1 00:00:00,040 --> 00:00:04,720 Speaker 1: In July, in the midst of the raging COVID nineteen pandemic, 2 00:00:05,280 --> 00:00:09,160 Speaker 1: the CEOs of the four major technology companies were dragged 3 00:00:09,160 --> 00:00:13,880 Speaker 1: before Congress. They appeared virtually the purpose of today's hearing 4 00:00:13,960 --> 00:00:17,759 Speaker 1: is to examine the dominance of Amazon, Apple, Facebook, and Google. 5 00:00:17,960 --> 00:00:21,759 Speaker 1: That's Rhode Island Representative David Cicillini, the chairman of the 6 00:00:21,800 --> 00:00:25,919 Speaker 1: House Antitrust Subcommittee. Do you swear or affirm, under penalty 7 00:00:25,920 --> 00:00:27,840 Speaker 1: of perjury that the testimony you are out to give 8 00:00:27,960 --> 00:00:30,920 Speaker 1: is true and correct to the best of your knowledge, information, 9 00:00:30,960 --> 00:00:36,560 Speaker 1: and belief, So help you God. Yes. In particular, he 10 00:00:36,680 --> 00:00:40,320 Speaker 1: and the other lawmakers had hard questions for Jeff Bezos. 11 00:00:40,960 --> 00:00:45,320 Speaker 1: They were skeptical. To put it mildly, Lawmakers from both 12 00:00:45,360 --> 00:00:49,480 Speaker 1: sides of the aisle united against him. Why isn't Amazon 13 00:00:49,640 --> 00:00:54,440 Speaker 1: more aggressive in ensuring that counterfeit goods are not sold 14 00:00:54,440 --> 00:00:58,800 Speaker 1: on its platform? Think? This is an incredibly important issue 15 00:00:58,840 --> 00:01:01,160 Speaker 1: and one that we work very hard on. Counterfeits are 16 00:01:01,160 --> 00:01:06,240 Speaker 1: a scourge. I would encourage this body to pass strict 17 00:01:06,360 --> 00:01:09,840 Speaker 1: penalties for counterfeiters and to increase the goods to make 18 00:01:09,920 --> 00:01:13,600 Speaker 1: money off of counterfeit goods being sold on your platform. 19 00:01:13,760 --> 00:01:17,280 Speaker 1: Isn't that correct, Mr Bezos, aren't seller fees now effectively 20 00:01:17,440 --> 00:01:21,920 Speaker 1: subsidizing Amazon's retail division? Congresswoman, No, I don't believe so. 21 00:01:22,000 --> 00:01:24,080 Speaker 1: I think what you're seeing there when you see these 22 00:01:24,280 --> 00:01:27,800 Speaker 1: fees going up in Bezos are are stolen goods sold 23 00:01:27,840 --> 00:01:34,240 Speaker 1: on Amazon, Congresswoman, not, to my knowledge all the once again, 24 00:01:34,360 --> 00:01:37,720 Speaker 1: do you require a real name and address from sellers? 25 00:01:38,319 --> 00:01:41,440 Speaker 1: I believe we do, but let me get back to 26 00:01:41,440 --> 00:01:44,559 Speaker 1: your office with a I'd rather give you the accurate answer, 27 00:01:44,560 --> 00:01:47,040 Speaker 1: but I think we do. It's rare to hear Jeff 28 00:01:47,080 --> 00:01:50,120 Speaker 1: Bezos con on his back foot like this. There's some 29 00:01:50,200 --> 00:01:54,760 Speaker 1: real uncertainty in his voice because government oversight could only 30 00:01:54,800 --> 00:01:58,080 Speaker 1: mean bad things for his company. It could mean fines 31 00:01:58,600 --> 00:02:01,320 Speaker 1: or even antitrust law suits that seek to break up 32 00:02:01,360 --> 00:02:06,520 Speaker 1: the company. The lawmakers focused on Amazon's retail empire, which 33 00:02:06,520 --> 00:02:11,520 Speaker 1: had expanded to an almost unimaginable size. This massive growth 34 00:02:11,560 --> 00:02:16,200 Speaker 1: depended in large part on Amazon's third party marketplace. That's 35 00:02:16,200 --> 00:02:19,440 Speaker 1: where independent merchants from around the world sell their wares 36 00:02:19,480 --> 00:02:23,240 Speaker 1: on the Amazon dot com website. The lawmakers had no 37 00:02:23,480 --> 00:02:28,080 Speaker 1: problem roughing up Bezos. He sounded defensive when asked whether 38 00:02:28,080 --> 00:02:33,200 Speaker 1: those third party sellers weren't also victims of Amazon. Georgia 39 00:02:33,240 --> 00:02:37,519 Speaker 1: Congresswoman Lucy Macbeth had one powerful example. I'm going to 40 00:02:37,600 --> 00:02:40,360 Speaker 1: share the story of a small business owner who is 41 00:02:40,400 --> 00:02:43,360 Speaker 1: also a wife and a mother. So, Mr Bezos, after 42 00:02:43,480 --> 00:02:47,720 Speaker 1: Amazon just delisted this small business without any apparent reason 43 00:02:47,960 --> 00:02:50,760 Speaker 1: or notice, she told us that they sent more than 44 00:02:50,919 --> 00:02:57,080 Speaker 1: five hundred separate communications to Amazon, including to you, Mr Bezos, 45 00:02:57,160 --> 00:03:01,440 Speaker 1: over the past year. There was not a single meaningful response. 46 00:03:01,919 --> 00:03:04,799 Speaker 1: Do you think this is an acceptable way to treat 47 00:03:05,120 --> 00:03:10,760 Speaker 1: someone that you described as both a partner and a customer? Uh? No, 48 00:03:10,880 --> 00:03:14,720 Speaker 1: congress Woman, and I appreciate you showed me that anecdote, 49 00:03:14,960 --> 00:03:17,320 Speaker 1: and I would like to talk to her. It does 50 00:03:17,360 --> 00:03:20,280 Speaker 1: not at all to me seem like the right way 51 00:03:20,320 --> 00:03:25,280 Speaker 1: to treat her. Bezos hadn't heard of her, likely because 52 00:03:25,280 --> 00:03:28,919 Speaker 1: there are thousands of sellers with similar stories. And it's 53 00:03:28,960 --> 00:03:32,200 Speaker 1: also likely that this merchant wasn't delisted by any one 54 00:03:32,360 --> 00:03:36,240 Speaker 1: Amazon employee, but that she got swept up in Amazon's 55 00:03:36,280 --> 00:03:41,080 Speaker 1: automated system. Many politicians and regulators think Amazon is too 56 00:03:41,120 --> 00:03:44,600 Speaker 1: big and wields too much power over these mom and 57 00:03:44,640 --> 00:03:48,680 Speaker 1: pop sellers. As part of this investigation, we've interviewed many 58 00:03:48,920 --> 00:03:53,800 Speaker 1: small businesses, and they used the words like bullying, fear, 59 00:03:54,600 --> 00:03:59,880 Speaker 1: and panic to describe their relationship with Amazon. Bullying, fear 60 00:04:00,360 --> 00:04:04,240 Speaker 1: and panic hardly the words Bezos had in mind when 61 00:04:04,280 --> 00:04:08,119 Speaker 1: he conceived the marketplace twenty years ago. Sellers can wake 62 00:04:08,200 --> 00:04:11,600 Speaker 1: up one morning and find their business in crisis. There 63 00:04:11,600 --> 00:04:15,880 Speaker 1: are vulnerable to negative reviews posted by competitors that tank 64 00:04:15,960 --> 00:04:19,840 Speaker 1: their ratings. A merchant hawking the exact same product can 65 00:04:19,880 --> 00:04:23,920 Speaker 1: accuse them of peddling unsafe or counterfeit items. And when 66 00:04:23,960 --> 00:04:28,400 Speaker 1: Amazon's algorithms detect even a suggestion of questionable conduct, they 67 00:04:28,400 --> 00:04:31,680 Speaker 1: can automatically close a seller's account and put them out 68 00:04:31,680 --> 00:04:36,600 Speaker 1: of business altogether with no explanation, leaving a small business 69 00:04:36,600 --> 00:04:41,839 Speaker 1: owner scrambling to figure out why you're listening to Foundering. 