WEBVTT - Amazon Part 4: The Virtual Bazaar 0:00:00.040 --> 0:00:04.720 In July, in the midst of the raging COVID nineteen pandemic, 0:00:05.280 --> 0:00:09.160 the CEOs of the four major technology companies were dragged 0:00:09.160 --> 0:00:13.880 before Congress. They appeared virtually the purpose of today's hearing 0:00:13.960 --> 0:00:17.759 is to examine the dominance of Amazon, Apple, Facebook, and Google. 0:00:17.960 --> 0:00:21.759 That's Rhode Island Representative David Cicillini, the chairman of the 0:00:21.800 --> 0:00:25.919 House Antitrust Subcommittee. Do you swear or affirm, under penalty 0:00:25.920 --> 0:00:27.840 of perjury that the testimony you are out to give 0:00:27.960 --> 0:00:30.920 is true and correct to the best of your knowledge, information, 0:00:30.960 --> 0:00:36.560 and belief, So help you God. Yes. In particular, he 0:00:36.680 --> 0:00:40.320 and the other lawmakers had hard questions for Jeff Bezos. 0:00:40.960 --> 0:00:45.320 They were skeptical. To put it mildly, Lawmakers from both 0:00:45.360 --> 0:00:49.480 sides of the aisle united against him. Why isn't Amazon 0:00:49.640 --> 0:00:54.440 more aggressive in ensuring that counterfeit goods are not sold 0:00:54.440 --> 0:00:58.800 on its platform? Think? This is an incredibly important issue 0:00:58.840 --> 0:01:01.160 and one that we work very hard on. Counterfeits are 0:01:01.160 --> 0:01:06.240 a scourge. I would encourage this body to pass strict 0:01:06.360 --> 0:01:09.840 penalties for counterfeiters and to increase the goods to make 0:01:09.920 --> 0:01:13.600 money off of counterfeit goods being sold on your platform. 0:01:13.760 --> 0:01:17.280 Isn't that correct, Mr Bezos, aren't seller fees now effectively 0:01:17.440 --> 0:01:21.920 subsidizing Amazon's retail division? Congresswoman, No, I don't believe so. 0:01:22.000 --> 0:01:24.080 I think what you're seeing there when you see these 0:01:24.280 --> 0:01:27.800 fees going up in Bezos are are stolen goods sold 0:01:27.840 --> 0:01:34.240 on Amazon, Congresswoman, not, to my knowledge all the once again, 0:01:34.360 --> 0:01:37.720 do you require a real name and address from sellers? 0:01:38.319 --> 0:01:41.440 I believe we do, but let me get back to 0:01:41.440 --> 0:01:44.559 your office with a I'd rather give you the accurate answer, 0:01:44.560 --> 0:01:47.040 but I think we do. It's rare to hear Jeff 0:01:47.080 --> 0:01:50.120 Bezos con on his back foot like this. There's some 0:01:50.200 --> 0:01:54.760 real uncertainty in his voice because government oversight could only 0:01:54.800 --> 0:01:58.080 mean bad things for his company. It could mean fines 0:01:58.600 --> 0:02:01.320 or even antitrust law suits that seek to break up 0:02:01.360 --> 0:02:06.520 the company. The lawmakers focused on Amazon's retail empire, which 0:02:06.520 --> 0:02:11.520 had expanded to an almost unimaginable size. This massive growth 0:02:11.560 --> 0:02:16.200 depended in large part on Amazon's third party marketplace. That's 0:02:16.200 --> 0:02:19.440 where independent merchants from around the world sell their wares 0:02:19.480 --> 0:02:23.240 on the Amazon dot com website. The lawmakers had no 0:02:23.480 --> 0:02:28.080 problem roughing up Bezos. He sounded defensive when asked whether 0:02:28.080 --> 0:02:33.200 those third party sellers weren't also victims of Amazon. Georgia 0:02:33.240 --> 0:02:37.519 Congresswoman Lucy Macbeth had one powerful example. I'm going to 0:02:37.600 --> 0:02:40.360 share the story of a small business owner who is 0:02:40.400 --> 0:02:43.360 also a wife and a mother. So, Mr Bezos, after 0:02:43.480 --> 0:02:47.720 Amazon just delisted this small business without any apparent reason 0:02:47.960 --> 0:02:50.760 or notice, she told us that they sent more than 0:02:50.919 --> 0:02:57.080 five hundred separate communications to Amazon, including to you, Mr Bezos, 0:02:57.160 --> 0:03:01.440 over the past year. There was not a single meaningful response. 