Speaker 1: In July, in the midst of the raging COVID nineteen pandemic,
Speaker 1: the CEOs of the four major technology companies were dragged
Speaker 1: before Congress. They appeared virtually the purpose of today's hearing
Speaker 1: is to examine the dominance of Amazon, Apple, Facebook, and Google.
Speaker 1: That's Rhode Island Representative David Cicillini, the chairman of the
Speaker 1: House Antitrust Subcommittee. Do you swear or affirm, under penalty
Speaker 1: of perjury that the testimony you are out to give
Speaker 1: is true and correct to the best of your knowledge, information,
Speaker 1: and belief, So help you God. Yes. In particular, he
Speaker 1: and the other lawmakers had hard questions for Jeff Bezos.
Speaker 1: They were skeptical. To put it mildly, Lawmakers from both
Speaker 1: sides of the aisle united against him. Why isn't Amazon
Speaker 1: more aggressive in ensuring that counterfeit goods are not sold
Speaker 1: on its platform? Think? This is an incredibly important issue
Speaker 1: and one that we work very hard on. Counterfeits are
Speaker 1: a scourge. I would encourage this body to pass strict
Speaker 1: penalties for counterfeiters and to increase the goods to make
Speaker 1: money off of counterfeit goods being sold on your platform.
Speaker 1: Isn't that correct, Mr Bezos, aren't seller fees now effectively
Speaker 1: subsidizing Amazon's retail division? Congresswoman, No, I don't believe so.
Speaker 1: I think what you're seeing there when you see these
Speaker 1: fees going up in Bezos are are stolen goods sold
Speaker 1: on Amazon, Congresswoman, not, to my knowledge all the once again,
Speaker 1: do you require a real name and address from sellers?
Speaker 1: I believe we do, but let me get back to
Speaker 1: your office with a I'd rather give you the accurate answer,
Speaker 1: but I think we do. It's rare to hear Jeff
Speaker 1: Bezos con on his back foot like this. There's some
Speaker 1: real uncertainty in his voice because government oversight could only
Speaker 1: mean bad things for his company. It could mean fines
Speaker 1: or even antitrust law suits that seek to break up
Speaker 1: the company. The lawmakers focused on Amazon's retail empire, which
Speaker 1: had expanded to an almost unimaginable size. This massive growth
Speaker 1: depended in large part on Amazon's third party marketplace. That's
Speaker 1: where independent merchants from around the world sell their wares
Speaker 1: on the Amazon dot com website. The lawmakers had no
Speaker 1: problem roughing up Bezos. He sounded defensive when asked whether
Speaker 1: those third party sellers weren't also victims of Amazon. Georgia
Speaker 1: Congresswoman Lucy Macbeth had one powerful example. I'm going to
Speaker 1: share the story of a small business owner who is
Speaker 1: also a wife and a mother. So, Mr Bezos, after
Speaker 1: Amazon just delisted this small business without any apparent reason
Speaker 1: or notice, she told us that they sent more than
Speaker 1: five hundred separate communications to Amazon, including to you, Mr Bezos,
Speaker 1: over the past year. There was not a single meaningful response.
Speaker 1: Do you think this is an acceptable way to treat
Speaker 1: someone that you described as both a partner and a customer? Uh? No,
Speaker 1: congress Woman, and I appreciate you showed me that anecdote,
Speaker 1: and I would like to talk to her. It does
Speaker 1: not at all to me seem like the right way
Speaker 1: to treat her. Bezos hadn't heard of her, likely because
Speaker 1: there are thousands of sellers with similar stories. And it's
Speaker 1: also likely that this merchant wasn't delisted by any one
Speaker 1: Amazon employee, but that she got swept up in Amazon's
Speaker 1: automated system. Many politicians and regulators think Amazon is too
Speaker 1: big and wields too much power over these mom and
Speaker 1: pop sellers. As part of this investigation, we've interviewed many
Speaker 1: small businesses, and they used the words like bullying, fear,
Speaker 1: and panic to describe their relationship with Amazon. Bullying, fear
Speaker 1: and panic hardly the words Bezos had in mind when
Speaker 1: he conceived the marketplace twenty years ago. Sellers can wake
Speaker 1: up one morning and find their business in crisis. There
Speaker 1: are vulnerable to negative reviews posted by competitors that tank
Speaker 1: their ratings. A merchant hawking the exact same product can
Speaker 1: accuse them of peddling unsafe or counterfeit items. And when
Speaker 1: Amazon's algorithms detect even a suggestion of questionable conduct, they
Speaker 1: can automatically close a seller's account and put them out
Speaker 1: of business altogether with no explanation, leaving a small business
Speaker 1: owner scrambling to figure out why you're listening to Foundering.
