Chris: [00:00:07] Hey everybody, welcome to another episode of seller performance solutions. I'm Chris McCabe, of ecommerceChris . Former Amazonian and current seller account consultant. And I'm here with Leah McHugh, who's one of our resident listing compliance experts and consultants and special guest, TJ from Payoneer. We've had you as a guest at our meetup here in Boston before. It's your first time on the podcast and ecommerceChris and Payoneer go way back. So welcome to the podcast. Thanks for joining us.

TJ: [00:00:43] Thanks, Chris. Good to see you and Leah again.

Chris: [00:00:47] And today we've got some interesting stuff.  We're going to be talking about some working capital issues, but first wanted to kick things off with talking about, let's see if I can say this straight. Amazon's preferred payment provider program for peace, apparently.

TJ: [00:01:04] Yep. You did it.

Chris: [00:01:07] Awesome. I mastered that.  Recent, right? February, this kind of kicked off. Maybe, can you define it for people? Maybe some people don't know about it yet. Maybe some people aren't even familiar. So if you could.

TJ: [00:01:19] Sure. So yeah, in February it was kicked off,  as an initiative by Amazon and,  it seems to that it was rooted in China.  So we see there was four providers that were announced as part of this new program.  And ultimately you have to be part of this program if you want to be able to receive funds from an Amazon seller. Now that doesn't include your traditional bank more, these intermediary solutions. So Payoneer is absolutely one of them.  What it is at the core, I believe is a way for Amazon to have a little bit more control over who they're paying funds out to. Ultimately we know compliance and Amazon is a big deal in terms of,  having multiple accounts and having multiple payment solutions and stuff like that. So it's just kind of streamlined each business.  And obviously as the payment provider, we have to be in conjunction and be aligned with what they want.

Chris: [00:02:19] Right. And sometimes it's interesting how Amazon handles this to this entire topic, right? They're not always equipped or ready or flexible enough to, let's just say what? Adjust to the times.

TJ: [00:02:31] Yeah. I personally think that something like this should have come about four or five, six years ago. I really think it's, it's a way of them to try and get a better hold of the Chinese sellers.  We see that out of the first four providers that were named they're all have large presences in China. So for them to just kind of understand what the Chinese sellers are doing when they're selling internationally, we know that they make up a large portion of the third-party marketplace sellers.  They cause a lot of havoc and a lot of good, but a lot of havoc for sellers around the world. So just to try and get a better grasp on who's actually selling on their marketplace.

Chris: [00:03:09] And then, and Leah and I have talked about this, sometimes Amazon surprises us because they're supposed to be, new data and move quickly and be agile and flexible. Like you'd expect an online marketplace. And then sometimes they act bureaucratic and slow and not moving with the times like you experience from a traditional bank. And sometimes that's surprising, but sometimes it's not surprising because we've seen how their other teams and processes, sometimes their tools are not as quickly updated as you'd expect. Right. I mean, a lot of people just expect Amazon to act like a new kind of bank. When is Amazon going to just start lending money in a different way, like a bank would or update their financial processes.

TJ: [00:03:54] Yeah. I think it's an assumption that Amazon is this big tech company.  Which they are, they have incredible tech, on the background, but you also have to remember that, they were started as a company in the marketplace model over 20 years ago. So what they've done is never really had the opportunity to, hit reset. They've always just built on top, built on top, built on top.

Chris: [00:04:16] Yeah.

TJ: [00:04:17] On top of that, unintended is they are very siloed as a business. Right. So, Chris, I'm not telling you anything, you don't know. Seller performance doesn't talk to the payments team, doesn't talk to the advertising team, right? So,  when things try and get changed, I think, other teams, don't get the memo here. They're the other, and that causes delays and backup orders and probably takes it.

Leah: [00:04:41] It's also a very easy way for these teams to pass the buck. So if there's an issue, well that must've been this other team. We had nothing to do with that. And then, it just keeps going through the teams, which is something we've experienced too. So when there are technical problems, I imagine it's quite hard to get them solved with each team, not talking to each other.

Chris: [00:04:59] And things get transferred around and back again, sometimes transferred in a circle and all you lose is time and money.