0:03:01.919 --> 0:03:04.799 Do you think this is an acceptable way to treat 0:03:05.120 --> 0:03:10.760 someone that you described as both a partner and a customer? Uh? No, 0:03:10.880 --> 0:03:14.720 congress Woman, and I appreciate you showed me that anecdote, 0:03:14.960 --> 0:03:17.320 and I would like to talk to her. It does 0:03:17.360 --> 0:03:20.280 not at all to me seem like the right way 0:03:20.320 --> 0:03:25.280 to treat her. Bezos hadn't heard of her, likely because 0:03:25.280 --> 0:03:28.919 there are thousands of sellers with similar stories. And it's 0:03:28.960 --> 0:03:32.200 also likely that this merchant wasn't delisted by any one 0:03:32.360 --> 0:03:36.240 Amazon employee, but that she got swept up in Amazon's 0:03:36.280 --> 0:03:41.080 automated system. Many politicians and regulators think Amazon is too 0:03:41.120 --> 0:03:44.600 big and wields too much power over these mom and 0:03:44.640 --> 0:03:48.680 pop sellers. As part of this investigation, we've interviewed many 0:03:48.920 --> 0:03:53.800 small businesses, and they used the words like bullying, fear, 0:03:54.600 --> 0:03:59.880 and panic to describe their relationship with Amazon. Bullying, fear 0:04:00.360 --> 0:04:04.240 and panic hardly the words Bezos had in mind when 0:04:04.280 --> 0:04:08.119 he conceived the marketplace twenty years ago. Sellers can wake 0:04:08.200 --> 0:04:11.600 up one morning and find their business in crisis. There 0:04:11.600 --> 0:04:15.880 are vulnerable to negative reviews posted by competitors that tank 0:04:15.960 --> 0:04:19.840 their ratings. A merchant hawking the exact same product can 0:04:19.880 --> 0:04:23.920 accuse them of peddling unsafe or counterfeit items. And when 0:04:23.960 --> 0:04:28.400 Amazon's algorithms detect even a suggestion of questionable conduct, they 0:04:28.400 --> 0:04:31.680 can automatically close a seller's account and put them out 0:04:31.680 --> 0:04:36.600 of business altogether with no explanation, leaving a small business 0:04:36.600 --> 0:04:41.839 owner scrambling to figure out why you're listening to Foundering. 0:04:42.279 --> 0:04:46.360 I'm your host, Brad Stone. In this episode, we're going 0:04:46.400 --> 0:04:50.400 to tell the story of the Amazon Marketplace, the always surprising, 0:04:50.839 --> 0:04:55.919 often chaotic, and hugely successful side of Jeff bezos retail empire. 0:04:56.720 --> 0:04:59.719 This is the business that helped make Amazon profitable in 0:04:59.760 --> 0:05:02.920 the dog days after the dot com bust and helped 0:05:02.960 --> 0:05:06.480 the company to fund projects like Alexa and Prime Video. 0:05:07.600 --> 0:05:10.320 It's a story that starts with yet another non intuitive 0:05:10.360 --> 0:05:14.120 decision by Bezos to let indie merchants sell stuff on 0:05:14.160 --> 0:05:19.640 the website right alongside Amazon's own products. That decision would 0:05:19.680 --> 0:05:24.040 have life changing ramifications for millions of sellers around the world. 0:05:24.720 --> 0:05:37.159 We'll tell you that story after the break. So in 0:05:37.240 --> 0:05:40.960 that somewhat disastrous testimony in front of Congress, Jeff Bezos 0:05:41.000 --> 0:05:43.760 actually told the story of the birth of the marketplace. 0:05:44.279 --> 0:05:46.960 Twenty years ago, we made the decision to invite other 0:05:47.000 --> 0:05:50.680 sellers to sell in our store. We believe that combining 0:05:50.720 --> 0:05:53.760 the strengths of Amazon Store with the vast selection of 0:05:53.800 --> 0:05:57.360 products offered by third parties would be a better experience 0:05:57.400 --> 0:06:01.880 for customers. Fortunately, we were right. They're now one point 0:06:01.920 --> 0:06:05.400 seven million small and medium sized businesses selling on Amazon. 0:06:06.240 --> 0:06:09.280 So if you shop on Amazon dot com, you can 0:06:09.320 --> 0:06:13.760 buy some listed items directly from Amazon. This is merchandise 0:06:13.800 --> 0:06:17.120 that Amazon bought from a wholesaler and sells to the customer. 0:06:17.640 --> 0:06:21.400 It's acting like a regular retailer like Walmart or Target. 0:06:22.360 --> 0:06:25.800 But in most cases Amazon customers are buying things on 0:06:25.839 --> 0:06:30.760 the site from other people or companies. That's the Amazon marketplace. 0:06:31.440 --> 0:06:36.000 These days. The Amazon marketplace is a massive, unruly world 0:06:36.080 --> 0:06:40.919 undo itself. It has over a billion products two million sellers, 0:06:41.720 --> 0:06:44.680 and one of the primary people responsible for the size 0:06:44.680 --> 0:06:48.680 and scope of the marketplace was a guy named Peter Pharisee. 