I'm curious what Amazon does to collect debt from sellers

So I have an interesting story from a few years back from a warehouse landlord I know.

One of his tenants was renting space there to start an Amazon business, this guy talked about his new business like he was going to be a top seller or something and how easy it was going to be once the money starts rolling in (you can see where this story’s going already). He ordered not one, but TWO full containerloads of products from China (this was a Chinese national btw). He processed all the stuff at the warehouse, and sent a bunch of it to FBA, and a bunch of it was still in the warehouse. So, a few months go by, guy has basically no sales on anything. Next thing he does is he gets some friends and family to order a bunch of stuff from him to write positive reviews hoping that it’ll get some momentum going. You can take a guess what happened next.

Few months later, the guy went back to China and left all his crap in the warehouse after not paying the past month’s rent, and I’m assuming hasn’t been repaying Amazon his negative balances for storage fees. And we’re talking about a LOT of storage fees. The landlord said there was maybe half a container worth of stuff abandoned at the warehouse (which btw had no value, he said it all looked like low quality junk that wasn’t even worth trying to sell to a liquidator), which means there container and a half was shipped over to FBA. We’re talking thousands of dollars a month in storage fees, and just wait till long term fees kick in.

I’m curious how Amazon handles this situation, I’m sure it’s not the only case where a business failed and left Amazon holding the bag w/ a bunch of junk and not getting paid their fees. This guy must’ve owed tens of thousands of $, and who knows how long Amazon would let the inventory sit there accruing fees until they finally decide it’s time to dump it.

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Storage facilities deal with this all the time. They auction off the contents of unpaid units fairly quickly, pre-pandemic in person, now mostly online. I have attended a few of them but never bid. There was a camaraderie amongst the bidders, for sure. If there are no bidders, the storage facility calls for a dumpster and emptys the unit so it can be rented again.

Most of them know storage tenants who abandon their units are confirmed deadbeats, and rather than taking them to court, write off the whole experience and move on.

Amazon may well take guidance from the storage facility industry especially when their means of charging sellers runs into a dead end, i.e. expired credit cards and closed checking accounts.

Storage facilities must adhere to state laws regarding abandoned property. Amazon probably also has to do so. Lobbyists for the storage facility industry write the laws, obviously in favor of their industry.

I understand that there have been cable television programs about competitive bidding for storage units, but I have never seen any of them.

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I would guess Amazon palatalizes the abandoned items and sells them at their pallet sales. AFAIK they are all blind sales

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Amazon is probably slower at doing this than the typical place though. I mean hell, I have warehouse damaged units sitting in my inventory still from SKUs I stopped selling 5 years ago.

So it says most states give 30 - 90 days to tenants to pay what they owe before their property can be seized and auctioned from a storage unit, so because Amazon has inventory distributed all over the country they probably have to go with at least 90 days at the shortest since they’re not going to partially liquidate a seller’s inventory one state at a time. Then actually picking all those items and processing them is a low priority task. Someone can easily run up 20-30K in fees by the time the products actually leave the FC.

I guess sending a debt collector after a company that didn’t bother to try to get their inventory back is a losing game.

Debt collectors typically get to keep a portion of what they collect. Typically, it costs nothing to turn a debt over to a collector.

This is why there are consumer protection laws attempting to regulate the behavior of debt collectors.

Your question was “What does Amazon do to collect debt from sellers.”

I know of one case personally. An associate of mine somewhere in the United States owed Amazon for many items.

Storage fees, other fees, monthly fees, accumulating subscription fees. And had an outstanding Amazon loan.

The first thing they do is try to get you to put in a valid credit card. I think we all know where that will end up.

I don’t know about other ways they tried, I do know, they had a person, an attorney, or debt collector knock on the door. Eyeball to eyeball.

Problem is I don’t think the world or the courts look at us sellers as “consumers” I know for sure that Amazon does not.

I know of a Seller who ended up having to send Amazon an actual check! :laughing: Amazon will also accept wire transfers.

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So, in the event that things start going bad with Amazon, report your credit card as stolen, and get a new card with a new number, or better yet, report card as stolen, pay balance and close account entirely.

Thanks! :wink:

Ah, the outstanding Amazon loan is probably why a person actually showed up. It’s an “Amazon” loan but it’s not actually issued by Amazon. The creditor is some bank and I believe you have to agree to be personally liable to get that loan. If you default on that they WILL collect on it. The negative Amazon seller account balance you are not personally liable for if it’s a business account, so chances are if a business was mismanaged to the point that they owe Amazon tens of thousands that debt will not be collectable. Do you have any idea how that situation ended up? Did they come after them just for the loan or for everything else as well?

And yes, an Amazon seller account debt is not a consumer debt, that’s a business debt.

In the event I had an Amazon business go south so bad that a lot of money’s owed to Amazon, first thing I would do is cancel the credit card and close the bank account. If they charge the credit card now you owe the credit card company money, and that you’re personally liable for. If you owe Amazon money the worst possible outcome is they sue the (bankrupt) business for it. Fortunately I’ve never had the idea to send multiple containerloads of products to FBA without having any idea of whether they’ll sell or not.

How does amazon cover their loss when there is no CC or bank to collect from?

  • liquidate (in this case, destroy, stop the bleeding)
  • write off against opex
  • charge 15%+ fees across the board from everyone to cover things like this

IOW, we all pay. The same way credit cards collect fees for all transactions, and a good chunk of that is to cover their fraud write offs. If 1% of everything that comes into the warehouse goes bad, then they add 1% to the cost to put things in the warehouse. That also erases any need on amazon’s part to actually do the (more expensive) careful vetting in the first place.

Let the floodgates open, take all the stuff, hike up the fees on good and bad, it all evens out in the wash!

In many cases this is a common misconception. Officers of a corporation may be liable for a variety of debts due to malfeasance on their part. This differs from the protections from liability which apply to shareholders.

Most of the time officers are found personally liable it is due to fraud or gross negligence. Seeing how “products that nobody wants to buy” is probably the #1 reason new businesses fail, it’s unlikely that the veil would pierced for Amazon to collect it’s fees.

It does seem like Amazon is willing to take on this risk to expand it’s product catalog though. I’ve received numerous emails about their “new to FBA” promotion where they’re offering discounted inbound shipping, and free storage and removals. The quantities are limited though (50 units per new ASIN for 90 days), and over time they’ve also gotten better about restricting how much space new sellers can send to FBA right off the bat, probably because they’ve gotten burned with 5-6 figure uncollectable storage fee debts from stupid people.

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Making that mistake often opens the door to other mistakes. It is common to include the officers of a corporation in any lawsuits against the corporation, and usually having to defend oneself is an expensive and time consuming effort. A bankrupt corporation will not defend you. Marginal companies tend not to have insurance protecting their officers and directors.

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This part is true. Even if you’re not liable the costs of defending the lawsuit itself can break you, and a new seller who gets themselves into this situation probably doesn’t have any insurance, let alone directors/officers insurance. Seeing how Amazon now requires the ID of a responsible party, it makes it even easier for them to add that person to any lawsuit.

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