Digital platforms such as Amazon and Etsy have become vital sales channels for many businesses and have become a particularly important revenue stream for small and medium-sized businesses (SMEs).
However, with these opportunities come challenges, especially when platforms change their policies. Here are some of the legal challenges and obstacles SMEs should be aware of:
Withholding of payments
Recent reports have highlighted that hundreds of Amazon sellers have faced issues with the platform withholding their money.
Such withholding can severely disrupt the cash flow of SMEs, making it challenging to manage daily operations, restock inventory, and even pay bills.
Unclear communication
Amazon introduced a policy in 2016 for new sellers where money would be held for seven days after the delivery date following a sale.
This policy was extended to EU and UK sellers registered before 2016 in August 2023. While Amazon claims to have notified affected sellers three months in advance, many sellers reported that the communication was unclear or went unnoticed in their junk mail folders.
It is therefore vital that businesses regularly check their emails for communication, especially in their junk or spam folders.
Terms of service changes
Third-party platforms frequently update their terms of service. These changes can include commission rates, payment terms, or return policies. SMEs must be vigilant in keeping up with these changes, as non-compliance can lead to account suspension or even legal action.
Intellectual property rights
Selling on a global platform exposes SMEs to a broader audience, but it also increases the risk of intellectual property (IP) infringements.
SMEs must ensure they have the right to sell their products and that they aren’t inadvertently infringing on someone else’s IP rights.
Dispute resolution
Most platforms have their own internal dispute-resolution procedures. While these can be efficient, they often favour the buyer, leaving sellers at a disadvantage. SMEs should be aware of their rights and be prepared to escalate matters if necessary.
Data protection and privacy
Platforms like Amazon and Etsy handle vast amounts of customer data. SMEs must ensure they are compliant with data protection regulations, such as the General Data Protection Regulation (GDPR), to avoid hefty fines and legal complications.
Platform fees and hidden costs
While platforms provide a marketplace, they also charge fees. These can include listing fees, transaction fees, and referral fees. SMEs need to be aware of all associated costs to ensure profitability.
Exclusive agreements
Some platforms may require exclusivity, meaning that SMEs can’t sell their products on other platforms or their own websites. This can limit growth opportunities and put businesses at the mercy of one platform’s policies.
Regulatory compliance
Different countries have different regulations. If an SME is selling internationally through these platforms, they must ensure their products comply with local regulations, from safety standards to import duties.
While third-party platforms offer a vast market and ease of business, SMEs must be prepared for the challenges that come with them. Stay informed, stay prepared, and always prioritise the financial health of your business.
If you would like more information about how we can help you navigate these challenges, please contact us today.