0:06:49.760 --> 0:06:52.479 Peter ran the music and movie business during his early 0:06:52.520 --> 0:06:56.560 years of the company until an unusual opportunity put him 0:06:56.560 --> 0:07:00.680 on Jeff Bezos radar. In two thousand eight, Peter was 0:07:00.720 --> 0:07:04.080 asked to host Amazon's annual all hands meeting, and he 0:07:04.120 --> 0:07:07.480 found a special guest. Getting asked to host the all 0:07:07.600 --> 0:07:12.920 hands meeting was like a treasured gift, and coming into it, 0:07:13.560 --> 0:07:16.320 I was looking for, well, gosh, what's the unique thing 0:07:16.840 --> 0:07:19.200 that we could do to really make this all hands 0:07:19.200 --> 0:07:21.840 meeting special. We had this idea of let's just try 0:07:21.880 --> 0:07:23.560 to get a you know, a big celebrity and a 0:07:23.600 --> 0:07:26.480 big name, so to skip ahead. We got really lucky 0:07:26.480 --> 0:07:31.240 and we got Tom Cruise, Yes, the Tom Cruise, Maverick 0:07:31.600 --> 0:07:37.200 Ethan Hunt, the couch jumping Scientology, proselytizing action star. Peter 0:07:37.320 --> 0:07:40.800 remembers that all hands meeting that's kind of magical, and 0:07:40.880 --> 0:07:44.560 perhaps his greatest accomplishment was not booking Tom Cruise, but 0:07:44.640 --> 0:07:49.520 impressing his boss, Jeff Bezos, who was clearly enthralled by cruise. 0:07:50.040 --> 0:07:52.760 So it was an incredible all hands meeting. The energy 0:07:52.800 --> 0:07:56.960 and the audience was incredible. Uh, Tom and Jeff talked 0:07:57.040 --> 0:08:00.600 backstage about space, rockets and planes and they had They 0:08:00.680 --> 0:08:02.440 turned out they actually had quite a few things in 0:08:02.480 --> 0:08:04.920 common when it comes to space and space travel. So 0:08:05.000 --> 0:08:07.440 that was that was fun to see. And after the 0:08:07.520 --> 0:08:10.920 all hands meeting ended, it ends with Jeff, you know, 0:08:11.000 --> 0:08:12.520 doing a Q and A. So it's he and I 0:08:12.640 --> 0:08:16.760 on stage together and he came over and I remember correctly, 0:08:16.800 --> 0:08:18.480 he either shook my hand or gave me a hug. 0:08:18.520 --> 0:08:20.280 I may have hugged him. I don't remember what it was, 0:08:20.320 --> 0:08:22.880 but it was like, that was great, and he invited 0:08:22.920 --> 0:08:25.559 me back to lunch afterwards with he and the S team. 0:08:26.240 --> 0:08:28.920 That's the senior team that was leading the entire company. 0:08:28.960 --> 0:08:32.160 So I thought to myself, wow, uh, this is this 0:08:32.240 --> 0:08:35.400 is great. So Peter is invited to a lunch with 0:08:35.440 --> 0:08:38.840 the most important people at Amazon, and that lunch would 0:08:38.880 --> 0:08:42.400 turn out to be pivotal because Bezos clearly took notice 0:08:42.400 --> 0:08:44.800 of Peter, and I was shocked to get a call 0:08:44.880 --> 0:08:48.439 from him a couple of weeks later saying, um, we 0:08:48.480 --> 0:08:51.360 have a new role. We want you to take and 0:08:51.520 --> 0:08:55.840 we have three businesses that are really struggling. One of 0:08:55.880 --> 0:08:58.720 them is called the marketplace, and that's all we want 0:08:58.760 --> 0:09:02.480 you to go lead. So I was on the other 0:09:02.600 --> 0:09:05.000 end of the phone, um, you know, and not knowing 0:09:05.000 --> 0:09:07.080 what to say exactly I was. It was such a 0:09:07.120 --> 0:09:10.160 different twist that I sort of imagined he was really 0:09:10.200 --> 0:09:13.800 surprised he was asked to change jobs to lead the small, 0:09:13.960 --> 0:09:18.360 sad team of about thirty five engineers their goal to 0:09:18.480 --> 0:09:22.240 bring third party sellers onto the site to compete against 0:09:22.240 --> 0:09:25.320 their own colleagues. As I came to find out, it 0:09:25.360 --> 0:09:29.680 was a very small, underfunded, uh team going through a 0:09:29.679 --> 0:09:31.520 really tough time, you know. And this was one of 0:09:31.559 --> 0:09:34.640 the teams with an Amazon that people would say, Wow, 0:09:34.840 --> 0:09:36.640 you know, I don't think he want to go over there, 0:09:36.720 --> 0:09:39.839 because those guys are struggling to get stuff done and 0:09:39.880 --> 0:09:43.120 the morale looks pretty poor. People were jumping ship. So 0:09:43.360 --> 0:09:46.000 I sort of said to myself, Wow, I wonder if 0:09:46.000 --> 0:09:49.600 the cruise thing went very poorly actually, because why would 0:09:49.640 --> 0:09:53.640 Jeff ask me to run this struggling business. At the time, 0:09:53.920 --> 0:09:57.760 the Amazon Marketplace was an unsuccessful backwater at the company. 