As if that were not enough, Amazon.com, Inc. is implementing a series of new policies, with some sellers saying that doing business on the platform is becoming increasingly unsustainable. In recent weeks, Amazon.com, Inc. has changed the way it pays sellers for sales revenue and charges for advertising services. Subsequently, the company announced that it will start charging sellers a 3.5% fuel surcharge to offset the increase in oil prices due to the Iran war. For some sellers, these measures are just another example of Amazon.com, Inc. putting pressure on them. Michael Patlong, who runs an eight-figure Amazon.com, Inc. business, said, "Our profits are disappearing." He also criticized the company's policies on X account, saying, "I think that's why things are becoming more and more frustrating." Patlong and hundreds of large Amazon.com, Inc. sellers joined together on Wednesday to boycott the advertising platform in protest of the recent policy changes that are squeezing their already tight profits. The 24-hour advertising boycott was initiated by the "Million Dollar Sellers" organization, a community of over 700 members with a combined annual revenue of approximately $14 billion. Eugene Cayman, co-founder of MDS, wrote on X about the boycott, "Sellers have been complaining for years, but this time it feels different," "The reason is simple: it's no longer just irritating, it's directly taking money from us." An Amazon.com, Inc. spokesperson, Ashley Vaughnichik, said that the recent changes to advertising payment methods and payment disbursement were meant to align "a small percentage of sellers" with the practices already adopted by the majority of sellers on the platform. The company stated that the introduction of the fuel surcharge is to partially recoup the increased costs due to rising oil and logistics prices. Launched in 2000, Amazon.com, Inc.'s third-party marketplace has grown to become a key pillar of its retail strategy. The marketplace has millions of sellers, ranging from small businesses operating out of garages to well-known brands, who can list their products on the site. Seller service revenue, which includes commissions, logistics, advertising, and customer support, has increased by over 400% since 2017. In the fourth quarter, this department's revenue grew by 11% year over year, reaching $52.8 billion, accounting for approximately 42% of Amazon.com, Inc.'s total sales for the period. Cash flow crisis Several sellers indicated that with the temporary fuel surcharge set to take effect on April 17, they expect to raise prices. Other policy changes may freeze their cash flow, leading to more destructive consequences. Cayman stated that this could prevent sellers from paying employees' wages or suppliers' invoices and force them to take on more debt. "Most sellers are mom-and-pop shops, or have just one or two employees. They usually get a 3% cashback from advertising spend, which may be their third-largest expense," Cayman said in an interview. "So, they were able to get quite a bit of money back, and (Amazon.com, Inc.) is taking away that ability." Cayman said that many sellers, especially small businesses, rely on the "credit card points" earned from spending on Amazon.com, Inc. advertising to make a living. Earlier this month, Amazon.com, Inc. announced that it would automatically deduct advertising fees from the revenue of some sellers, instead of allowing them to pay with credit cards. The notification stated that if a seller's sales revenue is insufficient to cover the advertising costs, Amazon.com, Inc. will use their existing payment method as a backup for deduction. The company also provided sellers with a $2,500 advertising credit to "help with the transition." Amazon.com, Inc. described this as being more favorable for sellers' "cash flow management," but sellers expressed concerns that it may have the opposite effect. On Tuesday, following feedback on the policy, Amazon.com, Inc. announced that the changes to the advertising payment method would be delayed until August 1. The company stated, "Based on feedback we've received, we are postponing this change to August 1, 2026 to give these advertisers more time to prepare." Critical points In mid-March, Amazon.com, Inc. implemented a new policy for some of its U.S. sellers, meaning that it will hold onto sales revenue for a longer period of time. Sellers must now wait 7 days after the product has been delivered to the customer before receiving payment. Previously, Amazon.com, Inc. paid sellers their sales revenue 7 days after the product was shipped to the customer. The policy changes have added to sellers' anxiety. "Combined with payment delays, this is creating a severe cash flow crisis," Adam Langquist, founder of Heist Labs, a company that acquires e-commerce brands, wrote in a LinkedIn post responding to the advertising policy changes. "As expenses increase and cash flow pressure mounts, there is a breaking point - Amazon.com, Inc. may soon find out." A seller who has been running a six-figure Amazon.com, Inc. business for over twenty years said that the delayed payment policy will put immense pressure on his company, which is already struggling to pay daily operational costs. "Amazon.com, Inc. has taken all the money it should've taken. What's left is ours, but we can't get it. Our money is being delayed," said the seller, who requested anonymity for fear of retaliation. Amazon.com, Inc. stated that the vast majority of its sellers have been using a 7-day settlement system since 2016. The company said it gave sellers who had not yet used this system a 6-month notice period to prepare for the transition. The company stated that this policy allows customers time to receive their purchased items, initiate returns, and submit claims. Fee review This boycott is just the latest example of Amazon.com, Inc. facing scrutiny for its rising platform selling costs. According to seller profit and loss statements cited by the third-party marketplace research company Marketplace Pulse, Amazon.com, Inc.'s average cut from each transaction surpassed 50% for the first time in 2022. Seller fees are part of a Federal Trade Commission antitrust lawsuit against Amazon.com, Inc., filed in September 2023 and scheduled for trial in 2027, which alleges that the company uses anti-competitive practices to maintain its dominance in e-commerce and suppress sellers on its platform. Amazon.com, Inc. has previously refuted the FTC's charges, stating that its practices benefit competition. The company stated, "We are committed to supporting sales partners in our store and to help them achieve record-breaking sales year after year," "We are deeply committed to providing powerful tools, services, and programs to support their business growth, with costs usually lower than other options." Charles Chakalo, a seller who has been on Amazon.com, Inc. for 15 years, stated that the recent policy changes effectively shorten some sellers' cash flow from 90 days to "virtually zero." "I believe this is Amazon.com, Inc. squeezing to pay the processing fees they pay to credit card companies," said Chakalo, who sells home and kitchen products and runs a news newsletter for Amazon.com, Inc. sellers. "If small sellers can't afford this fee, then tough luck. There will always be other sellers trying to survive on the platform." Amazon.com, Inc. has been a springboard for many businesses to reach its massive customer base, and in its annual progress report, it extolled the success stories of sellers, noting that the average net annual sales for independent businesses in 2024 were around $290,000. It often refers to sellers as its partners. However, Chakalo said that the recent policy changes make it feel less like a partnership between Amazon.com, Inc. and sellers, and more like sellers are just the company's "service providers."