Speaker 1: I'm your host, Brad Stone. In this episode, we're going
Speaker 1: to tell the story of the Amazon Marketplace, the always surprising,
Speaker 1: often chaotic, and hugely successful side of Jeff bezos retail empire.
Speaker 1: This is the business that helped make Amazon profitable in
Speaker 1: the dog days after the dot com bust and helped
Speaker 1: the company to fund projects like Alexa and Prime Video.
Speaker 1: It's a story that starts with yet another non intuitive
Speaker 1: decision by Bezos to let indie merchants sell stuff on
Speaker 1: the website right alongside Amazon's own products. That decision would
Speaker 1: have life changing ramifications for millions of sellers around the world.
Speaker 1: We'll tell you that story after the break. So in
Speaker 1: that somewhat disastrous testimony in front of Congress, Jeff Bezos
Speaker 1: actually told the story of the birth of the marketplace.
Speaker 1: Twenty years ago, we made the decision to invite other
Speaker 1: sellers to sell in our store. We believe that combining
Speaker 1: the strengths of Amazon Store with the vast selection of
Speaker 1: products offered by third parties would be a better experience
Speaker 1: for customers. Fortunately, we were right. They're now one point
Speaker 1: seven million small and medium sized businesses selling on Amazon.
Speaker 1: So if you shop on Amazon dot com, you can
Speaker 1: buy some listed items directly from Amazon. This is merchandise
Speaker 1: that Amazon bought from a wholesaler and sells to the customer.
Speaker 1: It's acting like a regular retailer like Walmart or Target.
Speaker 1: But in most cases Amazon customers are buying things on
Speaker 1: the site from other people or companies. That's the Amazon marketplace.
Speaker 1: These days. The Amazon marketplace is a massive, unruly world
Speaker 1: undo itself. It has over a billion products two million sellers,
Speaker 1: and one of the primary people responsible for the size
Speaker 1: and scope of the marketplace was a guy named Peter Pharisee.
Speaker 1: Peter ran the music and movie business during his early
Speaker 1: years of the company until an unusual opportunity put him
Speaker 1: on Jeff Bezos radar. In two thousand eight, Peter was
Speaker 1: asked to host Amazon's annual all hands meeting, and he
Speaker 1: found a special guest. Getting asked to host the all
Speaker 1: hands meeting was like a treasured gift, and coming into it,
Speaker 1: I was looking for, well, gosh, what's the unique thing
Speaker 1: that we could do to really make this all hands
Speaker 1: meeting special. We had this idea of let's just try
Speaker 1: to get a you know, a big celebrity and a
Speaker 1: big name, so to skip ahead. We got really lucky
Speaker 1: and we got Tom Cruise, Yes, the Tom Cruise, Maverick
Speaker 1: Ethan Hunt, the couch jumping Scientology, proselytizing action star. Peter
Speaker 1: remembers that all hands meeting that's kind of magical, and
Speaker 1: perhaps his greatest accomplishment was not booking Tom Cruise, but
Speaker 1: impressing his boss, Jeff Bezos, who was clearly enthralled by cruise.