0:09:58.080 --> 0:10:01.480 It was mostly a place where people sold used books, CDs, 0:10:01.559 --> 0:10:05.400 and DVDs. It represented maybe a quarter of all sales 0:10:05.440 --> 0:10:08.960 on the site, but Basos thought it could be bigger. 0:10:09.840 --> 0:10:12.400 If sellers could offer a lower price or get a 0:10:12.400 --> 0:10:16.120 product to customers faster, they should win the sale over Amazon. 0:10:16.960 --> 0:10:20.560 The idea struck a lot of employees as nuttie. It's 0:10:20.559 --> 0:10:22.840 one of those things you sort of raise your eyebrows 0:10:22.840 --> 0:10:25.319 on when you join the company, like, tell me this again. 0:10:25.400 --> 0:10:28.600 So I'm running our retail business, which you would also 0:10:28.760 --> 0:10:31.760 like me to enable thousands of people across the world 0:10:31.800 --> 0:10:35.679 to compete against us on our same platform on an 0:10:35.679 --> 0:10:39.640 even basis to serve our customers. So, you know, honestly, 0:10:39.679 --> 0:10:41.680 it was sort of no one had ever done this before. 0:10:41.760 --> 0:10:44.320 You know, you don't go into a retail store and 0:10:44.400 --> 0:10:48.439 see your competitors products on the shelf next to years. 0:10:48.840 --> 0:10:52.720 That didn't happen. Peter thought it was counterintuitive. In fact, 0:10:53.080 --> 0:10:59.400 most Amazon employees thought it was counterintuitive. Why inviting the competitors. Well, 0:10:59.800 --> 0:11:02.800 theelo realized that more sellers on the marketplace meant a 0:11:02.840 --> 0:11:07.800 greater selection of products, That more products meant more customers, 0:11:07.880 --> 0:11:11.960 and those buyers would in turn attract more sellers. All 0:11:12.000 --> 0:11:15.959 of this would make Amazon a richer, more prosperous company. 0:11:16.400 --> 0:11:20.240 Bezos posed a fundamental challenge for Peter. He asked this 0:11:20.280 --> 0:11:23.760 new marketplace team, how would you get a million sellers? 0:11:24.520 --> 0:11:28.400 It is a classic way of thinking at Amazon. You know, 0:11:28.840 --> 0:11:31.280 if you frame the question, how would we grow our 0:11:31.360 --> 0:11:34.800 seller based by ten percent next year? You'll probably get 0:11:34.800 --> 0:11:37.839 back and answer that delivers ten percent, which would be small. 0:11:38.640 --> 0:11:41.200 When you start the question by saying, how would I 0:11:41.240 --> 0:11:44.400 get a million more sellers into the marketplace, you know 0:11:44.720 --> 0:11:48.000 that can't be answered quickly, and obviously it's it's going 0:11:48.040 --> 0:11:51.600 to take an enormous amount of innovation here. So Peter 0:11:51.760 --> 0:11:54.400 realized that you couldn't recruit a million sellers one by 0:11:54.400 --> 0:11:58.599 one with salespeople making phone calls. He needed sellers to 0:11:58.640 --> 0:12:00.920 sign up on their own and go into business with 0:12:00.960 --> 0:12:05.400 Amazon dot Com. They called it a self service system. 0:12:05.520 --> 0:12:08.000 One of the big lessons I learned from Jeff actually 0:12:08.240 --> 0:12:13.720 was the importance of using technology to build self service 0:12:13.800 --> 0:12:16.400 in order to scale. Over the ten years I ran 0:12:16.480 --> 0:12:20.240 the business, more than eighty percent of all the businesses 0:12:20.240 --> 0:12:23.559 who sold their products on Amazon came in through self service. 