How many millions does Amazon owe to its 1P vendors, and why won’t they pay out?
By: Lesley Hensell
For years, I’ve heard horror stories from Amazon third-party sellers about inventory lost, damaged or destroyed by Amazon fulfillment centers (FCs). But just when I thought these tales couldn’t get any worse, we started getting calls that 1P vendors are getting ripped off by Amazon at the warehouse level. Amazon owes them hundreds of thousands of dollars, and the e-commerce giant won’t pay up.
How common is this? Probably more common than most people would imagine, since the cases just keep coming in to Riverbend, where we specialize in helping sellers and vendors deal with Amazon problems.
Check out these recent scenarios:
- A snack food vendor shipped product to an Amazon FC. Amazon then put about $40,000 worth of the product on a truck to send to another warehouse. The truck was involved in an accident, and the product was destroyed. The carrier (hired by Amazon) filed a claim with its insurance company, and the vendor was told to expect a resolution and reimbursement in three to five business days. Six months later, no money had come. The vendor hired Riverbend, and after an executive escalation, the vendor finally got their payment from Amazon.
- A long-time Amazon vendor of beauty products had many, many shipments that were not received in a timely manner at the Amazon FC. They filed claim after claim, and Amazon eventually “found” the inventory and paid the vendor for the items. But, even for payments made after two, three or more months, Amazon automatically deducted a quick-pay discount of 2 percent. This discount should not have been taken unless the invoice was paid in less than 30 days. The fraudulent discounts added up to over $300,000. The vendor hired Riverbend and asked us to go after the most recent two years of fraudulent discounts. After multiple executive escalations, we helped them shake $76,000 out of Amazon. Now, we are going after the balance.
We are currently working on more of these appeals, for companies whose inventory was delivered at the FCs but never received. Amazon refuses to pay up, saying they don’t have the items. Yet approved carriers show a signature at the Amazon dock.
These stories bring up many questions:
- Why is there no easy way for vendors to get paid when out-of-process exceptions happen? It seems like there should be some simple methods for vendors to follow, such as reaching out to the Vendor Support team or Accounts Payable. But these emails get no results. Instead, the vendor is told their items is being “researched” by the “appropriate team” – sometimes for months or even years!
- Why does it take Accounts Payable so long to research, respond to and reimburse these issues – which are often quite simple? When a truck crashes and food items are destroyed, clearly the vendor should be paid. There’s no two ways about it.
- What kind of (bad) incentives are in place to encourage this kind of terrible behavior by Amazon team members on behalf of their employers? Amazon’s vendors are – in many times – small businesses. They cannot afford to be ripped off, or even to have payments delayed for months at a time. Yet Amazon FCs feel justified in delaying receipt of goods to positively impact their numbers and slow payments. Amazon Accounts Payable has no problem holding funds – indefinitely – that do not belong to them. In fact, they have no problem wrongly taking millions in discounts – and refusing to reimburse them.
- When Amazon is being watched by the Federal Trade Commission, why would they allow such blatant fraud, abuse, and breach of contract to occur on a regular basis?
If your Vendor account has been stiffed by Amazon, or you have missing 3P inventory that Amazon won’t reimburse, please reach out to our team. We can help.
Riverbend Consulting navigates online retail. Get your Amazon account reinstated, sell with confidence, and increase your bottom line. Contact us.
Lesley Hensell is Partner at Riverbend Consulting, she offers practical know-how to improve retail performance. Lesley’s experience with Amazon compliance gets accounts back up fast.
