Scott Poole has been selling his company’s products on Amazon for 15 years. The partnership helped him grow the business so that it now makes up to £4million in annual sales. He said, “We had a great relationship.” “Until January.”
The 53-year old has been planning a legal action in order to recover almost £60,000 from his company that Amazon had frozen for nearly a month following what he calls the “diabolical handling” of an audit by UK sellers.
Poole is one of about 100,000 sellers who use Amazon’s British platform. They were informed that they had to confirm their status as UK-based or overseas-based sellers. Amazon launched the verification process to combat VAT fraud, and comply with HM Revenue & Customs regulations that will be implemented in 2021. These rules require retailers to collect VAT and remit it on transactions involving foreign sellers.
By its own admission, it has made a mess.
While the company claims that “the majority” of sellers have been verified with no problems, some sellers’ funds are frozen. This has led to a cash flow crisis for some before the VAT and self assessment deadline.
Liz Barclay is the small business commissioner for the Government. She says that many companies and sole-traders are “facing bankruptcy” and that up to £300,000.00 has been frozen. Sellers have also reported being repeatedly asked to provide verification information. This requires sending sensitive personal documents via email. Barclay reported that a seller had claimed to have submitted the same documents twenty times. Many people also claim that they are unable to contact anyone at Amazon for help in navigating the problems.
One trader on Amazon’s seller forums said that they were “in tears”, and another described the handling of the process by the large company as “disgraceful” and “cruel”. Others have frozen their listings out of fear that sales revenue will simply be added to the frozen funds. Some have said that they are considering leaving the platform.
Barclay gathered complaints from sellers, and sent them to Amazon to try to get it to act. Last Friday, the government sent a letter to sellers, asking them to describe the problem. It said that the information would help it “understand what additional work we might need to do in order to address this issue, and allow us continue to engage with Amazon in order to seek an immediate solution”.
Amazon started the process last January and some sellers have complained that they’ve been struggling with this issue for months. For many, however, the problem began after an email on January 25, 2009.
Amazon will not say how many accounts have been frozen. Barclay however, who does not hold any formal authority over the American group says she has received hundreds complaints. The number of accounts affected may be in the thousands.
The company apologized to the affected parties and said that most of their funds had been unfrozen after they were verified. Last week, some sellers complained that they couldn’t access their funds, while others claimed to have unfrozen funds only for a new freeze to be implemented a few days later.
Paints4trade is a paint manufacturer and distributor based in Essex. It also uses Amazon fulfilment services. The company has around £40,000 worth of stock stored in its warehouses. Poole claims that the high costs of returning the stock make it impossible to ask for it back. However, he does not want to allow it to be sold because it would add to the frozen funds.
He claims to have provided documents such as director’s passports, driving licenses, invoices from suppliers, and bills for utility and business rates. He was asked to prove the residence of his employees, but refused out of fear that he would violate data protection laws. After submitting the documents, an email was sent to him saying that they were incorrect and that he should try again. This happened four times.
He said he asked Amazon’s UK managing Director to intervene but received only a generic reply. He said, “It was diabolical.” “It is unacceptable to receive automated emails and have no human contact. We are partners in business and we should be treated with respect. “We are not treated with the respect that we deserve.”
Poole was preparing to sue Amazon in county court for the amount of the frozen funds. Poole raised his case with Amazon on Friday, and the platform indicated that the funds would be released shortly. Poole confirmed Amazon called him and apologized. He said that his funds would be released to him today.
A second trader who sells hand-made jewellery on Amazon described the platform’s handling the audit as “a farce” and claimed that the process, which appeared to be mostly automated, was “dehumanising”. A seller who requested anonymity said that they had repeatedly sent Amazon sensitive personal documents as part of the verification process. They received an anonymous response in which Amazon asked for them again.
There are fewer complaints since Kevin Hollinrake and Liz Barclay, the minister for small businesses, met Amazon on 9 February, but many accounts still have frozen funds
“I stopped sending the emails. I used to be in data protection, and identity theft was a major concern. It’s unbelievable how much sensitive information was requested. Where are all these data stored? “Is anyone picking it up?”
Amazon stated that it adhered to its own data protection policies and UK laws. Amazon acknowledged the concerns of sellers and announced that it would create a “secure portal”, where sellers can share documents.
The seller stated that they are considering closing their Amazon accounts. “The customer service is useless. Many sellers have been held up for months. This is how sellers make their living. Amazon has hurt many people.
Barclay claimed that complaints have slowed down since she and Kevin Hollinrake met with Amazon on February 9. However, there are still a few people who have not had their funds unfrozen. Some who thought they cleared the system reported their funds were re-frozen in the last week.
Barclay stated: “Nobody criticizes Amazon for adhering to UK law and ensuring that sellers are legal. Amazon is struggling to fix the problem, but something has gone horribly wrong. Sellers, who rely on Amazon to make a living, are now without income, forced to borrow money to pay bills, and facing the loss of their business. Even if the cases are resolved before the sellers hit the wall, trust is gone.”
Amazon’s spokesperson said: “Our partners are extremely important to us and to our customers.
“To comply to VAT legislation and to help combat tax fraud we have recently begun a process of performing additional verification of VAT status for all sellers who sell on our UK Store. We tried to make the process as easy as possible but it didn’t meet our high standards and we apologize to all sellers who had issues.
We are committed to improving and speeding up the process. We have already verified the vast majority of sellers, and are now working to verify as many sellers as quickly as possible.
How many online packages have you received this week? 90% of UK consumers shop online for anything from tools and toiletries to food and gifts. It is bad enough that big packages are hurled around in delivery vans and may contain a small package of screws. But I see the horrible impact of online retailers on small businesses that sell screws.
Customers, including myself, often order products without considering “Who is making money from this?” What does the small supplier get out of this deal? “Who pays the price for cost and convenience?”
We might be proud to name the platform when someone asks “Where did I get that?”. However, the company who made the product may have been a small one, run by a parent trying to earn a living.
The platforms receive fees and commissions from the suppliers of the products we wish to purchase, which reduces the profit they get per item. They gain access to a much larger number of potential customers. They are still working for a big customer who is their boss, but they do not sell directly to consumers.
This boss receives their commissions and fees. My bet is that if your boss did this, you would look for another job. These sellers have built their businesses for years on their preferred platform and are often unable to reach their customers anywhere else.
The seller will be forced to accept any treatment if the platform is a “monopsony”, which is a term used for a market with only one buyer. Otherwise, they risk losing their livelihood. We consumers are unaware that this is the way it works. That our favorite brand treats sellers in this manner. We have become too reliant on convenience and low prices.
This is a vicious circle. We have to shop elsewhere if we want to see small sellers treated fairly, even if we pay a little more or have to wait a few days for our jam instead of getting it tomorrow. We’ll lose those who make the things we love if we don’t.