0:12:23.960 --> 0:12:26.560 They never talked to a human being. I noticed some 0:12:26.600 --> 0:12:30.560 people This might sound kind of techno dystopian, but Peter's 0:12:30.600 --> 0:12:34.160 big win. The reason why the Amazon marketplace became so 0:12:34.320 --> 0:12:38.120 dominant it was because it depended on technology rather than 0:12:38.200 --> 0:12:42.280 people to grow. But this self service grow at all 0:12:42.360 --> 0:12:45.920 cost mentality is also why the marketplace would later generate 0:12:46.200 --> 0:12:51.160 so many problems for Amazon, unfairly punishing many sellers and 0:12:51.240 --> 0:12:55.680 drawing the attention of Congress. We'll tell that story next. 0:13:07.360 --> 0:13:10.000 So the early two thousand tens were a great time 0:13:10.080 --> 0:13:14.720 for the Amazon marketplace. Their primary rival at the time, eBay, 0:13:15.040 --> 0:13:19.360 was in decline. Now eBay sellers were jumping on Amazon. 0:13:20.240 --> 0:13:23.920 Through Bezos's self service system. They could sign up, list 0:13:23.960 --> 0:13:27.840 their wares, and start selling. But this is the Internet 0:13:27.960 --> 0:13:32.079 where things change fast. Pretty soon Peter Ferisse and his 0:13:32.200 --> 0:13:36.520 colleagues noticed they had real competition. Sellers in China were 0:13:36.559 --> 0:13:39.960 signing up for a site called wish dot com, operated 0:13:40.000 --> 0:13:43.920 by a San Francisco company. It allowed sellers anywhere in 0:13:43.960 --> 0:13:47.360 the world to sell products online to buyers anywhere else 0:13:47.400 --> 0:13:50.959 in the world. Ali Express, an arm of the Chinese 0:13:51.040 --> 0:13:55.120 Internet giant Ali Baba, was doing the same thing. For 0:13:55.240 --> 0:13:59.520 Peter Pharisee. It's struck close to home when our oldest 0:14:00.000 --> 0:14:02.040 as a freshman in college, I all of a sudden, 0:14:02.080 --> 0:14:05.560 I see a charge for Allie Express on my credit 0:14:05.600 --> 0:14:07.960 card and I and I say to myself, well, I 0:14:08.000 --> 0:14:10.880 know that wasn't me. So I wonder what happened here. 0:14:11.440 --> 0:14:15.000 And it turned out that my son bought a basketball 0:14:15.080 --> 0:14:18.720 jersey on there, and so did all of his college roommates. 0:14:19.240 --> 0:14:21.600 And he didn't even understand that Ellie Express might be 0:14:21.600 --> 0:14:24.880 a competitor to Amazon. All he knew is all of 0:14:24.920 --> 0:14:29.440 his roommates were constantly buying new sports clothing on Ellie Express. 0:14:29.480 --> 0:14:31.960 That's a wake up call. It was a signal to 0:14:32.000 --> 0:14:35.960 Peter that the Amazon marketplace could be in trouble. Sellers 0:14:35.960 --> 0:14:38.880 in China were the cost to make goods as much lower. 0:14:39.240 --> 0:14:42.000 We're suddenly competing head to head with sellers in the 0:14:42.040 --> 0:14:47.160 West were costs were higher. It was classic Internet style disruption. 0:14:47.880 --> 0:14:51.240 When we saw a Wish and Allie Express, it really 0:14:51.280 --> 0:14:54.080 broke one of the principles we had in mind, which is, well, wait, 0:14:54.600 --> 0:14:59.080 people won't want things that are delivered that slowly. And 0:14:59.160 --> 0:15:02.480 it turned out actually some people will. Some people are 0:15:02.480 --> 0:15:06.360 willing to make the trade off between much more higher value, 0:15:06.480 --> 0:15:09.840 you know, much lower cost and slower shipping time, and 0:15:09.920 --> 0:15:13.240 so that was a signal for us. So what did 0:15:13.280 --> 0:15:17.640 Amazon do? Of course, they also went to China. They 0:15:17.680 --> 0:15:21.200 decided to follow Wish dot Com and Ali Express and 0:15:21.240 --> 0:15:25.440 allowed Chinese sellers to reach buyers around the world. Peter 0:15:25.760 --> 0:15:28.920 wanted to see things for himself. I took my leadership 0:15:28.960 --> 0:15:32.080 team over to China and at the very beginning of 0:15:32.080 --> 0:15:35.040 this in Beijing, we hosted in kind of a big 0:15:35.120 --> 0:15:39.600 conference center, like a product fair. So Peter and his 0:15:39.720 --> 0:15:42.880 team held this big fair where they invited all sorts 0:15:42.880 --> 0:15:45.800 of merchants based in China to show off their products, 0:15:46.240 --> 0:15:51.160 and it was incredible. You know, these uh robot vacuums 0:15:51.160 --> 0:15:53.440 that we see all over our homes. I mean, we 0:15:53.480 --> 0:15:56.720 saw two or three people who built that. I think 0:15:56.720 --> 0:15:59.640 there was a Chinese company that acquired Segue, so we 0:15:59.680 --> 0:16:03.920 saw