Amazon Base Reserve policy impacts cashflow

Amazon have hit the news today as their new Base Reserve policy rolls out in the UK and Europe.

This comes just days after Etsy tweaked their reserve thresholds leading to uproar on their forums although the marketplace said that less than 2% of active UK sellers were impacted.

While the Etsy reserve change was a total surprise, Amazon did at least give warning, although it appears the scale of the impact was no where near clear enough for their sellers to understand.

The BBC reports a Vinyl and CD seller complaining that £5k has been placed on hold, while an ink cartridge seller already has £170k on hold and saying that the amount on reserve is growing by about £40k per day since the change hit their account on the 3rd of August.

So, what’s changed at Amazon? A reserve is the amount of money that Amazon reserves to ensure that you have enough funds to fulfil any refunds, claims or chargebacks from buyers. Up until now, for some time served sellers, it has been based on the shipment confirmation date to determine how long funds are held in reserve. This is changing to a Delivery Date Based Reserve policy, which uses the delivery date of an order and this is the standard Amazon has applied for new sellers in the UK and Europe since August 2016. What has changed is that it will apply to UK and European sellers registered before August 2016 as well.

In announcing the change to sellers, Amazon said:

While your current Base Reserve policy uses the shipment confirmation date to determine how long funds are held in reserve, the Delivery Date Based Reserve policy uses the delivery date of an order. When you use an integrated shipping provider, we will use the actual delivery date of the order. In the absence of valid tracking data, we will use the latest estimated delivery date. This policy change may cause a one-time cash-flow disruption until the new reserve is built up and funds become available for disbursement according to the estimated or confirmed delivery date.

– Amazon

And it’s the last line that’s causing the issues – the “one-time cash-flow disruption until the new reserve is built up and funds become available for disbursement”. It looked innocuous enough, and when buried in an email along with all the other notifications that come from marketplaces it’s easy to miss that one line or not fully comprehend the impact that it will have.

So, to reduce the impact to it’s minimum, it is essential that tracking be uploaded to Amazon. The important terms are:

• When you use an integrated shipping provider, Amazon will use the actual delivery date of the order.
• In the absence of valid tracking data, Amazon will use the latest estimated delivery date.

If your tracking is passed to Amazon (or you use FBA or Amazon Shipping), then the day the product is delivered is what counts. This means for sellers who ship with next day delivery, there should be no more than a single day between the old shipment confirmation date and the new actual delivery date. However, for those that use slower delivery services Amazon will use the least optimistic delivery expectation before releasing your funds.

It’s pretty clear from the complaints that many sellers have been caught on the hop by these changes, which are leaving a massive hole in their cash flow. And there will be more sellers as the Base Rate Changes are being rolled out in tranches by Amazon – we expect more sellers to be moved to their Delivery Date Based Reserve policy at the beginning of September. If that’s you, take care and start planning for a potential disruption to your cash flow now!