Actually it should be the Bank of Amazon, but I didn’t think it would be as eye catching. But then when I started writing, it might behave been a better title. Just over two weeks ago Amazon announced a lending programme to invited resellers in the UK.
Yes, that is what I said they are offering loans to resellers. Or initially to resellers of their choice. My first reactions were that this was a very smart move by Amazon. The details are sketchy, as the announcement was a bit under the radar, but they would select certain retailers and offer them funds to develop and they would take the repayments from commissions.
As a business initiative, it is pretty clever stuff. Amazon would have a company’s complete history on revenue flows, in much more detail than any bank or financial institution. It would also have a pretty good idea on the margins enjoyed by resellers. In terms of security, it would be a fairly sound proposition. If Amazon saw a reseller experiencing falling revenues it could assist in increasing its revenues, until the repayments had been made. Clever stuff, but a double edge sword for the reseller.
However, on reflection, and a lot of reflection wasn’t needed for this, there are some nasty bits. Two come to mind.
Firstly, Amazon are building a huge data base, which will quite soon reach a level , unmatched by any other institution, of any description, in the world. They are accruing sales data at an alarming rate, now they will be garnering related financial data.
Secondly, should they decide to extend this offer to other resellers, it raises the spectre of the Amazon market place favouring resellers with loans against self funded sites.
At the moment, this is all slightly hypothetical, as there are no details. I don’t know how the loans would be structured, apr’s, payment terms, plus how national governments would view or define these loans on a local level. In the USA, where they have already started the programme, the loans can be anything from $1000 to $600,000 and the repayments are generally over months as opposed to years. Moreover, it is not a totally new idea as a similar scheme has been run by PayPal.
Whilst currently owned by eBay, PayPal is due to be siphoned off as a seperate company in 2015. Hence with the operating differences between eBay and Amazon, plus PayPal becoming a seperate company. There are few similarities.
As to whether it is a good or bad thing is too early to tell. My initial reaction is of concern with the long term attitude of Amazon towards their resellers who they are assisting with finance against those who are being self financed or funded by third parties. Commercial logic would suggest favouring those who owe them money.
I suggest it will not be long before we begin to see what are the intended consequences of this financial munificence.