Speaker 1: So it was an incredible all hands meeting. The energy
Speaker 1: and the audience was incredible. Uh, Tom and Jeff talked
Speaker 1: backstage about space, rockets and planes and they had They
Speaker 1: turned out they actually had quite a few things in
Speaker 1: common when it comes to space and space travel. So
Speaker 1: that was that was fun to see. And after the
Speaker 1: all hands meeting ended, it ends with Jeff, you know,
Speaker 1: doing a Q and A. So it's he and I
Speaker 1: on stage together and he came over and I remember correctly,
Speaker 1: he either shook my hand or gave me a hug.
Speaker 1: I may have hugged him. I don't remember what it was,
Speaker 1: but it was like, that was great, and he invited
Speaker 1: me back to lunch afterwards with he and the S team.
Speaker 1: That's the senior team that was leading the entire company.
Speaker 1: So I thought to myself, wow, uh, this is this
Speaker 1: is great. So Peter is invited to a lunch with
Speaker 1: the most important people at Amazon, and that lunch would
Speaker 1: turn out to be pivotal because Bezos clearly took notice
Speaker 1: of Peter, and I was shocked to get a call
Speaker 1: from him a couple of weeks later saying, um, we
Speaker 1: have a new role. We want you to take and
Speaker 1: we have three businesses that are really struggling. One of
Speaker 1: them is called the marketplace, and that's all we want
Speaker 1: you to go lead. So I was on the other
Speaker 1: end of the phone, um, you know, and not knowing
Speaker 1: what to say exactly I was. It was such a
Speaker 1: different twist that I sort of imagined he was really
Speaker 1: surprised he was asked to change jobs to lead the small,
Speaker 1: sad team of about thirty five engineers their goal to
Speaker 1: bring third party sellers onto the site to compete against
Speaker 1: their own colleagues. As I came to find out, it
Speaker 1: was a very small, underfunded, uh team going through a
Speaker 1: really tough time, you know. And this was one of
Speaker 1: the teams with an Amazon that people would say, Wow,
Speaker 1: you know, I don't think he want to go over there,
Speaker 1: because those guys are struggling to get stuff done and
Speaker 1: the morale looks pretty poor. People were jumping ship. So
Speaker 1: I sort of said to myself, Wow, I wonder if
Speaker 1: the cruise thing went very poorly actually, because why would
Speaker 1: Jeff ask me to run this struggling business. At the time,
Speaker 1: the Amazon Marketplace was an unsuccessful backwater at the company.
Speaker 1: It was mostly a place where people sold used books, CDs,
Speaker 1: and DVDs. It represented maybe a quarter of all sales
Speaker 1: on the site, but Basos thought it could be bigger.
Speaker 1: If sellers could offer a lower price or get a
Speaker 1: product to customers faster, they should win the sale over Amazon.
Speaker 1: The idea struck a lot of employees as nuttie. It's
Speaker 1: one of those things you sort of raise your eyebrows
Speaker 1: on when you join the company, like, tell me this again.
Speaker 1: So I'm running our retail business, which you would also
Speaker 1: like me to enable thousands of people across the world
Speaker 1: to compete against us on our same platform on an
Speaker 1: even basis to serve our customers. So, you know, honestly,
Speaker 1: it was sort of no one had ever done this before.
Speaker 1: You know, you don't go into a retail store and
Speaker 1: see your competitors products on the shelf next to years.
Speaker 1: That didn't happen. Peter thought it was counterintuitive. In fact,
Speaker 1: most Amazon employees thought it was counterintuitive. Why inviting the competitors. Well,
Speaker 1: theelo realized that more sellers on the marketplace meant a
Speaker 1: greater selection of products, That more products meant more customers,
Speaker 1: and those buyers would in turn attract more sellers. All
Speaker 1: of this would make Amazon a richer, more prosperous company.
Speaker 1: Bezos posed a fundamental challenge for Peter. He asked this
Speaker 1: new marketplace team, how would you get a million sellers?
Speaker 1: It is a classic way of thinking at Amazon. You know,
Speaker 1: if you frame the question, how would we grow our
Speaker 1: seller based by ten percent next year? You'll probably get
Speaker 1: back and answer that delivers ten percent, which would be small.
