E-commerce: payment platforms and returns

Kitebird Goods sells outdoor gear through its own website and runs Kitebird Market, where independent makers list their products. Customers pay by card through a payment platform, which pays Kitebird every few days. Four issues set e-commerce apart.

1. Payouts are net. The platform doesn't send Kitebird its sales. It sends sales less refunds it processed, its processing fees, chargebacks and any reserve it holds. The bank statement therefore never matches the sales ledger. Kitebird records each sale against a platform receivable when the order ships, and reconciles each payout report to that receivable. Unreconciled platform balances are one of the most common sources of error in online businesses.

2. Gross revenue, fees as expenses. For its own inventory Kitebird is the principal: it controls the goods before they pass to the customer. Revenue is the full amount the customer pays; the platform's fee is a cost of a service bought from a supplier, presented as an expense — never netted against revenue.

3. Refunds and chargebacks. Online return rates are high, so Kitebird estimates a refund liability at each month end (as in the retail case). A chargeback happens when a cardholder disputes a payment with their bank: the platform reverses the payment and adds a fee. If Kitebird loses the dispute, the sale is effectively reversed and the fee is a cost.

4. Principal or agent. On Kitebird Market the makers own the stock, set their prices and ship the goods; Kitebird provides the platform and collects payment. Kitebird doesn't control the goods before they transfer, so it is an agent: its revenue is the commission, not the gross order value (IFRS 15.B34–B38). Indicators of a principal include primary responsibility for fulfilment, inventory risk and discretion over price (IFRS 15.B37). Getting this wrong doesn't change profit, but it can overstate revenue many times over — which is exactly why investors and auditors look hard at it.