TJ: [00:05:05] I think it also has to do with them being a truly global company. Right.  If you're talking about the example of a Chinese seller, who's selling it to the U.S. who's helping them? Is it where they're based or is it the marketplace they're selling on?  And then there's the language Issue potentially. And then, we're taking actions past that and, and getting things resolved. So.

Leah: [00:05:26] That's something that I've been pretty surprised about. Not just Amazon, just in general, how not international financial services are. Like, different bank accounts accessing them overseas can be surprisingly difficult in this day and age of globalization. It seems that finance in general really is adapting, but it's always surprised me as somebody who travels a lot, how little it has adapted the global marketplace.

Chris: [00:05:55] But it's, I mean, banking is just small. It's traditionally been a small handful of players. Right. Which is sort of,  the monopoly perspective, which is, unless we absolutely have to change things.

Leah: [00:06:09] Well, that's why we need Fintech. Right?

TJ: [00:06:11] Right. So bridging the gap. I mean, if you look at banking and finance in Europe, in the UK and the EU. Miles and miles ahead of the U.S.  And that Leah,  goes to your point, there's only a few players there. But when you look at, total number of banks and credit unions in the U.S. I think it's now north of like 7,000. And that doesn't even include any of the newer neo challenger banks that are trying to kind of disrupt and bridge the gap for these businesses. So in Europe, when they want it to move to like faster pay or bank to bank transfer.  I've never lived in Europe, but friends, when you want to send funds to someone else, you easily send it via the bank.

Leah: [00:06:57] I had to learn how to write a check when I moved to the U.S. because I had never written a check before. Like, nowhere else uses checks.

Chris: [00:07:04] I still have businesses and services that try to do business with me by check, which I don't do.

TJ: [00:07:11] So the U.S. is incredibly antiquated, in terms of banking.  See these Fintechs as you touched on like the Venmos of the world, but,  even the PayPals of the worlds and the pioneers are trying to bridge the gap between the consumer and the bank or between bank and bank even. But it's a big hurdle because even when we talk about Amazon being 20 years old and stacking their business units on top of each other, as they built. Banks are even older, and even more complex. And when you get into the regulations of, of being a bank or being a MSB, which is a money service business, which is what Payoneer is. There's incredible number of regulations regarding AML and KYC in terms of compliance and anti money laundering. It's a very complex world. I think there's been incredible strides over the last couple of years.  It's still a far way to go, especially for in the U.S.

Chris: [00:08:04] Yeah. The disruption of the U.S. banking industry, I guess, is still years away, unfortunately. But maybe in the next five years, that'll change rapidly. Somebody will figure out how to do it. If not Amazon, some other giant tech company.

Leah: [00:08:17] I think COVID probably pushed the timeline forward a little bit. Like Charles Schwab haven't had branches open for like 12 months now. So they've had to adapt to that in quite a lot of ways.

Chris: [00:08:27] Yeah. I'm glad you mentioned that siloed teams, because it's not that long ago that Amazon started making disbursement appeals. So, publicly different and knowable than emailing seller performance. Seller performance, you to just transfer those contexts, the payments teams, but they wouldn't.  They created this,  disbursement dash appeals at Amazon email address for like, Hey, do you need your money? Oh yeah. We've got all your money and you don't know where it is or why you haven't received it. It's only like 2019 that this became like a major problem where people would. I mean, some people would get suspended. Obviously we're dealing with suspended accounts all the time. They get suspended and then wait 90 days is assuming I'm getting my money.  I don't want to sell on Amazon anymore because I can't figure out what the hell they're doing.

TJ: [00:09:12] Right. 

Chris: [00:09:13] But I want my money. And at 90 days, you wouldn't get it. And you had to start appealing.

Leah: [00:09:16] That's still my favorite Amazon email template though. After careful considerations, we have decided that we're going to keep your money.

Chris: [00:09:22] Yeah. We decided not to disperse your funds. It's like, okay, do you have a legal basis for that? Well,

Leah: [00:09:27] Doesn't matter.

Chris: [00:09:28] Then you get into the whole arbitration and terms of service. That is a story for another time. But, have you dealt with a lot of clients, customers, sellers, who are just changing their strategy around money in general, simply because they know Amazon is more likely to hold their money? Even if they're active, hold their money in reserves for longer without explaining it, in larger amounts? Any of those things, you guys must be dealing with this all the time.