Speaker 1: When you start the question by saying, how would I
Speaker 1: get a million more sellers into the marketplace, you know
Speaker 1: that can't be answered quickly, and obviously it's it's going
Speaker 1: to take an enormous amount of innovation here. So Peter
Speaker 1: realized that you couldn't recruit a million sellers one by
Speaker 1: one with salespeople making phone calls. He needed sellers to
Speaker 1: sign up on their own and go into business with
Speaker 1: Amazon dot Com. They called it a self service system.
Speaker 1: One of the big lessons I learned from Jeff actually
Speaker 1: was the importance of using technology to build self service
Speaker 1: in order to scale. Over the ten years I ran
Speaker 1: the business, more than eighty percent of all the businesses
Speaker 1: who sold their products on Amazon came in through self service.
Speaker 1: They never talked to a human being. I noticed some
Speaker 1: people This might sound kind of techno dystopian, but Peter's
Speaker 1: big win. The reason why the Amazon marketplace became so
Speaker 1: dominant it was because it depended on technology rather than
Speaker 1: people to grow. But this self service grow at all
Speaker 1: cost mentality is also why the marketplace would later generate
Speaker 1: so many problems for Amazon, unfairly punishing many sellers and
Speaker 1: drawing the attention of Congress. We'll tell that story next.
Speaker 1: So the early two thousand tens were a great time
Speaker 1: for the Amazon marketplace. Their primary rival at the time, eBay,
Speaker 1: was in decline. Now eBay sellers were jumping on Amazon.
Speaker 1: Through Bezos's self service system. They could sign up, list
Speaker 1: their wares, and start selling. But this is the Internet
Speaker 1: where things change fast. Pretty soon Peter Ferisse and his
Speaker 1: colleagues noticed they had real competition. Sellers in China were
Speaker 1: signing up for a site called wish dot com, operated
Speaker 1: by a San Francisco company. It allowed sellers anywhere in
Speaker 1: the world to sell products online to buyers anywhere else
Speaker 1: in the world. Ali Express, an arm of the Chinese
Speaker 1: Internet giant Ali Baba, was doing the same thing. For
Speaker 1: Peter Pharisee. It's struck close to home when our oldest
Speaker 1: as a freshman in college, I all of a sudden,
Speaker 1: I see a charge for Allie Express on my credit
Speaker 1: card and I and I say to myself, well, I
Speaker 1: know that wasn't me. So I wonder what happened here.
Speaker 1: And it turned out that my son bought a basketball
Speaker 1: jersey on there, and so did all of his college roommates.
Speaker 1: And he didn't even understand that Ellie Express might be
Speaker 1: a competitor to Amazon. All he knew is all of
Speaker 1: his roommates were constantly buying new sports clothing on Ellie Express.
Speaker 1: That's a wake up call. It was a signal to
Speaker 1: Peter that the Amazon marketplace could be in trouble. Sellers
Speaker 1: in China were the cost to make goods as much lower.
Speaker 1: We're suddenly competing head to head with sellers in the
Speaker 1: West were costs were higher. It was classic Internet style disruption.