70 00:04:42,279 --> 00:04:46,360 Speaker 1: I'm your host, Brad Stone. In this episode, we're going 71 00:04:46,400 --> 00:04:50,400 Speaker 1: to tell the story of the Amazon Marketplace, the always surprising, 72 00:04:50,839 --> 00:04:55,919 Speaker 1: often chaotic, and hugely successful side of Jeff bezos retail empire. 73 00:04:56,720 --> 00:04:59,719 Speaker 1: This is the business that helped make Amazon profitable in 74 00:04:59,760 --> 00:05:02,920 Speaker 1: the dog days after the dot com bust and helped 75 00:05:02,960 --> 00:05:06,480 Speaker 1: the company to fund projects like Alexa and Prime Video. 76 00:05:07,600 --> 00:05:10,320 Speaker 1: It's a story that starts with yet another non intuitive 77 00:05:10,360 --> 00:05:14,120 Speaker 1: decision by Bezos to let indie merchants sell stuff on 78 00:05:14,160 --> 00:05:19,640 Speaker 1: the website right alongside Amazon's own products. That decision would 79 00:05:19,680 --> 00:05:24,040 Speaker 1: have life changing ramifications for millions of sellers around the world. 80 00:05:24,720 --> 00:05:37,159 Speaker 1: We'll tell you that story after the break. So in 81 00:05:37,240 --> 00:05:40,960 Speaker 1: that somewhat disastrous testimony in front of Congress, Jeff Bezos 82 00:05:41,000 --> 00:05:43,760 Speaker 1: actually told the story of the birth of the marketplace. 83 00:05:44,279 --> 00:05:46,960 Speaker 1: Twenty years ago, we made the decision to invite other 84 00:05:47,000 --> 00:05:50,680 Speaker 1: sellers to sell in our store. We believe that combining 85 00:05:50,720 --> 00:05:53,760 Speaker 1: the strengths of Amazon Store with the vast selection of 86 00:05:53,800 --> 00:05:57,360 Speaker 1: products offered by third parties would be a better experience 87 00:05:57,400 --> 00:06:01,880 Speaker 1: for customers. Fortunately, we were right. They're now one point 88 00:06:01,920 --> 00:06:05,400 Speaker 1: seven million small and medium sized businesses selling on Amazon. 89 00:06:06,240 --> 00:06:09,280 Speaker 1: So if you shop on Amazon dot com, you can 90 00:06:09,320 --> 00:06:13,760 Speaker 1: buy some listed items directly from Amazon. This is merchandise 91 00:06:13,800 --> 00:06:17,120 Speaker 1: that Amazon bought from a wholesaler and sells to the customer. 92 00:06:17,640 --> 00:06:21,400 Speaker 1: It's acting like a regular retailer like Walmart or Target. 93 00:06:22,360 --> 00:06:25,800 Speaker 1: But in most cases Amazon customers are buying things on 94 00:06:25,839 --> 00:06:30,760 Speaker 1: the site from other people or companies. That's the Amazon marketplace. 95 00:06:31,440 --> 00:06:36,000 Speaker 1: These days. The Amazon marketplace is a massive, unruly world 96 00:06:36,080 --> 00:06:40,919 Speaker 1: undo itself. It has over a billion products two million sellers, 97 00:06:41,720 --> 00:06:44,680 Speaker 1: and one of the primary people responsible for the size 98 00:06:44,680 --> 00:06:48,680 Speaker 1: and scope of the marketplace was a guy named Peter Pharisee. 99 00:06:49,760 --> 00:06:52,479 Speaker 1: Peter ran the music and movie business during his early 100 00:06:52,520 --> 00:06:56,560 Speaker 1: years of the company until an unusual opportunity put him 101 00:06:56,560 --> 00:07:00,680 Speaker 1: on Jeff Bezos radar. In two thousand eight, Peter was 102 00:07:00,720 --> 00:07:04,080 Speaker 1: asked to host Amazon's annual all hands meeting, and he 103 00:07:04,120 --> 00:07:07,480 Speaker 1: found a special guest. Getting asked to host the all 104 00:07:07,600 --> 00:07:12,920 Speaker 1: hands meeting was like a treasured gift, and coming into it, 105 00:07:13,560 --> 00:07:16,320 Speaker 1: I was looking for, well, gosh, what's the unique thing 106 00:07:16,840 --> 00:07:19,200 Speaker 1: that we could do to really make this all hands 107 00:07:19,200 --> 00:07:21,840 Speaker 1: meeting special. We had this idea of let's just try 108 00:07:21,880 --> 00:07:23,560 Speaker 1: to get a you know, a big celebrity and a 109 00:07:23,600 --> 00:07:26,480 Speaker 1: big name, so to skip ahead. We got really lucky 110 00:07:26,480 --> 00:07:31,240 Speaker 1: and we got Tom Cruise, Yes, the Tom Cruise, Maverick 111 00:07:31,600 --> 00:07:37,200 Speaker 1: Ethan Hunt, the couch jumping Scientology, proselytizing action star. Peter 112 00:07:37,320 --> 00:07:40,800 Speaker 1: remembers that all hands meeting that's kind of magical, and 113 00:07:40,880 --> 00:07:44,560 Speaker 1: perhaps his greatest accomplishment was not booking Tom Cruise, but 114 00:07:44,640 --> 00:07:49,520 Speaker 1: impressing his boss, Jeff Bezos, who was clearly enthralled by cruise. 115 00:07:50,040 --> 00:07:52,760 Speaker 1: So it was an incredible all hands meeting. The energy 116 00:07:52,800 --> 00:07:56,960 Speaker 1: and the audience was incredible. Uh, Tom and Jeff talked 117 00:07:57,040 --> 00:08:00,600 Speaker 1: backstage about space, rockets and planes and they had They 118 00:08:00,680 --> 00:08:02,440 Speaker 1: turned out they actually had quite a few things in 119 00:08:02,480 --> 00:08:04,920 Speaker 1: common when it comes to space and space travel. So 120 00:08:05,000 --> 00:08:07,440 Speaker 1: that was that was fun to see. And after the 121 00:08:07,520 --> 00:08:10,920 Speaker 1: all hands meeting ended, it ends with Jeff, you know, 122 00:08:11,000 --> 00:08:12,520 Speaker 1: doing a Q and A. So it's he and I 123 00:08:12,640 --> 00:08:16,760 Speaker 1: on stage together and he came over and I remember correctly, 124 00:08:16,800 --> 00:08:18,480 Speaker 1: he either shook my hand or gave me a hug. 125 00:08:18,520 --> 00:08:20,280 Speaker 1: I may have hugged him. I don't remember what it was, 126 00:08:20,320 --> 00:08:22,880 Speaker 1: but it was like, that was great, and he invited 127 00:08:22,920 --> 00:08:25,559 Speaker 1: me back to lunch afterwards with he and the S team. 128 00:08:26,240 --> 00:08:28,920 Speaker 1: That's the senior team that was leading the entire company. 