It would be great if a seller could synchronize its available stock at the warehouse with the different marketplaces (there is a huge list of these… like very, very huge) and then lay back and let sales just occur. Unfortunately, things still get a bit messier from here. The sales process will, in most cases, take a few weeks. Rarely less than 1, and commonly anywhere between 3 and 6. During this time the cash outflow continues. Attracting traffic to your products, PPC, product listing optimization… a strong positioning within the marketplace is more and more a full-time job and it is becoming quite common to use the services of an agency for this. Guess what? So far, more cash outflows, 0 inflows.
Eventually, sellers sell their stock. And just when they thought that they would see the proceeds from those sales hitting the bank account, marketplace payouts step in. Marketplaces retain those funds for 14 to 21 days (another 2 to 3 weeks). This is done to allow for a potential refund. But it also serves to finance the marketplace's own working capital. What is a positive (remember this is negative) working capital for the seller is a negative (remember this is positive) working capital for the marketplace.
If you did well enough to be able to sell directly to Amazon as Vendor then you are rewarded with payout terms that go up to 60 days. This deserves a whole new post so let’s not get into it here.
To summarize all of the above, the stock-to-sale process can take 4 weeks in a best-case scenario for lucky sellers, and 12-14 weeks for most others. That’s 12 weeks since a seller makes the first payment to a supplier until revenues hit the account. That’s also 12 weeks within which several other payments are required.
Finally, it is also worth noting the difference in size between the outflows and the inflows. Outflows are fairly large and happen in one go. On the other hand, inflows, or sales, are relatively smaller and happen over time.
Based on the briefly discussed cost structure of sellers and their working capital cycle, one can easily identify where the challenges for a seller come from: sellers need to wait for the marketplace payout to happen before they have available resources to stock up again.