Third-party marketplaces allow Walmart and Amazon to expand the range of goods they offer and give customers more choice, which, in turn, breeds loyalty. Or at least that’s how it works in theory.
But giving real estate to independent sellers comes with risks. We caught a glimpse of this when Walmart.com was listing pro-gun shirts in the wake of store shootings and an investigation by the Wall Street Journal found Amazon was selling nearly 4,200 unsafe products, which the report defined as deceptively labeled products or products deemed unsafe or banned by federal agencies and regulators.
Both retailers say they vet their sellers and have policies and tools in place to monitor them and their listings. But, as the marketplaces grow, they become increasingly difficult to police—and that may be particularly problematic for Amazon.
When asked if Walmart plans any policy changes, a spokesman said the retailer has “rigorous automated and manual checks on our site that search for prohibited items, including those that glorify violence.” When an item like a pro-gun shirt is not caught, “we add rules to block it and similar items in the future,” he added.
The system works. In 2015, Walmart made a policy decision to stop selling confederate flag merchandise after a hate crime shooting in Charleston that targeted black churchgoers. Four years later, a search for “confederate flag” on Walmart.com yields just a single result for the state flag of Mississippi.
Amazon reportedly said it would remove confederate flag merchandise, too, but listings for third-party products like a confederate flag tapestry, pillowcase and coffee mug were live as of Aug. 30.
The big task of policing the Amazon Marketplace
To be fair, Amazon has a lot more turf to patrol. Walmart would not disclose how many third-party sellers use its marketplace, but its 2019 annual report noted about $15.7 billion of U.S. net sales in fiscal 2019 were related to ecommerce. Third-party sales alone on Amazon were $160 billion in 2018, according to CEO Jeff Bezos’ last shareholder letter.
Amazon knows the risks associated with its sellers. In its 2018 annual report, the company said it “may be unable to prevent sellers in our stores … from selling unlawful, counterfeit, pirated or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others or otherwise violating our policies.”
As a result, the company acknowledged the Amazon Marketplace “could harm our business or damage our reputation, and we could face civil or criminal liability for unlawful activities by our sellers.”
While it’s too early to tell how this will play out, three U.S. senators sent a letter to Bezos this week to express “grave concerns” over the sale of unsafe products and calling on him to remove problematic items, conduct an investigation of its policies, and institute changes that will keep unsafe products off the site. They also reminded him it is illegal to sell recalled items under the Consumer Product Safety Improvement Act of 2008, with violators facing civil penalties of up to $15 million.
An Amazon spokesperson said the company plans to respond to the letter and referred additional comment to a blog post about its “industry-leading safety and compliance program,” which detailed measures like seller vetting, product policies, compliance specialists, tools and reports.
The spokesperson did not respond to additional questions about whether the 4,152 unsafe items identified by the Wall Street Journal indicate its existing measures are inadequate or whether the company plans to make any changes, including those requested by the senators.
“The conclusion here is something we already knew, which is that Amazon either can’t or won’t adequately police its sellers and protect consumers,” said Larry Pluimer, CEO of the Amazon agency Indigitous. He cited counterfeits, lead-based toys and accident-prone cribs as some of the problematic items, and noted that 40% of third-party sellers are based in China. “There are millions of Amazon [third-party] sellers, and the restrictions Amazon has in place to govern them are inadequate.”
Brooke Niemiec, chief marketing officer at agency Elicit, shared Pluimer’s concern that policies are almost never completely successful in preventing items from slipping through the cracks.
“And, when you’re dealing with the volume of third parties and brands that massive retailers are faced with today, the challenge of policing these products is daunting,” Niemiec added.
“The balance here has to be on safety and property rights”
When it comes to counterfeit, low quality or dangerous products like electrical cords and USB cables, Bret Carmichael, founder of branding agency Leap Works, said Amazon is playing “a game of cat and mouse” with bad actors who will almost always find ways to manipulate safeguards.
Niemiec and Carmichael both recommended a marketplace approach that marries AI and machine learning with human oversight. But Amazon says it already does that. Niemiec noted that Amazon may need more time to “make adjustments to find the right balance between automation and human intervention” given its product volume.
Niemiec also suggested using customers to identify offensive products, but Amazon says it does that, too. (She said customer education about process and results could help.)
“The balance here has to be on safety and property rights, and that’s going to require that Amazon be more transparent with customers and brands about its sellers,” Pluimer added.
Ryan Sullivan, chief strategy officer of marketing agency Performics, said brands should take matters into their own hands.
“We advise brands to go to marketplaces with a detailed strategy and be diligent about monitoring listings—both their own and others,” Sullivan said.
That’s because the scale of third-party marketplaces is what he called “clearly a problem without an ideal solution.”
“Brands cannot afford to rely only on retailer controls to protect and manage their brands along-side third-party sellers,” he added. “They need to have a brand safety and enforcement plan and employ independent technology to catch what slips through the retailer filters. Think of this as mystery shopping 2.0.”