129 00:08:28,960 --> 00:08:32,160 Speaker 1: So I thought to myself, wow, uh, this is this 130 00:08:32,240 --> 00:08:35,400 Speaker 1: is great. So Peter is invited to a lunch with 131 00:08:35,440 --> 00:08:38,840 Speaker 1: the most important people at Amazon, and that lunch would 132 00:08:38,880 --> 00:08:42,400 Speaker 1: turn out to be pivotal because Bezos clearly took notice 133 00:08:42,400 --> 00:08:44,800 Speaker 1: of Peter, and I was shocked to get a call 134 00:08:44,880 --> 00:08:48,439 Speaker 1: from him a couple of weeks later saying, um, we 135 00:08:48,480 --> 00:08:51,360 Speaker 1: have a new role. We want you to take and 136 00:08:51,520 --> 00:08:55,840 Speaker 1: we have three businesses that are really struggling. One of 137 00:08:55,880 --> 00:08:58,720 Speaker 1: them is called the marketplace, and that's all we want 138 00:08:58,760 --> 00:09:02,480 Speaker 1: you to go lead. So I was on the other 139 00:09:02,600 --> 00:09:05,000 Speaker 1: end of the phone, um, you know, and not knowing 140 00:09:05,000 --> 00:09:07,080 Speaker 1: what to say exactly I was. It was such a 141 00:09:07,120 --> 00:09:10,160 Speaker 1: different twist that I sort of imagined he was really 142 00:09:10,200 --> 00:09:13,800 Speaker 1: surprised he was asked to change jobs to lead the small, 143 00:09:13,960 --> 00:09:18,360 Speaker 1: sad team of about thirty five engineers their goal to 144 00:09:18,480 --> 00:09:22,240 Speaker 1: bring third party sellers onto the site to compete against 145 00:09:22,240 --> 00:09:25,320 Speaker 1: their own colleagues. As I came to find out, it 146 00:09:25,360 --> 00:09:29,680 Speaker 1: was a very small, underfunded, uh team going through a 147 00:09:29,679 --> 00:09:31,520 Speaker 1: really tough time, you know. And this was one of 148 00:09:31,559 --> 00:09:34,640 Speaker 1: the teams with an Amazon that people would say, Wow, 149 00:09:34,840 --> 00:09:36,640 Speaker 1: you know, I don't think he want to go over there, 150 00:09:36,720 --> 00:09:39,839 Speaker 1: because those guys are struggling to get stuff done and 151 00:09:39,880 --> 00:09:43,120 Speaker 1: the morale looks pretty poor. People were jumping ship. So 152 00:09:43,360 --> 00:09:46,000 Speaker 1: I sort of said to myself, Wow, I wonder if 153 00:09:46,000 --> 00:09:49,600 Speaker 1: the cruise thing went very poorly actually, because why would 154 00:09:49,640 --> 00:09:53,640 Speaker 1: Jeff ask me to run this struggling business. At the time, 155 00:09:53,920 --> 00:09:57,760 Speaker 1: the Amazon Marketplace was an unsuccessful backwater at the company. 156 00:09:58,080 --> 00:10:01,480 Speaker 1: It was mostly a place where people sold used books, CDs, 157 00:10:01,559 --> 00:10:05,400 Speaker 1: and DVDs. It represented maybe a quarter of all sales 158 00:10:05,440 --> 00:10:08,960 Speaker 1: on the site, but Basos thought it could be bigger. 159 00:10:09,840 --> 00:10:12,400 Speaker 1: If sellers could offer a lower price or get a 160 00:10:12,400 --> 00:10:16,120 Speaker 1: product to customers faster, they should win the sale over Amazon. 161 00:10:16,960 --> 00:10:20,560 Speaker 1: The idea struck a lot of employees as nuttie. It's 162 00:10:20,559 --> 00:10:22,840 Speaker 1: one of those things you sort of raise your eyebrows 163 00:10:22,840 --> 00:10:25,319 Speaker 1: on when you join the company, like, tell me this again. 164 00:10:25,400 --> 00:10:28,600 Speaker 1: So I'm running our retail business, which you would also 165 00:10:28,760 --> 00:10:31,760 Speaker 1: like me to enable thousands of people across the world 166 00:10:31,800 --> 00:10:35,679 Speaker 1: to compete against us on our same platform on an 167 00:10:35,679 --> 00:10:39,640 Speaker 1: even basis to serve our customers. So, you know, honestly, 168 00:10:39,679 --> 00:10:41,680 Speaker 1: it was sort of no one had ever done this before. 169 00:10:41,760 --> 00:10:44,320 Speaker 1: You know, you don't go into a retail store and 170 00:10:44,400 --> 00:10:48,439 Speaker 1: see your competitors products on the shelf next to years. 171 00:10:48,840 --> 00:10:52,720 Speaker 1: That didn't happen. Peter thought it was counterintuitive. In fact, 172 00:10:53,080 --> 00:10:59,400 Speaker 1: most Amazon employees thought it was counterintuitive. Why inviting the competitors. Well, 173 00:10:59,800 --> 00:11:02,800 Speaker 1: theelo realized that more sellers on the marketplace meant a 174 00:11:02,840 --> 00:11:07,800 Speaker 1: greater selection of products, That more products meant more customers, 175 00:11:07,880 --> 00:11:11,960 Speaker 1: and those buyers would in turn attract more sellers. All 176 00:11:12,000 --> 00:11:15,959 Speaker 1: of this would make Amazon a richer, more prosperous company. 177 00:11:16,400 --> 00:11:20,240 Speaker 1: Bezos posed a fundamental challenge for Peter. He asked this 178 00:11:20,280 --> 00:11:23,760 Speaker 1: new marketplace team, how would you get a million sellers? 179 00:11:24,520 --> 00:11:28,400 Speaker 1: It is a classic way of thinking at Amazon. You know, 180 00:11:28,840 --> 00:11:31,280 Speaker 1: if you frame the question, how would we grow our 181 00:11:31,360 --> 00:11:34,800 Speaker 1: seller based by ten percent next year? You'll probably get 182 00:11:34,800 --> 00:11:37,839 Speaker 1: back and answer that delivers ten percent, which would be small. 183 00:11:38,640 --> 00:11:41,200 Speaker 1: When you start the question by saying, how would I 184 00:11:41,240 --> 00:11:44,400 Speaker 1: get a million more sellers into the marketplace, you know 185 00:11:44,720 --> 00:11:48,000 Speaker 1: that can't be answered quickly, and obviously it's it's going 186 00:11:48,040 --> 00:11:51,600 Speaker 1: to take an enormous amount of innovation here. So Peter 187 00:11:51,760 --> 00:11:54,400 Speaker 1: realized that you couldn't recruit a million sellers one by 188 00:11:54,400 --> 00:11:58,599 Speaker 1: one with salespeople making phone calls. He needed sellers to 189 00:11:58,640 --> 00:12:00,920 Speaker 1: sign up on their own and go into business with 190 00:12:00,960 --> 00:12:05,400 Speaker 1: Amazon dot Com. They called it a self service system. 191 00:12:05,520 --> 00:12:08,000 Speaker 1: One of the big lessons I learned from Jeff actually 192 00:12:08,240 --> 00:12:13,720 Speaker 1: was the importance of using technology to build self service 193 00:12:13,800 --> 00:12:16,400 Speaker 1: in order to scale. Over the ten years I ran 194 00:12:16,480 --> 00:12:20,240 Speaker 1: the business, more than eighty percent of all the businesses 195 00:12:20,240 --> 00:12:23,559 Speaker 1: who sold their products on Amazon came in through self service. 196 00:12:23,960 --> 00:12:26,560 Speaker 1: They never talked to a human being. I noticed some 197 00:12:26,600 --> 00:12:30,560 Speaker 1: people This might sound kind of techno dystopian, but Peter's 198 00:12:30,600 --> 00:12:34,160 Speaker 1: big win. The reason why the Amazon marketplace became so 199 00:12:34,320 --> 00:12:38,120 Speaker 1: dominant it was because it depended on technology rather than 200 00:12:38,200 --> 00:12:42,280 Speaker 1: people to grow. But this self service grow at all 201 00:12:42,360 --> 00:12:45,920 Speaker 1: cost mentality is also why the marketplace would later generate 202 00:12:46,200 --> 00:12:51,160 Speaker 1: so many problems for Amazon, unfairly punishing many sellers and 203 00:12:51,240 --> 00:12:55,680 Speaker 1: drawing the attention of Congress. We'll tell that story next. 204 00:13:07,360 --> 00:13:10,000 Speaker 1: So the early two thousand tens were a great time 205 00:13:10,080 --> 00:13:14,720 Speaker 1: for the Amazon marketplace. Their primary rival at the time, eBay, 206 00:13:15,040 --> 00:13:19,360 Speaker 1: was in decline. Now eBay sellers were jumping on Amazon. 