November 4, 2009

Amazon's secret: Don't pay, just collect

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A Wall Street Journal report by Martin Peers details some of the secret tactics used by Amazon.com, a company which has never made a profit, to control the book industry by simply delaying payment of its debts.

As Peers begins, “It isn’t a secret that Amazon’s financial success is partly based on its ability to take in money for selling merchandise before it has to pay its suppliers. But lately Amazon has gone one better: steadily lengthening the time it takes to pay suppliers. That has been a factor behind the retailer’s soaring cash flow.”

According to Peers, Amazon has lengthened is “account-payable” delays — 30 days for most of the known world — from an initial 49 days in 2003 to 72 days today. As he notes, this means “that Amazon has not paid suppliers for sales consummated in mid-June.”

The question, says Peers, is “How long can Amazon.com put off paying its bills?”

Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him on Twitter at @mobylives

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