Amazon recently announced plans to expand Seller Central to include sales activity from Shopify, Walmart, eBay, and TikTok Shop.
That deserves some attention.
Amazon is no longer interested in managing just the products sold on its own marketplace. It wants to become the central platform for managing inventory, orders, fulfillment, and eventually profitability across multiple sales channels.
For ecommerce businesses, particularly those selling through several marketplaces, this could be a significant improvement. But there are some accounting considerations worth discussing.
What Is Amazon Changing?
Amazon has offered Multichannel Fulfillment for years. Sellers can store inventory in Amazon warehouses and use Amazon to fulfill orders placed through other platforms.
What’s changing is the amount of information Amazon wants to bring into Seller Central.
The new tools are intended to allow sellers to manage listings, orders, and fulfillment across multiple platforms. Amazon also plans to expand profitability reporting to include information from connected sales channels.
Having that information in one place could eliminate a considerable amount of administrative work.
But managing orders and inventory is not the same as maintaining accurate accounting records.
The Same Product Can Have Very Different Profit Margins
Consider a product that costs $20 and sells for $50 on Amazon, Shopify, and Walmart.
The gross profit before selling expenses is $30 regardless of the platform. But the amount the seller actually earns can vary considerably.
Amazon has referral and fulfillment fees. Shopify has payment processing expenses. Walmart has its own marketplace fees. Advertising costs and returns can also vary by platform.
And if Amazon fulfills orders originating on Shopify or Walmart, there are additional fulfillment charges to account for.
Amazon’s proposed profitability reporting could make these comparisons easier. But we would want to understand how those numbers are calculated.
Are inventory costs based on actual landed cost, including freight and duties? Are returns and advertising expenses properly allocated? Are fulfillment expenses recorded in the appropriate period?
Those details matter when determining which products and sales channels are actually profitable.
Inventory Is Where Things Get Interesting
A seller might have 5,000 units stored in an Amazon warehouse, with those units available for sale through several marketplaces.
That’s convenient from an operational standpoint. But the accounting still needs to track what happens to those units.
How many were sold? How many were returned? Were any damaged, lost, or disposed of? Were there reimbursements or other inventory adjustments?
And does the ending inventory balance agree with the accounting records?
Amazon may be able to provide better information about inventory movement across multiple platforms. That would certainly help.
But tracking inventory quantities and properly valuing inventory are two different things. The cost of inventory sold still needs to be matched with the related revenue, and the remaining inventory needs to be accurately valued.
One Order, Multiple Platforms
Consider a customer who purchases a product through Shopify that Amazon fulfills.
Shopify records the sale and processes the payment. Amazon ships the product and charges a fulfillment fee.
The accounting needs to capture the sale, payment processing expense, cost of goods sold, and fulfillment expense. Those transactions may appear in different reports and settle at different times.
This is why recording marketplace deposits as revenue doesn’t work. Deposits are the net result of sales, fees, refunds, and other adjustments.
Even if Amazon consolidates the operational information, the underlying transactions still need to be reconciled.
What We Will Be Watching
Amazon is making an interesting move. Rather than competing only for marketplace sales, it’s positioning itself to manage more of the infrastructure behind ecommerce businesses.
That could benefit sellers, particularly those struggling with disconnected systems and inconsistent reporting.
It could also make businesses more dependent on Amazon for their inventory management, fulfillment, and operating information. That’s something owners should consider.
We’re particularly interested in how Amazon develops its profitability reporting. If it can reliably capture sales, inventory costs, advertising, fulfillment expenses, and returns across multiple channels, it could become a useful management tool.
But accurate monthly financial statements still require reconciled transactions, properly valued inventory, and consistent accounting methods.
Amazon appears to be making multichannel ecommerce easier to manage.
Whether it can make the accounting easier remains to be seen.