multiple versions of the Segue, you know, motorized vehicles, 0:16:04.520 --> 0:16:08.760 and the innovation was just absolutely incredible, and you say 0:16:08.800 --> 0:16:12.200 to yourself, wow, I mean, if we were selling these 0:16:12.240 --> 0:16:16.040 products right now across the world, people would love it, 0:16:16.200 --> 0:16:18.520 you know, because not only were they high quality, but 0:16:18.520 --> 0:16:22.200 they were also great value. On the trip, Peter noticed 0:16:22.240 --> 0:16:26.480 something else. Brand names were under attack. But the most 0:16:26.520 --> 0:16:31.440 incredible thing to see live was the same factories that 0:16:31.480 --> 0:16:35.680 are making the most expensive apparel in the world, also 0:16:35.840 --> 0:16:39.120 on the same factory line, are capable of making something 0:16:39.720 --> 0:16:43.880 equally as beautiful, equally as high quality, and selling it 0:16:43.960 --> 0:16:49.000 for a tenth of the price the price. This could 0:16:49.040 --> 0:16:52.880 have enormous implications for the fashion industry. Peter and his 0:16:52.920 --> 0:16:56.240 team visited a factory that made sport codes for Abercrombie 0:16:56.240 --> 0:17:00.760 and Fitch. Abercrombie sold the jackets for five dollars, but 0:17:00.840 --> 0:17:03.840 it only costs the factory nine dollars to make the jacket, 0:17:04.720 --> 0:17:07.240 And then they took the same code, added a slightly 0:17:07.240 --> 0:17:10.720 different button pattern to it, and sold it directly online 0:17:10.960 --> 0:17:14.280 for ninety dollars and still made a fat profit. So 0:17:14.440 --> 0:17:18.280 pick whoever your favorite designer. Is the same factory that's 0:17:18.320 --> 0:17:22.040 making those clothes, They're also capable of making those same 0:17:22.080 --> 0:17:27.119 clothes um much less expensively. And so what we began 0:17:27.160 --> 0:17:30.919 to see was these entrepreneurs who owned these factories, and 0:17:31.000 --> 0:17:32.680 some of them were US based, some of them were 0:17:32.720 --> 0:17:35.640 China based, they all were coming to the same conclusion 0:17:35.680 --> 0:17:39.359 we were, which is this is gonna significantly disrupt the 0:17:39.400 --> 0:17:43.240 world of brands and brand premium, and from a customer perspective, 0:17:43.240 --> 0:17:45.520 it's like this is going to change the world. It's 0:17:45.520 --> 0:17:50.960 certainly changed the fate of Amazon in Peter Farisee and 0:17:51.000 --> 0:17:53.760 his team threw open the doors of the marketplace to 0:17:53.920 --> 0:18:00.000 international sellers. Overnight, the marketplace tripled in size. The next year, 0:18:00.320 --> 0:18:03.640 the marketplace was responsible for more than half of all 0:18:03.720 --> 0:18:07.440 goods sold on Amazon. Sales in North America took off. 0:18:07.960 --> 0:18:14.360 The annual growth rate jump from tote. Amazon was defying 0:18:14.400 --> 0:18:17.840 the laws of corporate gravity. It's basically unheard of for 0:18:17.920 --> 0:18:21.240 a twenty year old business to start growing even faster. 0:18:21.800 --> 0:18:25.720 As a result, It's stock presumed and Bezos was vaulted 0:18:25.760 --> 0:18:28.160 into the ranks of the wealthiest people in the world. 0:18:28.760 --> 0:18:32.720 Peter Farisee remembers presenting a written report on his team's progress. 0:18:33.359 --> 0:18:36.480 He kept the best feedback and Amazon executive can dream of. 0:18:37.240 --> 0:18:42.160 And so Jeff picked up the document and he held 0:18:42.200 --> 0:18:45.200 it close to his chest, and what I remember him 0:18:45.240 --> 0:18:48.639 saying is I'm gonna take this this document home and 0:18:48.680 --> 0:18:53.600 sleep with it tonight. But there was a serious downside. Remember, 0:18:53.640 --> 0:18:58.000 on the Amazon marketplace, anyone could register and start selling. 0:18:58.600 --> 0:19:03.280 There was hardly any quality control, no seller verification, no 0:19:03.440 --> 0:19:08.560 product safety tests. This had significant repercussions. A family in 0:19:08.600 --> 0:19:12.400 Tennessee is suing Amazon. Half a million hoverboards are being 0:19:12.480 --> 0:19:15.960 recalled after reports that dozens of them have burst into flames. 