Speaker 1: When we saw a Wish and Allie Express, it really
Speaker 1: broke one of the principles we had in mind, which is, well, wait,
Speaker 1: people won't want things that are delivered that slowly. And
Speaker 1: it turned out actually some people will. Some people are
Speaker 1: willing to make the trade off between much more higher value,
Speaker 1: you know, much lower cost and slower shipping time, and
Speaker 1: so that was a signal for us. So what did
Speaker 1: Amazon do? Of course, they also went to China. They
Speaker 1: decided to follow Wish dot Com and Ali Express and
Speaker 1: allowed Chinese sellers to reach buyers around the world. Peter
Speaker 1: wanted to see things for himself. I took my leadership
Speaker 1: team over to China and at the very beginning of
Speaker 1: this in Beijing, we hosted in kind of a big
Speaker 1: conference center, like a product fair. So Peter and his
Speaker 1: team held this big fair where they invited all sorts
Speaker 1: of merchants based in China to show off their products,
Speaker 1: and it was incredible. You know, these uh robot vacuums
Speaker 1: that we see all over our homes. I mean, we
Speaker 1: saw two or three people who built that. I think
Speaker 1: there was a Chinese company that acquired Segue, so we
Speaker 1: saw multiple versions of the Segue, you know, motorized vehicles,
Speaker 1: and the innovation was just absolutely incredible, and you say
Speaker 1: to yourself, wow, I mean, if we were selling these
Speaker 1: products right now across the world, people would love it,
Speaker 1: you know, because not only were they high quality, but
Speaker 1: they were also great value. On the trip, Peter noticed
Speaker 1: something else. Brand names were under attack. But the most
Speaker 1: incredible thing to see live was the same factories that
Speaker 1: are making the most expensive apparel in the world, also
Speaker 1: on the same factory line, are capable of making something
Speaker 1: equally as beautiful, equally as high quality, and selling it
Speaker 1: for a tenth of the price the price. This could
Speaker 1: have enormous implications for the fashion industry. Peter and his
Speaker 1: team visited a factory that made sport codes for Abercrombie
Speaker 1: and Fitch. Abercrombie sold the jackets for five dollars, but
Speaker 1: it only costs the factory nine dollars to make the jacket,
Speaker 1: And then they took the same code, added a slightly
Speaker 1: different button pattern to it, and sold it directly online
Speaker 1: for ninety dollars and still made a fat profit. So
Speaker 1: pick whoever your favorite designer. Is the same factory that's
Speaker 1: making those clothes, They're also capable of making those same
Speaker 1: clothes um much less expensively. And so what we began
Speaker 1: to see was these entrepreneurs who owned these factories, and
Speaker 1: some of them were US based, some of them were
Speaker 1: China based, they all were coming to the same conclusion
Speaker 1: we were, which is this is gonna significantly disrupt the
Speaker 1: world of brands and brand premium, and from a customer perspective,
Speaker 1: it's like this is going to change the world. It's
Speaker 1: certainly changed the fate of Amazon in Peter Farisee and
Speaker 1: his team threw open the doors of the marketplace to
Speaker 1: international sellers. Overnight, the marketplace tripled in size. The next year,
Speaker 1: the marketplace was responsible for more than half of all
Speaker 1: goods sold on Amazon. Sales in North America took off.
Speaker 1: The annual growth rate jump from tote. Amazon was defying
Speaker 1: the laws of corporate gravity. It's basically unheard of for
Speaker 1: a twenty year old business to start growing even faster.
Speaker 1: As a result, It's stock presumed and Bezos was vaulted
Speaker 1: into the ranks of the wealthiest people in the world.
Speaker 1: Peter Farisee remembers presenting a written report on his team's progress.
Speaker 1: He kept the best feedback and Amazon executive can dream of.
Speaker 1: And so Jeff picked up the document and he held
Speaker 1: it close to his chest, and what I remember him
Speaker 1: saying is I'm gonna take this this document home and
Speaker 1: sleep with it tonight. But there was a serious downside. Remember,
Speaker 1: on the Amazon marketplace, anyone could register and start selling.
Speaker 1: There was hardly any quality control, no seller verification, no
Speaker 1: product safety tests. This had significant repercussions. A family in
Speaker 1: Tennessee is suing Amazon. Half a million hoverboards are being
Speaker 1: recalled after reports that dozens of them have burst into flames.
Speaker 1: Hoverboard fires, like this one at a Houston mall in
Speaker 1: December sparked a major recall. If you own a hoverboard,
Speaker 1: stop using it immediately. It looked like chaos, counterfeits, fake products,
Speaker 1: fake reviews, even house fires. Media outlets around the world
Speaker 1: started investigating the problems of the marketplace, and Amazon belatedly
Speaker 1: tried to tame it. We invested hundreds of millions of
Speaker 1: dollars in innovations to try to fix this at the route.
