Amazon.com, Inc. Refunds Are A Cashflow Nightmare (For Sellers)

Amazon.com Inc (AMZN)

Amazon.com, Inc. (NASDAQ :AMZN)  is changing its returns policy, and the result could be very scary for sellers. The firm, known for its cost-cutting dominance of e-commerce, is making it easier for customers to return goods they bought on the site. Sellers who operate through the platform are up in arms about the changes.

Starting from October 2 customer returns on Amazon will be “automatically authorized.” That means small sellers won’t have the option of disputing the return before the box shows up at their office. These returns will also take place at the expense of the merchant. That’s likely to increase their costs. Already it’s resulting in some outcry among smaller sellers on the platform.

Sellers react to Amazon.com, Inc. returns policy

The returns policy was revealed in an email sent out to sellers this week. One seller who contacted CNBC about the policy said that it would “will totally crush small businesses that fulfill their own orders”. The full details of the policy can be found here.

Amazon.com vs THE Amazon

That doesn’t mean that the firm is going to stand down just yet. Most small and medium sized e-commerce concerns can’t avoid the platform. It’s a massive, and growing, amount of US online purchasing.

Still, the stress on sellers could be so great that they end up abandoning the firm’s sales channel. In recent years Amazon.com, Inc. (NASDAQ :AMZN) has pushed its sellers and they have stuck with Bezos’ business.

Amazon will give sellers an opportunity to appeal refunds, but only after they’ve arrived. How the firm handles that process could make the difference in merchant contentment. Merchants will also, at their discretion, be able to opt into returnless refunds. This is likely especially useful for low value items that will cost more to return than to refund.

Also, and this is the crux for most sellers, merchants will be allowed to exempt a certain number of items. This number appears to be anything up to 50,000. That means that all but the biggest sellers will be unaffected if they take care.

The move appears to be part of the firm’s campaign to offer the same experience whether they buy third or first party products on the site.

Amazon stock could suffer

It’s very hard to tell what Wall Street wants from Amazon stock. There seems to be broad trust in the firm’s growth mission, but those holding shares would also like to see some kind of consistent earnings growth to prove the firm’s acumen. In its most recent earnings report, the company showed just the opposite.

What effect will the new refunds policy have on the firm’s cash generation? That depends on how big the protest from sellers is. If merchants can’t make money, they’ll stop selling. There has already been huge outcry over refund scams on the site in recent months. An automatic return policy could make those issues graver.

The returns policy shows one thing. Amazon CEO Jeff Bezos is willing to do anything to keep customers happy. He wants prices low and customer service high.

Amazon.com, Inc. is still one of the hottest stocks on Wall Street, and the firm is downright dominant in online retail. Michael Pachter of Wedbush Securities recently said that investors are willing to put up with anything if sales growth continues. With their cash flow in trouble, we’re about to see if sellers can keep to the same discipline.

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