207 00:13:20,240 --> 00:13:23,920 Speaker 1: Through Bezos's self service system. They could sign up, list 208 00:13:23,960 --> 00:13:27,840 Speaker 1: their wares, and start selling. But this is the Internet 209 00:13:27,960 --> 00:13:32,079 Speaker 1: where things change fast. Pretty soon Peter Ferisse and his 210 00:13:32,200 --> 00:13:36,520 Speaker 1: colleagues noticed they had real competition. Sellers in China were 211 00:13:36,559 --> 00:13:39,960 Speaker 1: signing up for a site called wish dot com, operated 212 00:13:40,000 --> 00:13:43,920 Speaker 1: by a San Francisco company. It allowed sellers anywhere in 213 00:13:43,960 --> 00:13:47,360 Speaker 1: the world to sell products online to buyers anywhere else 214 00:13:47,400 --> 00:13:50,959 Speaker 1: in the world. Ali Express, an arm of the Chinese 215 00:13:51,040 --> 00:13:55,120 Speaker 1: Internet giant Ali Baba, was doing the same thing. For 216 00:13:55,240 --> 00:13:59,520 Speaker 1: Peter Pharisee. It's struck close to home when our oldest 217 00:14:00,000 --> 00:14:02,040 Speaker 1: as a freshman in college, I all of a sudden, 218 00:14:02,080 --> 00:14:05,560 Speaker 1: I see a charge for Allie Express on my credit 219 00:14:05,600 --> 00:14:07,960 Speaker 1: card and I and I say to myself, well, I 220 00:14:08,000 --> 00:14:10,880 Speaker 1: know that wasn't me. So I wonder what happened here. 221 00:14:11,440 --> 00:14:15,000 Speaker 1: And it turned out that my son bought a basketball 222 00:14:15,080 --> 00:14:18,720 Speaker 1: jersey on there, and so did all of his college roommates. 223 00:14:19,240 --> 00:14:21,600 Speaker 1: And he didn't even understand that Ellie Express might be 224 00:14:21,600 --> 00:14:24,880 Speaker 1: a competitor to Amazon. All he knew is all of 225 00:14:24,920 --> 00:14:29,440 Speaker 1: his roommates were constantly buying new sports clothing on Ellie Express. 226 00:14:29,480 --> 00:14:31,960 Speaker 1: That's a wake up call. It was a signal to 227 00:14:32,000 --> 00:14:35,960 Speaker 1: Peter that the Amazon marketplace could be in trouble. Sellers 228 00:14:35,960 --> 00:14:38,880 Speaker 1: in China were the cost to make goods as much lower. 229 00:14:39,240 --> 00:14:42,000 Speaker 1: We're suddenly competing head to head with sellers in the 230 00:14:42,040 --> 00:14:47,160 Speaker 1: West were costs were higher. It was classic Internet style disruption. 231 00:14:47,880 --> 00:14:51,240 Speaker 1: When we saw a Wish and Allie Express, it really 232 00:14:51,280 --> 00:14:54,080 Speaker 1: broke one of the principles we had in mind, which is, well, wait, 233 00:14:54,600 --> 00:14:59,080 Speaker 1: people won't want things that are delivered that slowly. And 234 00:14:59,160 --> 00:15:02,480 Speaker 1: it turned out actually some people will. Some people are 235 00:15:02,480 --> 00:15:06,360 Speaker 1: willing to make the trade off between much more higher value, 236 00:15:06,480 --> 00:15:09,840 Speaker 1: you know, much lower cost and slower shipping time, and 237 00:15:09,920 --> 00:15:13,240 Speaker 1: so that was a signal for us. So what did 238 00:15:13,280 --> 00:15:17,640 Speaker 1: Amazon do? Of course, they also went to China. They 239 00:15:17,680 --> 00:15:21,200 Speaker 1: decided to follow Wish dot Com and Ali Express and 240 00:15:21,240 --> 00:15:25,440 Speaker 1: allowed Chinese sellers to reach buyers around the world. Peter 241 00:15:25,760 --> 00:15:28,920 Speaker 1: wanted to see things for himself. I took my leadership 242 00:15:28,960 --> 00:15:32,080 Speaker 1: team over to China and at the very beginning of 243 00:15:32,080 --> 00:15:35,040 Speaker 1: this in Beijing, we hosted in kind of a big 244 00:15:35,120 --> 00:15:39,600 Speaker 1: conference center, like a product fair. So Peter and his 245 00:15:39,720 --> 00:15:42,880 Speaker 1: team held this big fair where they invited all sorts 246 00:15:42,880 --> 00:15:45,800 Speaker 1: of merchants based in China to show off their products, 247 00:15:46,240 --> 00:15:51,160 Speaker 1: and it was incredible. You know, these uh robot vacuums 248 00:15:51,160 --> 00:15:53,440 Speaker 1: that we see all over our homes. I mean, we 249 00:15:53,480 --> 00:15:56,720 Speaker 1: saw two or three people who built that. I think 250 00:15:56,720 --> 00:15:59,640 Speaker 1: there was a Chinese company that acquired Segue, so we 251 00:15:59,680 --> 00:16:03,920 Speaker 1: saw multiple versions of the Segue, you know, motorized vehicles, 252 00:16:04,520 --> 00:16:08,760 Speaker 1: and the innovation was just absolutely incredible, and you say 253 00:16:08,800 --> 00:16:12,200 Speaker 1: to yourself, wow, I mean, if we were selling these 254 00:16:12,240 --> 00:16:16,040 Speaker 1: products right now across the world, people would love it, 255 00:16:16,200 --> 00:16:18,520 Speaker 1: you know, because not only were they high quality, but 256 00:16:18,520 --> 00:16:22,200 Speaker 1: they were also great value. On the trip, Peter noticed 257 00:16:22,240 --> 00:16:26,480 Speaker 1: something else. Brand names were under attack. But the most 258 00:16:26,520 --> 00:16:31,440 Speaker 1: incredible thing to see live was the same factories that 259 00:16:31,480 --> 00:16:35,680 Speaker 1: are making the most expensive apparel in the world, also 260 00:16:35,840 --> 00:16:39,120 Speaker 1: on the same factory line, are capable of making something 261 00:16:39,720 --> 00:16:43,880 Speaker 1: equally as beautiful, equally as high quality, and selling it 262 00:16:43,960 --> 00:16:49,000 Speaker 1: for a tenth of the price the price. This could 263 00:16:49,040 --> 00:16:52,880 Speaker 1: have enormous implications for the fashion industry. Peter and his 264 00:16:52,920 --> 00:16:56,240 Speaker 1: team visited a factory that made sport codes for Abercrombie 265 00:16:56,240 --> 00:17:00,760 Speaker 1: and Fitch. Abercrombie sold the jackets for five dollars, but 266 00:17:00,840 --> 00:17:03,840 Speaker 1: it only costs the factory nine dollars to make the jacket, 267 00:17:04,720 --> 00:17:07,240 Speaker 1: And then they took the same code, added a slightly 268 00:17:07,240 --> 00:17:10,720 Speaker 1: different button pattern to it, and sold it directly online 269 00:17:10,960 --> 00:17:14,280 Speaker 1: for ninety dollars and still made a fat profit. So 270 00:17:14,440 --> 00:17:18,280 Speaker 1: pick whoever your favorite designer. Is the same factory that's 271 00:17:18,320 --> 00:17:22,040 Speaker 1: making those clothes, They're also capable of making those same 272 00:17:22,080 --> 00:17:27,119 Speaker 1: clothes um much less expensively. And so what we began 273 00:17:27,160 --> 00:17:30,919 Speaker 1: to see was these entrepreneurs who owned these factories, and 274 00:17:31,000 --> 00:17:32,680 Speaker 1: some of them were US based, some of them were 275 00:17:32,720 --> 00:17:35,640 Speaker 1: China based, they all were coming to the same conclusion 276 00:17:35,680 --> 00:17:39,359 Speaker 1: we were, which is this is gonna significantly disrupt the 277 00:17:39,400 --> 00:17:43,240 Speaker 1: world of brands and brand premium, and from a customer perspective, 278 00:17:43,240 --> 00:17:45,520 Speaker 1: it's like this is going to change the world. It's 279 00:17:45,520 --> 00:17:50,960 Speaker 1: certainly changed the fate of Amazon in Peter Farisee and 280 00:17:51,000 --> 00:17:53,760 Speaker 1: his team threw open the doors of the marketplace to 281 00:17:53,920 --> 00:18:00,000 Speaker 1: international sellers. Overnight, the marketplace tripled in size. The next year, 282 00:18:00,320 --> 00:18:03,640 Speaker 1: the marketplace was responsible for more than half of all 283 00:18:03,720 --> 00:18:07,440 Speaker 1: goods sold on Amazon. Sales in North America took off. 284 00:18:07,960 --> 00:18:14,360 Speaker 1: The annual growth rate jump from tote. Amazon was defying 285 00:18:14,400 --> 00:18:17,840 Speaker 1: the laws of corporate gravity. It's basically unheard of for 286 00:18:17,920 --> 00:18:21,240 Speaker 1: a twenty year old business to start growing even faster. 287 00:18:21,800 --> 00:18:25,720 Speaker 1: As a result, It's stock presumed and Bezos was vaulted 288 00:18:25,760 --> 00:18:28,160 Speaker 1: into the ranks of the wealthiest people in the world. 289 00:18:28,760 --> 00:18:32,720 Speaker 1: Peter Farisee remembers presenting a written report on his team's progress. 290 00:18:33,359 --> 00:18:36,480 Speaker 1: He kept the best feedback and Amazon executive can dream of. 291 00:18:37,240 --> 00:18:42,160 Speaker 1: And so Jeff picked up the document and he held 292 00:18:42,200 --> 00:18:45,200 Speaker 1: it close to his chest, and what I remember him 293 00:18:45,240 --> 00:18:48,639 Speaker 1: saying is I'm gonna take this this document home and 294 00:18:48,680 --> 00:18:53,600 Speaker 1: sleep with it tonight. But there was a serious downside. Remember, 295 00:18:53,640 --> 00:18:58,000 Speaker 1: on the Amazon marketplace, anyone could register and start selling. 296 00:18:58,600 --> 00:19:03,280 Speaker 1: There was hardly any quality control, no seller verification, no 297 00:19:03,440 --> 00:19:08,560 Speaker 1: product safety tests. This had significant repercussions. A family in 298 00:19:08,600 --> 00:19:12,400 Speaker 1: Tennessee is suing Amazon. Half a million hoverboards are being 299 00:19:12,480 --> 00:19:15,960 Speaker 1: recalled after reports that dozens of them have burst into flames. 300 00:19:17,480 --> 00:19:20,280 Speaker 1: Hoverboard fires, like this one at a Houston mall in 301 00:19:20,359 --> 00:19:24,360 Speaker 1: December sparked a major recall. If you own a hoverboard, 302 00:19:24,640 --> 00:19:31,520 Speaker 1: stop using it immediately. It looked like chaos, counterfeits, fake products, 303 00:19:31,560 --> 00:19:36,000 Speaker 1: fake reviews, even house fires. Media outlets around the world 304 00:19:36,080 --> 00:19:40,960 Speaker 1: started investigating the problems of the marketplace, and Amazon belatedly 305 00:19:41,280 --> 00:19:45,119 Speaker 1: tried to tame it. We invested hundreds of millions of 306 00:19:45,160 --> 00:19:48,600 Speaker 1: dollars in innovations to try to fix this at the route. 307 00:19:48,800 --> 00:19:50,960 Speaker 1: You know, and if you've seen what's happening on these 308 00:19:51,000 --> 00:19:55,040 Speaker 1: social media platforms, you can't hire thousands of people and 309 00:19:55,119 --> 00:19:58,840 Speaker 1: play whack a mole looking at every single posting and 310 00:19:58,880 --> 00:20:01,760 Speaker 1: trying to take them down. That's a process that you'll 311 00:20:01,800 --> 00:20:04,680 Speaker 1: lose because there are people out there who have great 312 00:20:04,720 --> 00:20:08,800 Speaker 1: technology and can keep you know, the the whatever whatever 313 00:20:08,880 --> 00:20:11,040 Speaker 1: bad actor things you're trying to do coming at you 314 00:20:11,200 --> 00:20:14,440 Speaker 1: faster than you can stop them. Amazon urgently needed to 315 00:20:14,480 --> 00:20:17,520 Speaker 1: police the marketplace, but the way they would do, it 316 00:20:17,520 --> 00:20:21,399 Speaker 1: would prove to be controversial. Just like they relied on 317 00:20:21,480 --> 00:20:25,320 Speaker 1: technology to create the global marketplace, they would also develop 318 00:20:25,359 --> 00:20:30,040 Speaker 1: technology to keep it in check. Algorithms and automation would 319 00:20:30,119 --> 00:20:34,320 Speaker 1: monitor reviews and probably boot sellers whose products drue complaints 320 00:20:34,320 --> 00:20:38,960 Speaker 1: about quality or safety. For sellers caught in these shifting sands, 321 00:20:39,400 --> 00:20:58,439 Speaker 1: this was the stuff of nightmares. That's next. So the 322 00:20:58,520 --> 00:21:02,320 Speaker 1: Amazon marketplace was now international and all over the world. 323 00:21:02,560 --> 00:21:06,440 Speaker 1: It was making people rich. The biggest Amazon sellers even 324 00:21:06,480 --> 00:21:11,080 Speaker 1: became public companies. For instance, the electronics maker Anchor is 325 00:21:11,119 --> 00:21:15,440 Speaker 1: now worth more than six billion dollars. But not everyone 326 00:21:15,520 --> 00:21:18,960 Speaker 1: was so lucky. Here's James Thompson. He used to work 327 00:21:18,960 --> 00:21:23,040 Speaker 1: at Amazon and now advises Amazon sellers. Consumers just sit 328 00:21:23,080 --> 00:21:25,080 Speaker 1: back and say, Wow, look at all this great selection 329 00:21:25,160 --> 00:21:30,200 Speaker 1: that's happening, not realizing that there is a whole type 330 00:21:30,240 --> 00:21:35,480 Speaker 1: of Darwinism happening every day on the site, and some 331 00:21:35,640 --> 00:21:39,840 Speaker 1: of it is brutal. It's absolutely brutal. It's brutal because 332 00:21:39,880 --> 00:21:42,800 Speaker 1: the competition among sellers from around the world is fierce. 