Speaker 1: You know, and if you've seen what's happening on these
Speaker 1: social media platforms, you can't hire thousands of people and
Speaker 1: play whack a mole looking at every single posting and
Speaker 1: trying to take them down. That's a process that you'll
Speaker 1: lose because there are people out there who have great
Speaker 1: technology and can keep you know, the the whatever whatever
Speaker 1: bad actor things you're trying to do coming at you
Speaker 1: faster than you can stop them. Amazon urgently needed to
Speaker 1: police the marketplace, but the way they would do, it
Speaker 1: would prove to be controversial. Just like they relied on
Speaker 1: technology to create the global marketplace, they would also develop
Speaker 1: technology to keep it in check. Algorithms and automation would
Speaker 1: monitor reviews and probably boot sellers whose products drue complaints
Speaker 1: about quality or safety. For sellers caught in these shifting sands,
Speaker 1: this was the stuff of nightmares. That's next. So the
Speaker 1: Amazon marketplace was now international and all over the world.
Speaker 1: It was making people rich. The biggest Amazon sellers even
Speaker 1: became public companies. For instance, the electronics maker Anchor is
Speaker 1: now worth more than six billion dollars. But not everyone
Speaker 1: was so lucky. Here's James Thompson. He used to work
Speaker 1: at Amazon and now advises Amazon sellers. Consumers just sit
Speaker 1: back and say, Wow, look at all this great selection
Speaker 1: that's happening, not realizing that there is a whole type
Speaker 1: of Darwinism happening every day on the site, and some
Speaker 1: of it is brutal. It's absolutely brutal. It's brutal because
Speaker 1: the competition among sellers from around the world is fierce.
Speaker 1: That's why sometimes you can't even find the same item
Speaker 1: twice on Amazon. Oh I think I bought that set
Speaker 1: of that that the headset last week on Amazon. I
Speaker 1: think I wanna buy another one for my nephew. Oh
Speaker 1: it's not on Amazon anymore. Well, it's not on Amazon
Speaker 1: because either that brand was taken down, or that brand
Speaker 1: no longer exists and it's been replaced with ten other brands,
Speaker 1: or somebody went after that brand and file a bunch
Speaker 1: of fake reviews and the brand is temporarily suspended while
Speaker 1: they work out with Amazon how to get reinstated. All
Speaker 1: this stuff is happening, and as an Amazon customer, you
Speaker 1: just say, Wow, there's ten thousand brands of headsets I
Speaker 1: can buy r T. I lucky. As a customer it
Speaker 1: is choice, choice, choice, It's wonderful. As a seller, it's
Speaker 1: a lot scarier. It's scary for sellers because the same
Speaker 1: technology that makes it easy for them to sign up
Speaker 1: on the marketplace can also take them down. All it
Speaker 1: takes is a couple of reviewers saying they think our
Speaker 1: merchants products are fake, and the algorithms picked this up
Speaker 1: and the next thing you know, the seller's banned. Amazon's
Speaker 1: automated system has little ability to sort out false allegations
Speaker 1: from real ones, and the sellers are at its mercy.
Speaker 1: To better understand this new landscape, we sent our colleagues,
Speaker 1: Spencer Soaper to one of the largest gatherings of Amazon
Speaker 1: merchants in the world. We're at the Las Vegas prosper Show.
Speaker 1: And what you hear um, I'm a new Amazon seller
Speaker 1: and this is our first conference, so we're just trying
Speaker 1: to get some basic information. Okay, what do you what
Speaker 1: do you sew? We saw aftermarket you t V and
Speaker 1: a TV products. So when you say a TV like
Speaker 1: like off roading vehicles, razors and mudsli windshields, winches, mirrors, bumbers.
Speaker 1: The Prosperous Show is all about Amazon, but it's not
Speaker 1: sponsored by Amazon in any way. But selling on Amazon
Speaker 1: can be so confusing and overwhelming, and the rules constantly change.
Speaker 1: The sellers find it helpful to meet in a big
Speaker 1: group and network and swept tips and what kind of
Speaker 1: problems to Amazon seller station? I would say poor communication
Speaker 1: from the Amazon customer support is that can be an issue.
