With this move the e-commerce giant is overhauling the supply chain in its marketplace so as to retain sellers and prevent them from going to rivals such as Ebay and Wal-Mart.
On Wednesday, an executive from Amazon.com Inc disclosed that the world’s largest online retailer has stepped up lending to third-party sellers on its site who are looking to grow their business.
In the last 12 months, Amazon.com has given more than $1 billion to its sellers in the form of small loans, said Peeyush Nahar, Amazon’s vice president for Marketplace. He went on to add, sellers have utilised the funds to either expand their inventory or provide discount to boost their sales on Amazon.
A hike in the sales of third-party merchants on its platform is very lucrative for Amazon since it takes a cut out of those transactions.
Amazon has also provided more leg room to sellers by allowing them to pay a small fee to fulfill their orders and boost their placement in search results, which is key to grabbing shoppers’ eyeballs and concluding a purchase.
Amazon stated it had doled out small loans, ranging from $1,000 to $750,000 with interest rates between 6%-14%, to more than 20,000 small businesses, more than half of whom have opted to take a second loan from the company.
The move may help sellers stick to Amazon’s marketplace rather than move to rivals, including Wal-Mart Stores or eBay Inc.
“We do tell them it’s to help them grow on the Amazon Marketplace,” said Nahar.
After the 2008 financial crisis, traditional lenders have shied away from small merchants. This has created an opportunity for Amazon. Although this opens Amazon to additional risks, the e-commerce giant has near real-time data on sellers’ businesses and access to their customer reviews, all of which are key components in deciding in their loan profile.
Significantly, the loan program is invitation-only and has been restricted to sellers in the U.S., UK and Japan.
The loan program will eventually expand to other countries in its marketplace, including, France, Canada and China.
As for when it will do so, “Stay tuned” said Nahar.