TJ: [00:09:57] Yeah, so at the core of, I think every online selling business, Amazon or not, or every business really is, is cash flow.  And cash flow is, an incredible issue. Significant number of businesses fail because of cash flow issues. So when you now apply that to a business model, like the marketplace selling, where you have to, even before getting to Amazon, you have to pay out money to your supplier. Even a deposit of 30%. Then wait for those items to get to the U.S. under the assumptions coming from China, six weeks, eight weeks. Now you have to ship it to FBA. Another two weeks to get checked in. Then you have to make your sales. Now we're looking at like a significant number of months where you're going to be out money when you still have to pay your rent and maybe any staff. And lastly, probably, yourself.  But any other services,

Leah: [00:10:49] And maybe buy more inventory.

TJ: [00:10:51] Because then by the time you get there and your products are sold,  hopefully, you're selling out like hotcakes, but then you still have to wait for the cycle again. And then, you don't want to lose all your sales rank that you get to. So we realized this a couple of years ago. Obviously no secret. But, we developed a working capital solution,  specifically for Amazon and Walmart sellers.  We were talking before about how it really lends itself to the vendor central side.  Vendors that you are paid on net 60 or net 90 days. Obviously on the third-party marketplace seller side or seller central side, it's, every two weeks. Which can still be a pretty significant gap for some sellers, barring no suspensions or any other issues.

Leah: [00:11:37] Well, even without suspension, we had a few larger sellers last year where, because they were selling such large amounts. Amazon told them we're going to keep a larger percentage in reserve because of this.

TJ: [00:11:49] Was that for like returns or something?

Leah: [00:11:52] They didn't really, I guess a reason wasn't really given. It was just, we've decided that we're going to hold a larger percentage because this is such high volume.  We also had, and this may have been COVID related because things were a bit weird, but we also had people who were selling PPE. So all of a sudden, they sold like a million dollars worth in a month where, before they were only selling a few thousand. And Amazon just decided to keep all of that. They looked into it, like we're keeping all of this until we figure it out. And so there was a period of, we had one client, it took about three months and Amazon was holding about a million dollars worth of their money while they investigate. They weren't even suspended.  They weren't doing, they didn't do anything wrong.

Chris: [00:12:32] They were sellers, they were not newbies. They were perhaps sellers for a while. But in the case that she's talking about, they started selling a different type, a different category, different types of product. But because of the product or just because they're not that agile and flexible with how they manage this. They just carpet bomb. And they're like, well, now we're going to keep this giant reserve. And it wasn't necessarily set up in advance where they understand that you can't just like, hold on hundreds of thousands of dollars of somebody's revenue without impacting their business negatively. And what if-

Leah: [00:13:07] So in the meantime, they had already ordered more inventory and no payments to their suppliers were coming due. They were still selling, but they weren't getting any of their cash back. So we have these people coming to us. I mean, that's an extreme case, but we were regularly having conversations with people who were like, well, I can't afford to do anything about this because I have tens of thousands or hundreds of thousands of dollars being held up.

TJ: [00:13:30] Right. And I think that circles back to. Maybe that's an extreme situation, especially during COVID, but a lot of businesses in terms of capital are not always planning far enough ahead. And they're only going to look for the capital when they've already needed it for too long. And that's kind of what, where we sit is like. You as an online seller or an Amazon business. You're probably going to have a tough time going to your bank to get a traditional loan or,  a traditional loan from any sort of non-bank alternative. Whereas, our product was specifically made for marketplace sellers and Amazon sellers in the sense that we know that the natural ebbs and flows of selling online. You could sell out, your listing could get hacked, you can lose the buy box and all these things happen. But, you as a business, we'll understand where you come from and work with you. And that's why our collection is a percentage base. We take a percentage of each disbursement and not, you know, five grand, every two weeks you owe us.

Chris: [00:14:39] Right. Right.

TJ: [00:14:40] You know, things happen, especially in the online selling world. So what I always say is,  there's a ton of solutions out there for working capital and, be prepared for before you need it, you know, what your options are. And then also there's a lot of different options within that. And make sure you figure out which one's right for you and for your business, especially in terms of the terms and obviously the price or cost.

