Global digital commerce giant Amazon has been stepping up its game in the B2B services sector. The company recently launched a revamped version of its B2B online marketplace, Amazon Business, allowing businesses to connect with each other and sell and procure goods online. Now, the conglomerate has expanded its supplier financing program across eight new countries.
According to reports, Amazon had previously only offered supplier financing to businesses in the U.S. and Japan. But on Monday (June 29), Peter Faricy, head of Amazon Marketplace, told Reuters the program will offer short-term working capital loans in additional countries where the company operates third-party, seller-run marketplaces. Those markets include Canada, France, Germany, India, Italy, Spain, China and the U.K.
As credit becomes a significant factor in the competition for new vendors and capturing market share, retailers are turning to what some consider to be risky loans to continue the growth of their vendor base.
But Amazon told Reuters that it will mitigate risk by implementing internal data analysis. Plus, it will collect loan payments from vendors’ sales proceeds, lessening the risk for repayment default.
“We know a lot about our sellers’ business and invite only those who we think are in the best position to take capital and grow,” said Faricy, adding that the company’s algorithms will assess which sellers are most reliable for a loan based on how often they run out of stock, how popular their products are, and their inventory cycles.
The invite-only program offers three-to-six month financing of loans up to $600,000 to help merchants purchase necessary inventory, reports said. Amazon reported early success with its seller financing in the U.S. and Japan, with more than half of borrowers coming back for another loan. While no specific figures were given, the company said it has already facilitated hundreds of millions of dollars in loans since the program first began in 2012.
According to analysts, the venture will be especially important for China, not only as Chinese SMEs seek supplier financing, but also as Amazon looks to compete with the nation’s eCommerce behemoth Alibaba. Alibaba already offers supplier financing through its Ant Financial unit.
“Amazon has very little share in China,” said Wedbush Securities analyst Gil Luria in a Reuters interview, “and they haven’t been able to break out of that, so this is a very important, necessary step for them to be able to grow.”