0:19:17.480 --> 0:19:20.280 Hoverboard fires, like this one at a Houston mall in 0:19:20.359 --> 0:19:24.360 December sparked a major recall. If you own a hoverboard, 0:19:24.640 --> 0:19:31.520 stop using it immediately. It looked like chaos, counterfeits, fake products, 0:19:31.560 --> 0:19:36.000 fake reviews, even house fires. Media outlets around the world 0:19:36.080 --> 0:19:40.960 started investigating the problems of the marketplace, and Amazon belatedly 0:19:41.280 --> 0:19:45.119 tried to tame it. We invested hundreds of millions of 0:19:45.160 --> 0:19:48.600 dollars in innovations to try to fix this at the route. 0:19:48.800 --> 0:19:50.960 You know, and if you've seen what's happening on these 0:19:51.000 --> 0:19:55.040 social media platforms, you can't hire thousands of people and 0:19:55.119 --> 0:19:58.840 play whack a mole looking at every single posting and 0:19:58.880 --> 0:20:01.760 trying to take them down. That's a process that you'll 0:20:01.800 --> 0:20:04.680 lose because there are people out there who have great 0:20:04.720 --> 0:20:08.800 technology and can keep you know, the the whatever whatever 0:20:08.880 --> 0:20:11.040 bad actor things you're trying to do coming at you 0:20:11.200 --> 0:20:14.440 faster than you can stop them. Amazon urgently needed to 0:20:14.480 --> 0:20:17.520 police the marketplace, but the way they would do, it 0:20:17.520 --> 0:20:21.399 would prove to be controversial. Just like they relied on 0:20:21.480 --> 0:20:25.320 technology to create the global marketplace, they would also develop 0:20:25.359 --> 0:20:30.040 technology to keep it in check. Algorithms and automation would 0:20:30.119 --> 0:20:34.320 monitor reviews and probably boot sellers whose products drue complaints 0:20:34.320 --> 0:20:38.960 about quality or safety. For sellers caught in these shifting sands, 0:20:39.400 --> 0:20:58.439 this was the stuff of nightmares. That's next. So the 0:20:58.520 --> 0:21:02.320 Amazon marketplace was now international and all over the world. 0:21:02.560 --> 0:21:06.440 It was making people rich. The biggest Amazon sellers even 0:21:06.480 --> 0:21:11.080 became public companies. For instance, the electronics maker Anchor is 0:21:11.119 --> 0:21:15.440 now worth more than six billion dollars. But not everyone 0:21:15.520 --> 0:21:18.960 was so lucky. Here's James Thompson. He used to work 0:21:18.960 --> 0:21:23.040 at Amazon and now advises Amazon sellers. Consumers just sit 0:21:23.080 --> 0:21:25.080 back and say, Wow, look at all this great selection 0:21:25.160 --> 0:21:30.200 that's happening, not realizing that there is a whole type 0:21:30.240 --> 0:21:35.480 of Darwinism happening every day on the site, and some 0:21:35.640 --> 0:21:39.840 of it is brutal. It's absolutely brutal. It's brutal because 0:21:39.880 --> 0:21:42.800 the competition among sellers from around the world is fierce. 0:21:43.600 --> 0:21:46.840 That's why sometimes you can't even find the same item 0:21:46.880 --> 0:21:49.720 twice on Amazon. Oh I think I bought that set 0:21:49.760 --> 0:21:53.040 of that that the headset last week on Amazon. I 0:21:53.080 --> 0:21:55.280 think I wanna buy another one for my nephew. Oh 0:21:55.400 --> 0:21:58.200 it's not on Amazon anymore. Well, it's not on Amazon 0:21:58.240 --> 0:22:01.440 because either that brand was taken down, or that brand 0:22:01.480 --> 0:22:04.919 no longer exists and it's been replaced with ten other brands, 0:22:05.080 --> 0:22:07.840 or somebody went after that brand and file a bunch 0:22:07.880 --> 0:22:11.120 of fake reviews and the brand is temporarily suspended while 0:22:11.600 --> 0:22:14.520 they work out with Amazon how to get reinstated. All 0:22:14.560 --> 0:22:17.359 this stuff is happening, and as an Amazon customer, you 0:22:17.440 --> 0:22:20.720 just say, Wow, there's ten thousand brands of headsets I 0:22:20.720 --> 0:22:23.560 can buy r T. I lucky. As a customer it 0:22:23.760 --> 0:22:28.080 is choice, choice, choice, It's wonderful. As a seller, it's 0:22:28.080 --> 0:22:31.600 a lot scarier. It's scary for sellers because the same 0:22:31.640 --> 0:22:34.000 technology that makes it easy for them to sign up 0:22:34.000 --> 0:22:38.000 on the marketplace can also take them down. All it 0:22:38.040 --> 0:22:40.560 takes is a couple of reviewers saying they think our 0:22:40.560 --> 0:22:44.560 merchants products are fake, and the algorithms picked this up 0:22:44.840 --> 0:22:49.000 and the next thing you know, the seller's banned. Amazon's 0:22:49.000 --> 0:22:52.880 automated system has little ability to sort out false allegations 0:22:52.880 --> 0:22:56.800 from real ones, and the sellers are at its mercy. 