333 00:21:43,600 --> 00:21:46,840 Speaker 1: That's why sometimes you can't even find the same item 334 00:21:46,880 --> 00:21:49,720 Speaker 1: twice on Amazon. Oh I think I bought that set 335 00:21:49,760 --> 00:21:53,040 Speaker 1: of that that the headset last week on Amazon. I 336 00:21:53,080 --> 00:21:55,280 Speaker 1: think I wanna buy another one for my nephew. Oh 337 00:21:55,400 --> 00:21:58,200 Speaker 1: it's not on Amazon anymore. Well, it's not on Amazon 338 00:21:58,240 --> 00:22:01,440 Speaker 1: because either that brand was taken down, or that brand 339 00:22:01,480 --> 00:22:04,919 Speaker 1: no longer exists and it's been replaced with ten other brands, 340 00:22:05,080 --> 00:22:07,840 Speaker 1: or somebody went after that brand and file a bunch 341 00:22:07,880 --> 00:22:11,120 Speaker 1: of fake reviews and the brand is temporarily suspended while 342 00:22:11,600 --> 00:22:14,520 Speaker 1: they work out with Amazon how to get reinstated. All 343 00:22:14,560 --> 00:22:17,359 Speaker 1: this stuff is happening, and as an Amazon customer, you 344 00:22:17,440 --> 00:22:20,720 Speaker 1: just say, Wow, there's ten thousand brands of headsets I 345 00:22:20,720 --> 00:22:23,560 Speaker 1: can buy r T. I lucky. As a customer it 346 00:22:23,760 --> 00:22:28,080 Speaker 1: is choice, choice, choice, It's wonderful. As a seller, it's 347 00:22:28,080 --> 00:22:31,600 Speaker 1: a lot scarier. It's scary for sellers because the same 348 00:22:31,640 --> 00:22:34,000 Speaker 1: technology that makes it easy for them to sign up 349 00:22:34,000 --> 00:22:38,000 Speaker 1: on the marketplace can also take them down. All it 350 00:22:38,040 --> 00:22:40,560 Speaker 1: takes is a couple of reviewers saying they think our 351 00:22:40,560 --> 00:22:44,560 Speaker 1: merchants products are fake, and the algorithms picked this up 352 00:22:44,840 --> 00:22:49,000 Speaker 1: and the next thing you know, the seller's banned. Amazon's 353 00:22:49,000 --> 00:22:52,880 Speaker 1: automated system has little ability to sort out false allegations 354 00:22:52,880 --> 00:22:56,800 Speaker 1: from real ones, and the sellers are at its mercy. 355 00:22:57,160 --> 00:23:00,600 Speaker 1: To better understand this new landscape, we sent our colleagues, 356 00:23:00,640 --> 00:23:03,720 Speaker 1: Spencer Soaper to one of the largest gatherings of Amazon 357 00:23:03,800 --> 00:23:07,840 Speaker 1: merchants in the world. We're at the Las Vegas prosper Show. 358 00:23:08,400 --> 00:23:11,240 Speaker 1: And what you hear um, I'm a new Amazon seller 359 00:23:11,560 --> 00:23:13,600 Speaker 1: and this is our first conference, so we're just trying 360 00:23:13,640 --> 00:23:17,119 Speaker 1: to get some basic information. Okay, what do you what 361 00:23:17,160 --> 00:23:19,800 Speaker 1: do you sew? We saw aftermarket you t V and 362 00:23:19,840 --> 00:23:23,160 Speaker 1: a TV products. So when you say a TV like 363 00:23:23,160 --> 00:23:30,560 Speaker 1: like off roading vehicles, razors and mudsli windshields, winches, mirrors, bumbers. 364 00:23:30,600 --> 00:23:33,880 Speaker 1: The Prosperous Show is all about Amazon, but it's not 365 00:23:34,080 --> 00:23:37,680 Speaker 1: sponsored by Amazon in any way. But selling on Amazon 366 00:23:37,720 --> 00:23:41,480 Speaker 1: can be so confusing and overwhelming, and the rules constantly change. 367 00:23:42,000 --> 00:23:44,680 Speaker 1: The sellers find it helpful to meet in a big 368 00:23:44,720 --> 00:23:48,720 Speaker 1: group and network and swept tips and what kind of 369 00:23:48,960 --> 00:23:52,760 Speaker 1: problems to Amazon seller station? I would say poor communication 370 00:23:52,960 --> 00:23:55,919 Speaker 1: from the Amazon customer support is that can be an issue. 371 00:23:56,280 --> 00:23:58,199 Speaker 1: You're not really sure if they shut your listing now? 372 00:23:58,200 --> 00:24:00,760 Speaker 1: And what the exact issue is us with your listing? 373 00:24:01,160 --> 00:24:05,040 Speaker 1: An abrupt suspension? What do you sell on Amazon? Engagement 374 00:24:05,080 --> 00:24:09,280 Speaker 1: rings and wedding bands while so people buy those on Amazon. Yes, 375 00:24:09,760 --> 00:24:12,639 Speaker 1: I had no idea. And uh so what do you 376 00:24:12,640 --> 00:24:15,480 Speaker 1: sell on Amazon? Pb fit? It's a peanut butter powder. 377 00:24:15,760 --> 00:24:18,720 Speaker 1: It sound like a protein powder. It's kind of tell 378 00:24:18,760 --> 00:24:21,359 Speaker 1: me your name, Okay, my name is Maniche Busche, and 379 00:24:21,400 --> 00:24:25,399 Speaker 1: I'm uh high seven figure Amazon sello. One of the 380 00:24:25,440 --> 00:24:29,399 Speaker 1: most interesting people I met at the Prosperous show was Maniche. Uh. 381 00:24:29,480 --> 00:24:32,080 Speaker 1: He's from Phoenix, Arizona. And what stood out to me 382 00:24:32,160 --> 00:24:34,280 Speaker 1: was that he was ready to talk about numbers that 383 00:24:34,320 --> 00:24:36,080 Speaker 1: a lot of the other merchants didn't want to talk about. 384 00:24:36,320 --> 00:24:39,840 Speaker 1: I seven figure Amazon seller. That sounds very important. And 385 00:24:39,880 --> 00:24:42,399 Speaker 1: what were you doing before this? I was entirely in 386 00:24:42,400 --> 00:24:47,080 Speaker 1: a different trade. I was doing scrib metal trading. You know, 387 00:24:47,119 --> 00:24:50,240 Speaker 1: there was no need of middleman like me, so I 388 00:24:50,320 --> 00:24:53,600 Speaker 1: quit that business. Maniche buys most of the products from China, 389 00:24:53,600 --> 00:24:55,879 Speaker 1: where they're made. Then he ships them to the US 390 00:24:55,960 --> 00:24:58,640 Speaker 1: and he sends them to Amazon warehouses all around the country. 391 00:24:59,440 --> 00:25:03,480 Speaker 1: What's your best selling product? Um, it's a five gallon 392 00:25:03,960 --> 00:25:07,399 Speaker 1: gas can that turned out to be lucrative. It's doing 393 00:25:07,960 --> 00:25:11,560 Speaker 1: three thousand dollars a day. What is the gas can 394 00:25:11,680 --> 00:25:14,800 Speaker 1: cost on Amazon? Is the five gallon one? I sell 395 00:25:14,880 --> 00:25:19,159 Speaker 1: for fifteen bugs, something I get for two dollar fifty cents. 396 00:25:19,160 --> 00:25:22,200 Speaker 1: What percentage of each sale would you say goes to Amazon? 397 00:25:23,359 --> 00:25:26,880 Speaker 1: So I'll say I'm making fifteen Ten to fifteen is 398 00:25:27,119 --> 00:25:30,360 Speaker 1: what I take home. It's your profit margin that's ten 399 00:25:30,480 --> 00:25:34,280 Speaker 1: to fifteen percent. So for every fifteen dollar gas can 400 00:25:34,359 --> 00:25:37,840 Speaker 1: many sales, he pockets about a dollar fifty maybe two 401 00:25:37,880 --> 00:25:42,440 Speaker 1: dollars um. What's the biggest challenge to selling on Amazon? 