Amazon is going after the business customer and has decided to broaden selection for Amazon Business customers by bringing third-party sellers along – but with a major change that could mean deferred payment for some orders.
Amazon Business extends credit to a selection of pre-qualified buyers through Pay by Invoice (PBI). Many business customers expect to be able to pay by check or wire with Net 30 (or longer) terms, and Amazon is opening up all inventory on its site to such terms, including those from third-party sellers.
Here’s the letter it sent to sellers on May 1st:
Introducing Pay By Invoice with Guaranteed Payments
Since 2015, Amazon Business has connected thousands of sellers to new business customers. We are excited to announce that we are now offering Amazon Business customers a new payment method called “Pay by Invoice.” Pay by Invoice gives qualified Amazon Business customers the option to receive an invoice with an extended payment due date. Pay by Invoice represents a new growth opportunity for sellers by encouraging Amazon Business customers to use the Amazon Marketplace as their primary channel for B2B purchases.
What does this mean for you?
As a seller on Amazon, you do not need to do anything to make your items available for purchase by Amazon Business customers using Pay by Invoice. Your products will automatically become available for invoiced purchasing with no added fees or effort. Amazon will handle all aspects of the invoicing process, including credit risk assessment, billing, and collection activities. For all Pay by Invoice transactions, payment to you is guaranteed, even if the Amazon Business customer is late or defaults on their payment to Amazon.
For any invoiced orders that you receive on Amazon, your payment on these orders will be credited to the available balance of your Selling on Amazon account as soon as the customer payment is processed and no later than the 7th day past the due date of the customer’s invoice.
Get Paid Faster
We are also launching the ability for you to “Get Paid Faster” for invoiced orders. With this feature, your payment will be credited to the available balance of your Selling on Amazon account immediately after shipment for a processing charge of 1.5% of the invoiced order amount.
The invoiced order payment process will be launched after June 30, 2018, although it may take longer to receive your first invoiced order due to the limited number of Amazon Business buyers qualified for Pay by Invoice. You will receive additional information and resources prior to the launch.
Business sellers include corporations, small businesses, schools, laboratories, manufacturers, and hospitals. By offering business-friendly terms on all inventory, it gives Amazon an enormous edge and poses a challenge for B2B companies like Staples and Grainger.
This is a good news – bad news scenario for sellers. It’s important to note that Amazon Business doesn’t offer PBI to all buyers in the program, and it guarantees sellers will be paid for orders in cases where credit is extended. Giving businesses payment flexibility will undoubtedly result in incremental sales for some third-party sellers. On the other hand, it impacts sellers’ cash flow – they must pay their suppliers, shipping carriers, and vendors for expenses and have counted on immediate payment for orders on Amazon (subject to their disbursement schedule).
Amazon doesn’t allow sellers to opt out, and though it allows sellers to get paid faster for PBI transactions, there’s a 1.5% fee for doing so, which has incensed some sellers.
The reason for opening up PBI to 3P inventory was made clear in this interview with Martin Rohde, head of commercial customers for Amazon Business, where he discussed the importance of adding breadth and depth to the B2B Amazon Business marketplace.
Amazon Business launched in the United States in April of 2015, in Germany in December of 2016, in the United Kingdom in April of 2017, and in Japan and India in September of 2017. It launched in France in February. It offers “Business Prime Shipping” in several countries. For example, small business (up to 10 users) pay $499/year for Business Prime; medium businesses (up to 100 users) pay $1,299/year; and enterprise businesses (over 100 users) pay $10,099/year.
An Amazon spokesperson provided us with additional information about its decision to open PBI to third-party inventory, which you can read on the AuctionBytes Blog.