Counterfeit products and merchant account breaches aren’t the only problems Amazon has to deal with on its e-commerce platform. Many of Amazon’s third-party sellers assert that most of the “just launched” merchants on Amazon Marketplace are peddling products that simply don’t exist, offering a low price to entice naive buyers.
Legitimate sellers are immensely frustrated by what they see as fraudulent competition — some even think it’s an attack on Amazon, perhaps Chinese corporate espionage. The direct financial impact on Amazon is hard to judge, let alone the damage to the website’s brand, but sellers’ outrage is very clear.
Amazon denies that “just launched” scammers have a significant impact on their platform. “Amazon has zero tolerance for fraud,” a spokesperson emailed Inc. “We withhold payment to sellers until we are confident that our customers have received the products and services they ordered. In the event that sellers do not comply with the terms and conditions they’ve agreed to, we work quickly to take action on behalf of customers.” Amazon also noted it works with law enforcement to combat fraud.
Here’s how the scam supposedly works: Someone signs up for an Amazon seller account using fake information. They use software to identify the most prominent listings, then say they are also offering those products for sale. (Occasionally the fake seller will build up a couple of months of legitimate activity first, or hijack an established seller account.) People buy from the fake listings, and are told the product will be shipped in a couple of weeks. By the time they realize the product isn’t coming, the fake seller has already made off with the money, and Amazon ends up eating the refund cost.
In March, video game website Polygon noted a rash of unrealistically low-priced Nintendo Switches supposedly for sale on Amazon. “It seems as if Amazon is being gripped by sellers who sign up with fresh accounts, list popular items below market price with a longer than usual shipping range, and then mark the item as shipped once they receive your money. By the time the shipping date has passed and you file for a return, the seller is long gone.”
Polygon’s account is slightly imprecise: Amazon pays its sellers roughly every 14 days, and it doesn’t disburse money to sellers until they confirm that an order has been shipped. But crucially, sellers don’t have to prove the item was actually received. It’s not clear whether Amazon verifies the tracking numbers that sellers provide, but even if they do, a seller could pay for a shipping label and receive a valid tracking number without ever mailing a product.
A Forbes story published in January noted the same pattern that Polygon did. “While Amazon admitted the fraud and backed up these purchases with their A-to-Z Guarantee, it still left me empty-handed on Christmas morning — a state of affairs in which I was not alone,” Wade Shepard wrote.
Posts about scammers are frequent and popular on the Amazon Seller Forums. One person wrote, “Ever[y] single thread on the forums should be this issue until Amazon responds or fixes it. The fact that I have to come here in desperation is unacceptable.”
In numerous discussions with Inc., as well as in forum posts, sellers said Amazon’s buyer-protection guarantee means the company is eating refund costs once customers realize they’ve been scammed. Other sellers have speculated the scammers make money by selling customer information. As with the issue of counterfeits, virtually all sellers are upset by the perceived lack of communication and transparency from Amazon. The majority of the sellers who spoke with Inc. requested anonymity, citing fears the company would retaliate.
“I see these sellers coming and going, coming and going, all day long,” said Fred Ruckel. Ruckel invented a popular cat toy called the Ripple Rug, and he’s dealt with problems on the e-commerce platform before. “All day long there’s sellers that are ‘just launched,’ then gone, ‘just launched,’ then gone. It’s incredible that… their system is not blocking people.”
Ruckel suggested, “All they have to do is say that when you sign up to be a seller on the Amazon Marketplace, you have to give, let’s say, a $1,000 deposit, and that deposit will stay on for six months — or until you’ve shipped X amount of orders and satisfied X amount of customers, so that we know you are a real seller.”
A user on the Amazon Seller Forums wrote, “It is my hope that Amazon impose[s] a policy to limit the number of products offered by new sellers during an automatic vetting period to verify identity and banking.” The user continued, “I cannot believe Amazon is not doing everything they can eliminate these sellers, it must be costing them millions. I think Amazon should be more proactively communicating with their sellers so everyone can be aware of these fraudulent practices and more sellers could assist in removing these scammers.”