0:22:57.160 --> 0:23:00.600 To better understand this new landscape, we sent our colleagues, 0:23:00.640 --> 0:23:03.720 Spencer Soaper to one of the largest gatherings of Amazon 0:23:03.800 --> 0:23:07.840 merchants in the world. We're at the Las Vegas prosper Show. 0:23:08.400 --> 0:23:11.240 And what you hear um, I'm a new Amazon seller 0:23:11.560 --> 0:23:13.600 and this is our first conference, so we're just trying 0:23:13.640 --> 0:23:17.119 to get some basic information. Okay, what do you what 0:23:17.160 --> 0:23:19.800 do you sew? We saw aftermarket you t V and 0:23:19.840 --> 0:23:23.160 a TV products. So when you say a TV like 0:23:23.160 --> 0:23:30.560 like off roading vehicles, razors and mudsli windshields, winches, mirrors, bumbers. 0:23:30.600 --> 0:23:33.880 The Prosperous Show is all about Amazon, but it's not 0:23:34.080 --> 0:23:37.680 sponsored by Amazon in any way. But selling on Amazon 0:23:37.720 --> 0:23:41.480 can be so confusing and overwhelming, and the rules constantly change. 0:23:42.000 --> 0:23:44.680 The sellers find it helpful to meet in a big 0:23:44.720 --> 0:23:48.720 group and network and swept tips and what kind of 0:23:48.960 --> 0:23:52.760 problems to Amazon seller station? I would say poor communication 0:23:52.960 --> 0:23:55.919 from the Amazon customer support is that can be an issue. 0:23:56.280 --> 0:23:58.199 You're not really sure if they shut your listing now? 0:23:58.200 --> 0:24:00.760 And what the exact issue is us with your listing? 0:24:01.160 --> 0:24:05.040 An abrupt suspension? What do you sell on Amazon? Engagement 0:24:05.080 --> 0:24:09.280 rings and wedding bands while so people buy those on Amazon. Yes, 0:24:09.760 --> 0:24:12.639 I had no idea. And uh so what do you 0:24:12.640 --> 0:24:15.480 sell on Amazon? Pb fit? It's a peanut butter powder. 0:24:15.760 --> 0:24:18.720 It sound like a protein powder. It's kind of tell 0:24:18.760 --> 0:24:21.359 me your name, Okay, my name is Maniche Busche, and 0:24:21.400 --> 0:24:25.399 I'm uh high seven figure Amazon sello. One of the 0:24:25.440 --> 0:24:29.399 most interesting people I met at the Prosperous show was Maniche. Uh. 0:24:29.480 --> 0:24:32.080 He's from Phoenix, Arizona. And what stood out to me 0:24:32.160 --> 0:24:34.280 was that he was ready to talk about numbers that 0:24:34.320 --> 0:24:36.080 a lot of the other merchants didn't want to talk about. 0:24:36.320 --> 0:24:39.840 I seven figure Amazon seller. That sounds very important. And 0:24:39.880 --> 0:24:42.399 what were you doing before this? I was entirely in 0:24:42.400 --> 0:24:47.080 a different trade. I was doing scrib metal trading. You know, 0:24:47.119 --> 0:24:50.240 there was no need of middleman like me, so I 0:24:50.320 --> 0:24:53.600 quit that business. Maniche buys most of the products from China, 0:24:53.600 --> 0:24:55.879 where they're made. Then he ships them to the US 0:24:55.960 --> 0:24:58.640 and he sends them to Amazon warehouses all around the country. 0:24:59.440 --> 0:25:03.480 What's your best selling product? Um, it's a five gallon 0:25:03.960 --> 0:25:07.399 gas can that turned out to be lucrative. It's doing 0:25:07.960 --> 0:25:11.560 three thousand dollars a day. What is the gas can 0:25:11.680 --> 0:25:14.800 cost on Amazon? Is the five gallon one? I sell 0:25:14.880 --> 0:25:19.159 for fifteen bugs, something I get for two dollar fifty cents. 0:25:19.160 --> 0:25:22.200 What percentage of each sale would you say goes to Amazon? 0:25:23.359 --> 0:25:26.880 So I'll say I'm making fifteen Ten to fifteen is 0:25:27.119 --> 0:25:30.360 what I take home. It's your profit margin that's ten 0:25:30.480 --> 0:25:34.280 to fifteen percent. So for every fifteen dollar gas can 0:25:34.359 --> 0:25:37.840 many sales, he pockets about a dollar fifty maybe two 0:25:37.880 --> 0:25:42.440