402 00:25:43,280 --> 00:25:47,520 Speaker 1: Every now and then a lot of hackers attack are 403 00:25:47,560 --> 00:25:51,879 Speaker 1: listening to bring the listing down, and the once the 404 00:25:52,000 --> 00:25:54,600 Speaker 1: listing is down, it takes a couple of days to 405 00:25:54,720 --> 00:25:58,720 Speaker 1: bring it up, so that itself is damage. At least 406 00:25:58,720 --> 00:26:01,800 Speaker 1: your sales is not half think for that period of time, right, 407 00:26:01,880 --> 00:26:06,520 Speaker 1: So Amazon sellers get attacked by rivals. So in a 408 00:26:06,560 --> 00:26:10,199 Speaker 1: lot of cases, someone who sells a competing product, say 409 00:26:10,240 --> 00:26:13,120 Speaker 1: another gas can, will find a way to take down 410 00:26:13,119 --> 00:26:18,360 Speaker 1: as competitors listings. This happens frequently. It's part of why 411 00:26:18,400 --> 00:26:22,520 Speaker 1: these unofficial support systems for sellers exist. Like the Prosper show. 412 00:26:23,560 --> 00:26:27,480 Speaker 1: James Thompson, the guy who advises sellers, has seen many 413 00:26:27,560 --> 00:26:31,840 Speaker 1: of the worst case scenarios. I've seen many people disappear 414 00:26:32,600 --> 00:26:36,440 Speaker 1: because they were so disgruntled, or they made bad initial 415 00:26:36,480 --> 00:26:39,800 Speaker 1: decisions around how to think about which products to sell, 416 00:26:40,280 --> 00:26:42,720 Speaker 1: and they ended up with tens of thousands of dollars 417 00:26:42,720 --> 00:26:45,160 Speaker 1: of unsold inventory that they'll never be able to sell. 418 00:26:45,640 --> 00:26:49,320 Speaker 1: They didn't they didn't monitor the competitive landscape properly, and 419 00:26:49,560 --> 00:26:52,320 Speaker 1: they basically said, all my savings that I thought I 420 00:26:52,320 --> 00:26:54,560 Speaker 1: was going to turn into the next e commerce business, 421 00:26:54,560 --> 00:26:57,680 Speaker 1: it's gone. And that's exactly what happened to a guy 422 00:26:57,760 --> 00:27:01,840 Speaker 1: named Barack Giovanni Basic Glee. Everything that could go wrong 423 00:27:01,880 --> 00:27:05,080 Speaker 1: for an Amazon seller went wrong for him. Like my 424 00:27:05,160 --> 00:27:09,119 Speaker 1: life was so perfect simple, like like I have a job, 425 00:27:09,680 --> 00:27:13,119 Speaker 1: a family, I have like like very simple life, live 426 00:27:13,200 --> 00:27:16,720 Speaker 1: in the same place for so many years. And now 427 00:27:16,760 --> 00:27:18,920 Speaker 1: I'm like waking up in the morning and I don't 428 00:27:18,920 --> 00:27:21,080 Speaker 1: know what next because I need first about to finish 429 00:27:21,080 --> 00:27:25,159 Speaker 1: with Amazon, but Tila will get money from Amazon. I 430 00:27:25,200 --> 00:27:28,200 Speaker 1: have so much debt I cannot I cannot apply into 431 00:27:28,200 --> 00:27:31,399 Speaker 1: a credit card right now. For seventeen years, Brock had 432 00:27:31,440 --> 00:27:34,840 Speaker 1: a clothing store called New York Speed. He mostly sold 433 00:27:34,920 --> 00:27:40,159 Speaker 1: trendy streetwear like Hugo, Boss, Calvin Klein, and Lucky. He 434 00:27:40,200 --> 00:27:43,159 Speaker 1: had a physical store front in l a on Melrose Place, 435 00:27:43,560 --> 00:27:47,720 Speaker 1: and he also sold online on eBay and Amazon. Then, 436 00:27:48,040 --> 00:27:51,679 Speaker 1: when the pandemic hit in the spring of clothing sales 437 00:27:51,680 --> 00:27:54,840 Speaker 1: were down, he decided to close the store and go 438 00:27:54,960 --> 00:27:59,400 Speaker 1: all in on Amazon. Back then, he was telling himself 439 00:27:59,440 --> 00:28:03,240 Speaker 1: Amazon is the future. This decision would end up costing 440 00:28:03,320 --> 00:28:07,120 Speaker 1: him Dearly in mouth two thou twenty, we packed all 441 00:28:07,160 --> 00:28:10,040 Speaker 1: the warehouse and we moved it to Amazon. And this 442 00:28:10,160 --> 00:28:12,240 Speaker 1: was the biggest move that I did in my life 443 00:28:12,240 --> 00:28:14,760 Speaker 1: because imagine, like to take a huge warehouse and just 444 00:28:14,840 --> 00:28:20,639 Speaker 1: to pack every item individually underwell Jean's leather jacket, expensive 445 00:28:20,680 --> 00:28:23,960 Speaker 1: item you're talking about like a lot of merchandise. Brock 446 00:28:24,080 --> 00:28:27,080 Speaker 1: says that all of this merchandise had a retail value 447 00:28:27,200 --> 00:28:31,520 Speaker 1: of eight hundred thousand dollars. Amazon says it was worth 448 00:28:31,560 --> 00:28:35,480 Speaker 1: a quarter of that. Either way, it basically amounted to 449 00:28:35,560 --> 00:28:39,800 Speaker 1: his life savings, and it was all inside Amazon warehouses. 450 00:28:40,640 --> 00:28:43,520 Speaker 1: Then one day he got just about the worst news 451 00:28:43,720 --> 00:28:46,400 Speaker 1: that an Amazon seller can get. You wake up in 452 00:28:46,440 --> 00:28:48,680 Speaker 1: the morning and then the employees calling you and telling 453 00:28:48,720 --> 00:28:50,720 Speaker 1: you that they close your account, and then of course 454 00:28:50,760 --> 00:28:54,000 Speaker 1: your body getting getting sweat all over body, and like 455 00:28:54,000 --> 00:28:56,680 Speaker 1: like you get you freaked out you're going to the office, 456 00:28:56,720 --> 00:28:59,120 Speaker 1: you're calling Amazon and you check what they need, and 457 00:28:59,160 --> 00:29:02,400 Speaker 1: you start and you send them everything. Brock says Amazon 458 00:29:02,480 --> 00:29:06,120 Speaker 1: suspended as account with a little explanation. They seized his 459 00:29:06,240 --> 00:29:10,080 Speaker 1: inventory and froze the money. It was the equivalent of 460 00:29:10,120 --> 00:29:12,800 Speaker 1: going to open your store one day and finding chains 461 00:29:12,840 --> 00:29:17,200 Speaker 1: on the doors. After coming through his own customer reviews, 462 00:29:17,560 --> 00:29:22,240 Speaker 1: Barrock believed that Amazon suspected AS products were counterfeit. This 463 00:29:22,320 --> 00:29:25,920 Speaker 1: is essentially a death sentence for an Amazon seller. Yes, 464 00:29:26,000 --> 00:29:28,920 Speaker 1: and this is like you're ruining somebody life based on 465 00:29:29,240 --> 00:29:32,360 Speaker 1: somebody else giving a review. Now, they don't give you 466 00:29:32,440 --> 00:29:35,280 Speaker 1: enough information. You need to dig to see what is 467 00:29:35,320 --> 00:29:38,120 Speaker 1: the last time that somebody bought this item. And then 468 00:29:38,160 --> 00:29:40,120 Speaker 1: you see you have a jacket that like four people 469 00:29:40,160 --> 00:29:43,760 Speaker 1: bought or two people, and like you're checking if somebody complain, 470 00:29:43,840 --> 00:29:45,959 Speaker 1: it's ours that that you need to do your research. 471 00:29:46,000 --> 00:29:49,240 Speaker 1: They're not telling you all the information like why somebody 472 00:29:49,280 --> 00:29:51,920 Speaker 1: will complain. This is something a lot of people don't 473 00:29:52,000 --> 00:29:55,560 Speaker 1: realize about Amazon. The company can suspend you based on 474 00:29:55,640 --> 00:29:59,200 Speaker 1: mere suspicions that it's up to the merchant to prove 475 00:29:59,240 --> 00:30:03,240 Speaker 1: the Amazon to the products are indeed authentic, and Amazon 476 00:30:03,320 --> 00:30:06,520 Speaker 1: has no obligation to spell out why they're suspending an account. 