Month: August 2017

The New Amazon Refund Policy…

Is it a Stake through the Heart of FBM Sellers?

Last week Amazon announced a new refund policy that could be a stake through the heart to many Third Party Sellers on the digital marketplace.

Starting October 2^nd, marketplace sellers who ship their products from their own facility rather than using an Amazon facility…were notified last week by email that items they sell will be automatically authorized for return.  Let that sink in for a minute.

While the stated objective of this policy change is to make it easier for Amazon customers to send back items without having to worry about the costs associated with the return expenses….the other less obvious impact it will have is to either flush more marketplace sellers to Amazon fulfillment, or possibly force them out of the marketplace all together.

New Rules of the Game…

Under these new rules starting October 2^nd, FBM sellers will have to automatically agree to issue refunds to their customers if requested to.  This means that the seller will not have the opportunity to work with the customer to try and resolve any issues thus avoiding the need to issue a refund!

Another new facet of this rule is that customers will be able to access a prepaid return shipping label using the Amazon “Online Return Center.”  This means they will be able to print out the label at no cost to them… and at any time…to ship back the purchased item to the seller.

This means that the refund expense will automatically be placed onto the Seller.  Thus the financial burden of the return shipping costs will impact sellers big and small.  Unfortunately, not all of the sellers who will have to absorb this burden will be capable of surviving another line item on the debit side of the ledger.

Buyers vs. Sellers…

“While Amazon’s new policy will make it much easier for consumers to send back items fulfilled by merchants…creating “parity” with Amazon’s own FBA terms,” says Pat Petriello, Head of Marketplace Strategy.

“…many Sellers have expressed frustration with how this will impact their own operations, the policy change is yet another in a move aimed at making the shopping experience better for consumers on Amazon,” according to Petriello.

However, it is Petriello’s opinion that this new policy will also encourage Sellers to move more of their inventory into Amazon’s fulfillment network…or adhere to the new “customer friendly” terms, both of which should improve the Amazon customer’s experience.

Petriello pointed out that, “…from a practical standpoint, marketplace Sellers who aren’t already leveraging FBA are at a significant disadvantage when it comes to maximizing product visibility and conversion with this update serving to accelerate that reality.”

The Bottom Line…

If a customer today decides to return an item they have purchased, Amazon will notify the seller via an email.  Funds from that sale are debited from the seller’s account and held by Amazon awaiting the customer’s return of the product.

Normally, when a customer decides to return an item, Amazon gives them about 30-45 days to entertain that transaction.  If a customer fails to return the product, Amazon will usually return any withheld funds back to the seller.

It is during this time frame that the seller will typically contact the customer to find out why they have inquired about returning their purchase.  If it is because they do not understand how to use the product correctly or some other issue that can be handled by the seller’s customer service department, the merchandise may never be returned and the customer is satisfied.

Under the new policy this contact by Amazon to alert the seller will not likely take place nor will the seller have a chance to satisfy the customer to reduce the chances of the return taking place at all.  On top of that, the costs for this return will fall directly upon the seller with no chance of intervention on their behalf.

October 2^nd….and ticking

At Mosaica we are constantly attempting to provide our clients meaningful information that will assist them in protecting their profits.  Most of the time this means we are focused on their international foreign exchange management, however, when we feel something as important as this new Amazon policy needs to be addressed, we make it our business to help protect your business.

Make an appointment with one of our Executive Account Managers today to discuss this new Amazon policy and how you can thrive under it without necessarily resorting to FBA if you don’t want to.

 

 

Amazon Sales Tax Amnesty Alert!

…the clock is ticking

There is a temporary sales tax amnesty program that certain Amazon sellers may qualify for.  The Multi-state Tax Commission is in the process of rolling out a new amnesty program that would allow online sellers to waive any potential tax liabilities they may be facing.

Thirteen states have now joined this program with at least eight more considering participation.  Amazon sellers who use the Fulfillment by Amazon program have roughly $2 Billion in unpaid tax liabilities according to the MTC.

These tax liabilities are based on an estimated $2 Billion in uncollected sales taxes that sellers failed to collect on digital marketplace consumer purchases.  This opportunity is a chance to waive those obligations as a part of this new multi-state agreement.

A Baker’s Dozen…

This past Wednesday, thirteen States announced a new sales tax amnesty program for online merchants who sell on Amazon as well as other digital marketplace sites.  For three months starting August 17^th, sellers with potential outstanding tax liabilities will be able to sign up with the Multi-state Tax Commission (MTC) thus enabling them to become compliant and pay their sales taxes …only on future sales.

This is a tremendous opportunity to reset the sales tax collection process for literally thousands of online sellers.  It is possible that this type program will never be offered again by the participating States working with the MTC.  For that reason it is worthy of thoughtful consideration by those companies that may have such tax liabilities facing them.

