Sellers’ loans at risk as Amazon decides to take essential goods only in warehouse

Some Amazon sellers have voiced concern that the online giant’s decision to stop receiving non-essential inventory in response to the Coronavirus epidemic could jeopardise the sales they need to make payments on their Amazon loans.

On Thursday, a spokesman for Amazon told Reuters the company is working to provide relief to the selling community. He declined to provide specifics.

On Tuesday, Amazon said it was suspending sellers from sending non-essential products to its US and UK warehouses until 5 April. The online retailer had taken this decision in order to free up inventory space for essential items such as medical goods and household essentials, which are running out due to the Coronavirus outbreak.

The online marketplace is among an array of retailers aiming to keep food and hygienic items in stock and have employees on hand for warehouse work or delivery.

Sellers have said they are concerned that the suspension on non-essential items like apparel, toys and outdoor items could impact their sales as they are unable to restock items, and further affect their ability to repay their Amazon loans in time.

For Jamison Philippi, an Amazon seller based in Hackensack, New Jersey, toys and video games represent 95% of his Amazon business. But those products now are considered “non-essential” so he cannot restock them in Amazon’s warehouses.

As his inventory runs out, Philippi estimates his income could drop by 75% – affecting his ability to make the roughly $3,500 payment due on his Amazon loan on 1 April. Philippi told Reuters that “not being able to ship things in for three weeks – it’s going to sting.”

Amazon automatically pulls loan payments from the account where he receives his bi-weekly sales payments. If that balance falls short, it comes out of his bank account.

He added: “i’m hoping they suspend that for a month and offer a grace period,” and voiced he believes Amazon is making decisions that it believes are best for the selling community.

“They control everything, we’re just playing in their sandbox,” Phillippi said.

LOAN PAYMENT DUE

Launched in late 2011, Amazon’s lending programme makes loans of $1,000 to over $1 million (860,955.6 pounds) to qualified sellers, and uses seller’s inventory in Amazon warehouses as collateral. Repayment terms are three to 12 months, and interest rates typically range from 6-19.9%.

The move to suspend warehousing non-essential products has left sellers unable to restock some of their bestsellers.

Some sellers are panicking because borrowers can be in default if sales in any 30-day period are less than 50% of the lowest level during the 12 months prior, according to a loan agreement reviewed by Reuters.

Some sellers have voiced their concerns to Amazon but have not heard back about any relief. In a statement to Reuters, Amazon said it is working to determine the best ways to quickly assist its lending clients during the coronavirus crisis.

The online giant said: “Our selling partners tell us our loans are an ideal way to grow inventory, expand product lines, and reach more customers.”

In other cases, sellers are seeing loan offers from Amazon disappear from their accounts.