Speaker 1: You're not really sure if they shut your listing now?
Speaker 1: And what the exact issue is us with your listing?
Speaker 1: An abrupt suspension? What do you sell on Amazon? Engagement
Speaker 1: rings and wedding bands while so people buy those on Amazon. Yes,
Speaker 1: I had no idea. And uh so what do you
Speaker 1: sell on Amazon? Pb fit? It's a peanut butter powder.
Speaker 1: It sound like a protein powder. It's kind of tell
Speaker 1: me your name, Okay, my name is Maniche Busche, and
Speaker 1: I'm uh high seven figure Amazon sello. One of the
Speaker 1: most interesting people I met at the Prosperous show was Maniche. Uh.
Speaker 1: He's from Phoenix, Arizona. And what stood out to me
Speaker 1: was that he was ready to talk about numbers that
Speaker 1: a lot of the other merchants didn't want to talk about.
Speaker 1: I seven figure Amazon seller. That sounds very important. And
Speaker 1: what were you doing before this? I was entirely in
Speaker 1: a different trade. I was doing scrib metal trading. You know,
Speaker 1: there was no need of middleman like me, so I
Speaker 1: quit that business. Maniche buys most of the products from China,
Speaker 1: where they're made. Then he ships them to the US
Speaker 1: and he sends them to Amazon warehouses all around the country.
Speaker 1: What's your best selling product? Um, it's a five gallon
Speaker 1: gas can that turned out to be lucrative. It's doing
Speaker 1: three thousand dollars a day. What is the gas can
Speaker 1: cost on Amazon? Is the five gallon one? I sell
Speaker 1: for fifteen bugs, something I get for two dollar fifty cents.
Speaker 1: What percentage of each sale would you say goes to Amazon?
Speaker 1: So I'll say I'm making fifteen Ten to fifteen is
Speaker 1: what I take home. It's your profit margin that's ten
Speaker 1: to fifteen percent. So for every fifteen dollar gas can
Speaker 1: many sales, he pockets about a dollar fifty maybe two
Speaker 1: dollars um. What's the biggest challenge to selling on Amazon?
Speaker 1: Every now and then a lot of hackers attack are
Speaker 1: listening to bring the listing down, and the once the
Speaker 1: listing is down, it takes a couple of days to
Speaker 1: bring it up, so that itself is damage. At least
Speaker 1: your sales is not half think for that period of time, right,
Speaker 1: So Amazon sellers get attacked by rivals. So in a
Speaker 1: lot of cases, someone who sells a competing product, say
Speaker 1: another gas can, will find a way to take down
Speaker 1: as competitors listings. This happens frequently. It's part of why
Speaker 1: these unofficial support systems for sellers exist. Like the Prosper show.
Speaker 1: James Thompson, the guy who advises sellers, has seen many
Speaker 1: of the worst case scenarios. I've seen many people disappear
Speaker 1: because they were so disgruntled, or they made bad initial
Speaker 1: decisions around how to think about which products to sell,
Speaker 1: and they ended up with tens of thousands of dollars
Speaker 1: of unsold inventory that they'll never be able to sell.