Currently, the States that are participating in the program are Alabama, Arkansas, Colorado, Connecticut, Kansas, Kentucky, Louisiana, Nebraska, New Jersey, Oklahoma, Texas, Utah and Vermont.  The MTC has said that there are currently eight additional States considering participation in the program.

The Bottom Line

Many States do not require digital merchants to collect sales tax on online sales if the seller does not have a physical presence in a particular State.  On top of that Amazon also inadvertently complicates matters through some of its Fulfillment by Amazon (FBA) logistical operations.

The FBA program lets Sellers pay a fee to use Amazon’s substantial warehousing capabilities as well as its massive logistics operations.  For an online Seller that uses FBA, it is highly possible that inventory could get shipped to warehouses in certain States that require sales tax to be captured and paid by the Seller.  However, not all Sellers are aware of where this warehousing takes place by Amazon, unknowingly creating tax liabilities.

In fact, Amazon sometimes makes it difficult to know where a Sellers inventory may be stored, leaving Sellers liable for sales tax without their knowledge.  “It’s a huge area of non-compliance,” says Richard Cram, Director of the MTC’s nexus program.

Mosaica would recommend that a digital Seller consider the following suggestions;

• If you are knowingly selling online and your fulfillment originates in one of the thirteen States that are participating in the MTC amnesty program, and you have not been collecting sales tax in those States, you should review the amnesty program to see if it would apply to your situation.
• If you use FBA for your online sales, you should contact your Amazon portal service center and find out if any of your products are inventoried in those thirteen States for fulfillment purposes.

Our goal is to help protect your profits and while our main focus is to do this by helping manage your foreign exchange transactions…the information contained in this article may also help with regards to sales tax liabilities you may be obligated for.

Make an appointment to speak with one of our Executive Account Managers to further explore what Mosaica can do for your company to protect your profits and help chart a successful course through these turbulent waters.

Amazon & Retail Stores

(The Teeter-Totter Rule)

Anyone who has ever played on a playground has probably been on a teeter-totter.  If you don’t remember that playground contraption, it was basically a long board that two people would sit at opposite ends of while it “teetered” on a single pivot point.  When one rider was raised upward…the other rider was lowered to the ground.

The entire premise of the “teeter-totter,” was based on an unequal balance of force resulting in only one rider rising at the expense of the other.   It is precisely that mechanical lever effect that best describes what many are now calling the “Amazon Effect.”

In that regards, the latest Fitch report indicates that the default rate for distressed retailers spiked again in July.  In fact, according to that rating agency, the trailing 12 month high-yield default rate among U.S. retailers rose to 2.9% in mid-July from 1.8% at the end of June.  This unfortunate increase was no doubt impacted by J. Crew which completed a $566 Million distressed-debt exchange effort during that time frame as well.

110%+

Retail bankruptcies have surged 110% in the first of half of 2017.  To that point, if recent trends are an indication…the latter will only get worse as Fitch expects Claire’s, Sears Holdings and Nine West all to default by the end of this year, pushing the retail default rate to 9%!

With the time line for Sears and Claire’s highly likely default a bit more uncertain, Fitch believes that even without a year-end filing for these two major retailers…the retail default rate would be more than 5%.  Placing the retail sectors financial issues in perspective, Reorg First Day has calculated that retail bankruptcies have increased more than 110% in the last 12 months…resulting in more than $6 Billion in debt.

Large, established brands that have gone by the wayside read like a “who’s who,” of major retailers including RadioShack, Rue21, hhgregg, Gander Mountain, Payless Holdings, Pawn America and The Limited….to name a few.  In each of the aforementioned…all of these retailers listed Amazon’s aggressive retail practices as a major contributor to their downfall.

The Bottom Line…

During a mid-year review, Reorg First Day said, “…Many retailers have echoed the familiar cries of those that filed before them…the proliferation of online shopping, rapidly deteriorating brick-and-mortar retail, the rise of fast fashion, hefty lease obligations and shifting consumer preferences.” 

Conventional wisdom says that while Amazon continues to grow exponentially….it is having an equal and opposite reaction regarding the main street and community mall stores.  Much like the “teeter-totter,” of our youth, as Amazon revenue continues to rise, traditional “brick & mortar,” retailers seem to spiral downward.

As this “Amazon Effect,” continues to strengthen it is expected that a cascade effect will eventually turn it inward upon itself.  In other words, once Amazon filters through the weak traditional retailers…one should expect that only the strong, well positioned digital retailers will also thrive under the Amazon Effect.

How can an Amazon digital retailer succeed under this pressure?  One way to help ensure your success is to make solid financial decisions, especially when dealing with foreign currency management  and to do that it is imperative that you have an FX Account Executive that you can trust to support your international efforts.

Make an appointment today to speak with one of our Executive Account Managers to discuss how Mosaica can introduce you to the latest technologies and strategies to protect your profits.