Chris: [00:15:04] I mean, as you know, we're well versed in telling people how to avoid a suspension and how to prepare for one in case it hits. But the side conversation there is, have some reserves, have some resources ready to deal with an account suspension. You'd be surprised how many people don't. Or listing not just an account suspension, because that might happen less often to them, but their top selling ASIN goes down. And they're like, oh, we're not prepared for this. We don't, have other skews that we've launched to make up for some of that business loss. Sometimes they don't have money to hire us to come in and take over. So they start doing it themselves and they muck it up. But either way they weren't ready. Right. I mean, different, depending on how you define that. In terms of setting aside money.

Leah: [00:15:50] Yeah. Not to get all Dave Ramsey about it, but emergency funds are a useful thing to have.

Chris: [00:15:56] Right. No, I mean, you gotta be prepared for this type of stuff because random stuff happens, whether it's a competitor jumping on your list , nailing your listing or if it's Amazon itself and competent stuff, technical, glitches, whatever. So, we're definitely big believers in getting people to prepare for this stuff in advance.  Do you notice that people are taking some of these business decisions a little bit more seriously now?  Given the uncertainties of spelling on Amazon, they're kind of getting around to, understanding the complexities and planning for them or is it sorta like, well, we've got a rainy day fund, but.

TJ: [00:16:30] Obviously we're much more into the financial side now of the,  financially prepping yourself.  But what I also see is businesses being way more controlled with their actions on the marketplace to make sure that they're not setting off any red flags that Amazon could review them for. Even if you're a hundred percent good seller,  things are gonna happen.  So just being more cautious about,  maybe not ramping up to go from a thousand dollars a month to a hundred thousand dollars a month. You know, more gradual payments. And making sure you're not having five different Amazon accounts. Right. So like making sure you're selling within all the terms of service.  I think it very much used to be the wild wild west,  maybe 2014, 15, 16. But when we talk about taxes and financial compliance, especially in the EU, a couple of years ago, definitely. There was some wild, wild west actions there from both U.S. and Chinese sellers. But I think , everything has been sort of brought in-house. Unfortunately, I think Amazon got pressured by the local governments, which is good because it definitely leveled the playing field for everyone. Not only the domestic sellers in the EU or in the UK, but for the Chinese sellers, for the US sellers for global business. We're seeing that in the US too. So with the marketplace facilitator act, I think where the states actually collect the sales tax. So,  there should be less,  price gauging and undercutting because , the Chinese supplier doesn't pay the middleman and they don't pay taxes. So their price is $5 less than yours , and we are seeing a little bit of levelness out in that and sellers playing by the rules, which they have to do.

Leah: [00:18:15] Yeah. I feel like it's almost split more where,  there were maybe more people not paying as much attention to the rules a few years ago. Now people are either paying more attention to the rules or people are like going total other side. And they're like, I'm just going to do all of this illegal stuff. Like, cause we're seeing a lot more abuse on the marketplace. So then the sellers you were less inclined to. Or maybe even they weren't doing blackhat before, but they were doing what they would consider grayhat. They're moving more onto the compliance side and then the black hat people are just going full throttle.

Chris: [00:18:49] There's a divide.

TJ: [00:18:50] I think some people are not going to change their methods. And if they get shut down they're going to turn around and try and create a new account and do it again. Right. Unfortunately that' s just a bad actor.

Leah: [00:19:02] Yeah. But we are certainly seeing more people coming to us before they're in trouble to have us look at their account.  See if there's anything that they're doing incorrectly or things that they should be doing differently to reduce that risk . We're seeing a lot more risk avoidance than we were say a few years ago.

Chris: [00:19:17] Yeah. I think that'll continue as well. I think word is out. Sellers are better educated now on what can potentially happen to them, whether they're established or new. And some of these brands have too much money on the line to risk it. So they're taking it more seriously. They're more aware of how random this stuff can be, whether it's Amazon itself or like a competitor messing with them. We'll see, we'll see what the Andy Jassy era is like more automation, harder to communicate with Amazon. There's going to be more strife and friction around payments issues to be sure. So they'll have to be ready for them. Yeah. But thanks TJ so much for joining us on this podcast. Best way to reach you?

TJ: [00:19:55] Feel free to connect with me via email  tjhy@payoneer.com.

Chris: [00:20:03] Great.  Looking forward to speaking with you on these interesting issues again, and thanks everybody for listening, we will catch up with you next time.

TJ: [00:20:11] Thanks guys.