‘Deterring The Ill-Intentioned’: Amazon Ramps Up Efforts To Screen Out Bad Actors On Its Marketplace, But It Still Needs To Do More

Amazon
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is trialling two new programs to screen new sellers on its online marketplace, acknowledging a problem with fly-by-night operators, fraudsters, and counterfeiters. These programs, both of which are only active in very specific markets, are a good start. But there is much more the retail giant could be doing to protect both brands and customers. 

The new programs

One method, which was rolled out on a pilot basis in select markets, requires new sellers to get verified through a video call. According to Techcrunch, more than 1,000 sellers had used the video verification program as of April. “As we practice social distancing, we are testing a process that allows us to validate prospective sellers’ identification via video conferencing. This pilot allows us to connect one-on-one with prospective sellers while making it even more difficult for fraudsters to hide,” Amazon said in a statement to Techcrunch. 

Amazon is also currently advertising three positions for a ‘Seller Onboarding Associate’ whose primary duties include “collecting the required information and documentation and conducting the relevant verification” before the merchant can start selling on Amazon. The verification and onboarding tasks the Associate is required to do could take place on Amazon’s premises, or at the seller’s place of business. There are currently job openings in New York, Santa Monica, and Seattle. 

Seller verification is something that Amazon has largely automated in the past, relying on screening tools to prevent rogue merchants from defrauding customers. But for brands selling on Amazon and many customers who’ve received fake products, it’s clear that primarily relying on machine-led systems was not enough. Hand-to-hand combat is needed, and bad actors need to know the risk of being caught is high. 

But it’s still not enough

The problem with these programs is that they are very limited in their scope. Could three Seller Onboarding Associates meet every new seller in the U.S. in person?  Unlikely, given that the research company Marketplace Pulse counts 70,000 new sellers on the Amazon US marketplace in 2020 so far.  

The most notorious source of counterfeiting and fraud comes from China. Last year, the Wall Street Journal discussed Amazon’s heavy recruitment of Chinese sellers as being a significant source of this activity. It’s unclear if any additional hurdles have been created for new Chinese-based sellers. 

Amazon needs to do what they do best: scale up their onboarding and verification programs. And fully automating it is not the answer. I have encountered many devastating examples of false-positives caused by Amazon algorithms recently: products being suspended for incorrect price-gouging claims during the pandemic, and new merchants having their accounts suspended because competitors vengefully reported their products as being counterfeit. While Amazon does need to scale up its detection systems, they also need more human intervention and thoughtful judgement calls. 

More hurdles are needed

Video screening and in-person visits need to be supplemented with other hurdles that will deter and catch bad actors. 

I have written previously about a small change that will put more pressure on merchants, one which is already in place in most international Amazon markets but confoundingly, not in the U.S. market: simply publishing the seller’s physical address and business details to their seller page. Doing so would put more public accountability on sellers and allow customers to do their own due diligence. Sunlight is a great disinfectant.

Here are some other things that Amazon could be doing. 

• Requiring proof of physical address by sending direct mail with a code that needs to be verified within 30 days. Google
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  does this very well with their system of verifying new businesses for Google Places. Each Amazon seller should have a unique address – address matches would be red flags since some sellers will be using mail forwarding services. Not a deal-breaker on its own, but all accounts with matching addresses could be more closely investigated.
• Validate business phone number through an automated call
• Additional verification through a D-U-N-S number if its a business registered in the U.S.
• Follow through with Amazon’s long-held requirement for product liability insurance. This is a requirement of all sellers, but I have never heard of Amazon actually calling for proof of it. The cost of product liability insurance is not usually a substantial expense to a genuine retail business, but it’s certainly a barrier to entry for fly-by-night operators who are only out to make a quick buck.

None of these should be deal-breakers on their own, but data points that Amazon could use to investigate outliers. All of this should be done without telling the new seller about the verification tools. This will catch bad actors who supply false information.

All these things sound pretty straight-forward and scalable to enact, especially for one of the most powerful companies on earth. In 2019, Amazon spent $500MM on anti-counterfeiting programs and removing bad actors. Relative to their gross merchandise volume, this is a small amount, all while public concern over counterfeits and fraud seemingly escalates. It begs the question, does Amazon actually want to fix this problem, or do the 2,527 sellers joining the marketplace every day actually present more opportunity?