For those who don't know MyCommerce is a platform for selling software online. They're merchant of record, they handle taxes, generate license keys, etc so they're a bit higher level than Stripe or PayPal. We're with them since 2005. Things started going south in August. July payment was due on August 15 but never came. Few days afterwards they sent and email that they're changing contract terms and that payments will now be sent 60 days instead of 15 days after the month. Sadly, I didn't switch to another payment processor immediately that day - accountants were on holiday, we were investigating our options, and we were generally happy for 20 years with them. We switched only in September, where they worsened contract terms even more, introducing monthly fee, hourly fee for support, increased payment thresholds, etc. By the time we switched, MyCommerce already sat on entire revenue from July, August, and half of September. Their support is not helpful.
This is not only about us, it's about myriad other vendors, mostly small ones. Unfortunately, we didn't have online space to share our findings and experiences. I only found today that it was discussed on kvraudio forum, and a bit on LinkedIn. There are many small vendors who are now in a hole for tens of thousands of dollars/euros.
It looks pretty much that MyCommerce / DigitarRiver Gmbh are in financial trouble. There are news of layoffs and new management. It's questionable whether we'll see any of our money and when. But the troubling part is MyCommerce still operates and takes orders. If there are vendors who still only know about what MyCommerce officially told them and wait for delayed payments - please reconsider your position.
https://www.kvraudio.com/forum/viewtopic.php?t=612462
https://www.kvraudio.com/forum/viewtopic.php?t=614929&start=...
https://www.linkedin.com/posts/lorant-barla_mycommerce-digit...
Still, their cut is around 5-10%, depending on how much they dip on the exchange rate. That means they hoarded 10-20x of their usual profits for July, August and September from all the other vendors. I sure hope that they didn't spent all that or moved it to a parent company. But the fact that we're not hearing any official statements suggests otherwise.
Companies like this are usually run as a barely sustainable ponzi scheme. Any money they might have had is long gone. They're paying your September revenue with money from their October sales, and they plan to pay your October revenue with money from their November sales.
Then suddenly their sales take a big hit, perhaps because a big merchant left, or perhaps because of a general economic downturn. They still need to pay out their other merchants' October revenue, but their November sales are not enough to cover it. What happens is that they announce that from now on, payment terms will be net 60 instead of 15 or 30. This is the first big red flag. The plan is to wait for December sales. Maybe that will solve the problem in the short term. Maybe it won't, and if it doesn't, by January everyone is in deep shit.
That means they were at most taking a half of future month for "ponzi buffer". Couldn't be more than that, if we assume they were not accruing debt. Which they most probably did, but for the sake of high-level analysis we could assume they were at zero.
They're now all of a sudden sitting on a July, August, and in most cases good piece of September sales. They basically went from 15 days of "extra ponzi buffer" to 45 day. If we include July, which they also didn't pay - they're now sitting on 75 day of revenue. That's quite the extra money compared with extra buffer they were operating with until recently, depending on how we look - 5 times more.
We should also take into account that MyCommerce margin is between 5 and 10%, depending on order size and how much of currency exchange they take. So their operating expenses should be around that. Even if they lost some big clients and let's say lost half of the sales, their expenses should went from 10% to a 20% of a single month. But they're sitting on full 2.5 months of now, 25 times more than their typical expenses.
Something is way off, that can't be explained with gradual slip into ponzi scheme.
One explanation was that Kaspersky was so big for them, it made 90% of sales. When they left the platform, their operating expenses went from 10% to 100% (using napkin math, we're only guessing anyway).
However, since they had a huge layoff in July I assume they're adjusting their expenses to the loss of such a big client. Layoff in US was without severance, based on reports. Since they continued collecting money from other vendors, and not paying them, and considering that they accumulated multiple months of full revenue compared to the usual 5-10% of a single month they should still have MUCH more money at hand.
It's very likely that they're transferring that money to another entity. Perhaps paying off a big creditor, which might be legal, but they intentionally picked to pay off one single creditor with big legal team instead of hundreds (thousands?) small defenseless vendors. And they lied to these small vendors to make them stay a bit more and siphon some more money for that other party.
In essence, they told us to stay with them and bring them more sales which at that point they were already planning to send to another party. This very much looks like a fraud and theft.
Assume, for illustration purposes, that they had a monthly revenue of $10M, of which $7M was Kaspersky sales.
15 days after their last month with Kaspersky, they need to pay Kaspersky $7M (minus fees), as well as $3M (minus fees) to their other merchants. But now they're only making $3M a month. Whatever payment schedule they can get Kaspersky to agree to, they still don't have enough money left to pay their other merchants.
Of course every company should save up for a rainy day, especially if they are exposed to this kind of risk. Unfortunately, many companies don't, either out of incompetence or out of malice -- which tend to become indistinguishable at these scales.