477 00:30:07,680 --> 00:30:11,680 Speaker 1: This is when Amazon sellers learn a difficult lesson. Amazon 478 00:30:11,720 --> 00:30:14,880 Speaker 1: can afford to suspend them indefinitely because there are millions 479 00:30:14,920 --> 00:30:19,240 Speaker 1: more merchants with millions more products. The disruption for Amazon 480 00:30:19,360 --> 00:30:24,520 Speaker 1: is negligible, but for the individual seller, the consequences are catastrophic. 481 00:30:25,160 --> 00:30:28,320 Speaker 1: And then they stopped communicating with you, and then they 482 00:30:28,600 --> 00:30:32,240 Speaker 1: telling you that they will destroy your merchandise like this 483 00:30:32,400 --> 00:30:34,680 Speaker 1: point like you already live in a nightmare for a 484 00:30:34,720 --> 00:30:37,240 Speaker 1: couple of months. Now they want to destroy your merchandise. 485 00:30:37,280 --> 00:30:39,840 Speaker 1: It's like, why to destroy my life saving? Like like 486 00:30:40,040 --> 00:30:43,000 Speaker 1: this is not happening to me. The threat that destroys 487 00:30:43,080 --> 00:30:46,600 Speaker 1: inventory sounds over the top, right, But it's safe to 488 00:30:46,640 --> 00:30:50,240 Speaker 1: say that Amazon has been extremely sensitive about accusations of 489 00:30:50,240 --> 00:30:55,520 Speaker 1: selling counterfeits because in April, the U. S. Government pointed 490 00:30:55,560 --> 00:30:58,640 Speaker 1: a finger at the company as a haven for fake products. 491 00:30:59,280 --> 00:31:02,720 Speaker 1: The next year, Amazon claims that it sees and destroyed 492 00:31:03,040 --> 00:31:07,800 Speaker 1: two million counterfeit products from its warehouses. It's possible that 493 00:31:07,840 --> 00:31:11,000 Speaker 1: Barack got swept up in this crackdown. He says that 494 00:31:11,040 --> 00:31:13,640 Speaker 1: he sent multiple requests to get at the inventory back, 495 00:31:13,960 --> 00:31:17,400 Speaker 1: but these requests were ignored. Nothing happened. They destroy all 496 00:31:17,400 --> 00:31:22,040 Speaker 1: your merchandise. You have nothing to do. I'm on unemployment. 497 00:31:22,680 --> 00:31:26,560 Speaker 1: I was a businessman with employees. Every life perfect, walking 498 00:31:26,640 --> 00:31:30,080 Speaker 1: forty fifty sixty hours a week. The epist person ever 499 00:31:30,680 --> 00:31:34,760 Speaker 1: now waiting on Amazon every day like I'm like, this 500 00:31:34,840 --> 00:31:37,080 Speaker 1: is the longest deal of my life and nothing. They're 501 00:31:37,080 --> 00:31:40,040 Speaker 1: just ignoring us. They're just like like ghosting us. A 502 00:31:40,160 --> 00:31:44,920 Speaker 1: spokesperson said. Amazon repeatedly asked Barack Jovanni to provide evidence 503 00:31:44,920 --> 00:31:48,520 Speaker 1: that his items were authentic. Amazon says the invoices he 504 00:31:48,560 --> 00:31:52,000 Speaker 1: showed them were either illegible or didn't match the records 505 00:31:52,000 --> 00:31:55,480 Speaker 1: of the brand owners. They said they informed Barack that 506 00:31:55,560 --> 00:31:58,800 Speaker 1: he needed to remove his inventory by specific dates or 507 00:31:58,840 --> 00:32:02,400 Speaker 1: it would be destroyed, and that Barack failed a request 508 00:32:02,440 --> 00:32:06,400 Speaker 1: to remove his inventory in time. So Barack is now 509 00:32:06,520 --> 00:32:10,200 Speaker 1: waiting in hopes of getting reimbursed for his inventory. We 510 00:32:10,240 --> 00:32:13,840 Speaker 1: recorded this podcast in the fall of he had a 511 00:32:13,840 --> 00:32:17,720 Speaker 1: binding arbitration case pending against Amazon at the time. In 512 00:32:17,800 --> 00:32:22,080 Speaker 1: binding arbitration, the outcome is kept confidential, so we may 513 00:32:22,120 --> 00:32:26,120 Speaker 1: never find out what actually happens. It's hard to say 514 00:32:26,200 --> 00:32:32,040 Speaker 1: how frequently these things happen. Nightmare. Amazon stories abound. Entire 515 00:32:32,160 --> 00:32:36,360 Speaker 1: cottage industries have sprung up of consultants and attorneys who 516 00:32:36,440 --> 00:32:41,400 Speaker 1: specialize in helping Amazon sellers navigate the suspension process, and 517 00:32:41,480 --> 00:32:45,080 Speaker 1: of course, the predicaments of sellers came to the attention 518 00:32:45,120 --> 00:32:48,360 Speaker 1: of the U. S. Congress. Our first witnesses Jeff Bezos, 519 00:32:48,440 --> 00:32:52,240 Speaker 1: the chief executive officer of Amazon dot Com. This journey 520 00:32:52,240 --> 00:32:55,480 Speaker 1: started with an order to get a million sellers into 521 00:32:55,520 --> 00:32:58,600 Speaker 1: the marketplace, to build a system that was self service, 522 00:32:59,000 --> 00:33:03,480 Speaker 1: and to globalize fast. The marketplace enriched the company and 523 00:33:03,560 --> 00:33:08,720 Speaker 1: Jeff Bezos beyond anyone's wildest dreams. Like other tech giants, 524 00:33:08,960 --> 00:33:12,840 Speaker 1: the Amazon marketplace grew into a huge platform through automation 525 00:33:13,120 --> 00:33:18,280 Speaker 1: and algorithms, but not having enough human oversight hurt customers 526 00:33:18,320 --> 00:33:22,360 Speaker 1: and sellers alike. It also turned the company into the 527 00:33:22,400 --> 00:33:26,200 Speaker 1: policeman of e commerce, whose job was to instill order 528 00:33:26,520 --> 00:33:30,400 Speaker 1: on the chaos of its own making. It also brought 529 00:33:30,480 --> 00:33:34,720 Speaker 1: Amazon into the crosshairs of the U. S. Government. Meanwhile, 530 00:33:35,040 --> 00:33:39,520 Speaker 1: another part of its business would prove justice controversial. Amazon 531 00:33:39,600 --> 00:33:43,120 Speaker 1: decided they would deliver their own packages. They pushed to 532 00:33:43,160 --> 00:33:47,000 Speaker 1: expand their vast network of fulfillment centers, launching one of 533 00:33:47,000 --> 00:33:50,800 Speaker 1: the largest armies of warehouse workers and drivers that the 534 00:33:50,840 --> 00:33:54,400 Speaker 1: world had ever seen. That's coming up in the next 535 00:33:54,480 --> 00:34:08,759 Speaker 1: chapter of Foundering. The Amazon story. Foundering is hosted by 536 00:34:08,800 --> 00:34:13,600 Speaker 1: me brad Stone. Sean When is our executive producer. Spencer 537 00:34:13,680 --> 00:34:18,520 Speaker 1: Soaper contributed reporting to this episode. Raymondo is our audio engineer, 538 00:34:19,360 --> 00:34:23,680 Speaker 1: Molly Nugent as our associate producer, Mark Million and Vander 539 00:34:23,719 --> 00:34:28,200 Speaker 1: may Robin Agello and Molly Shoots our story editors. Francesca 540 00:34:28,280 --> 00:34:31,400 Speaker 1: Levi is the head of Bloomberg Podcasts. Be sure to 541 00:34:31,440 --> 00:34:34,200 Speaker 1: subscribe and if you like our show, leave of You. 542 00:34:34,920 --> 00:34:38,359 Speaker 1: Most importantly, tell your friends see you next time.