Speaker 1: They didn't they didn't monitor the competitive landscape properly, and
Speaker 1: they basically said, all my savings that I thought I
Speaker 1: was going to turn into the next e commerce business,
Speaker 1: it's gone. And that's exactly what happened to a guy
Speaker 1: named Barack Giovanni Basic Glee. Everything that could go wrong
Speaker 1: for an Amazon seller went wrong for him. Like my
Speaker 1: life was so perfect simple, like like I have a job,
Speaker 1: a family, I have like like very simple life, live
Speaker 1: in the same place for so many years. And now
Speaker 1: I'm like waking up in the morning and I don't
Speaker 1: know what next because I need first about to finish
Speaker 1: with Amazon, but Tila will get money from Amazon. I
Speaker 1: have so much debt I cannot I cannot apply into
Speaker 1: a credit card right now. For seventeen years, Brock had
Speaker 1: a clothing store called New York Speed. He mostly sold
Speaker 1: trendy streetwear like Hugo, Boss, Calvin Klein, and Lucky. He
Speaker 1: had a physical store front in l a on Melrose Place,
Speaker 1: and he also sold online on eBay and Amazon. Then,
Speaker 1: when the pandemic hit in the spring of clothing sales
Speaker 1: were down, he decided to close the store and go
Speaker 1: all in on Amazon. Back then, he was telling himself
Speaker 1: Amazon is the future. This decision would end up costing
Speaker 1: him Dearly in mouth two thou twenty, we packed all
Speaker 1: the warehouse and we moved it to Amazon. And this
Speaker 1: was the biggest move that I did in my life
Speaker 1: because imagine, like to take a huge warehouse and just
Speaker 1: to pack every item individually underwell Jean's leather jacket, expensive
Speaker 1: item you're talking about like a lot of merchandise. Brock
Speaker 1: says that all of this merchandise had a retail value
Speaker 1: of eight hundred thousand dollars. Amazon says it was worth
Speaker 1: a quarter of that. Either way, it basically amounted to
Speaker 1: his life savings, and it was all inside Amazon warehouses.
Speaker 1: Then one day he got just about the worst news
Speaker 1: that an Amazon seller can get. You wake up in
Speaker 1: the morning and then the employees calling you and telling
Speaker 1: you that they close your account, and then of course
Speaker 1: your body getting getting sweat all over body, and like
Speaker 1: like you get you freaked out you're going to the office,
Speaker 1: you're calling Amazon and you check what they need, and
Speaker 1: you start and you send them everything. Brock says Amazon
Speaker 1: suspended as account with a little explanation. They seized his
Speaker 1: inventory and froze the money. It was the equivalent of
Speaker 1: going to open your store one day and finding chains
Speaker 1: on the doors. After coming through his own customer reviews,
Speaker 1: Barrock believed that Amazon suspected AS products were counterfeit. This
Speaker 1: is essentially a death sentence for an Amazon seller. Yes,
Speaker 1: and this is like you're ruining somebody life based on
Speaker 1: somebody else giving a review. Now, they don't give you
Speaker 1: enough information. You need to dig to see what is
Speaker 1: the last time that somebody bought this item. And then
Speaker 1: you see you have a jacket that like four people
Speaker 1: bought or two people, and like you're checking if somebody complain,
Speaker 1: it's ours that that you need to do your research.
Speaker 1: They're not telling you all the information like why somebody
Speaker 1: will complain. This is something a lot of people don't
Speaker 1: realize about Amazon. The company can suspend you based on
Speaker 1: mere suspicions that it's up to the merchant to prove
Speaker 1: the Amazon to the products are indeed authentic, and Amazon
Speaker 1: has no obligation to spell out why they're suspending an account.
Speaker 1: This is when Amazon sellers learn a difficult lesson. Amazon
Speaker 1: can afford to suspend them indefinitely because there are millions
Speaker 1: more merchants with millions more products. The disruption for Amazon
Speaker 1: is negligible, but for the individual seller, the consequences are catastrophic.
Speaker 1: And then they stopped communicating with you, and then they
Speaker 1: telling you that they will destroy your merchandise like this
Speaker 1: point like you already live in a nightmare for a
Speaker 1: couple of months. Now they want to destroy your merchandise.
Speaker 1: It's like, why to destroy my life saving? Like like
Speaker 1: this is not happening to me. The threat that destroys
Speaker 1: inventory sounds over the top, right, But it's safe to
Speaker 1: say that Amazon has been extremely sensitive about accusations of
Speaker 1: selling counterfeits because in April, the U. S. Government pointed
Speaker 1: a finger at the company as a haven for fake products.
Speaker 1: The next year, Amazon claims that it sees and destroyed
Speaker 1: two million counterfeit products from its warehouses. It's possible that
Speaker 1: Barack got swept up in this crackdown. He says that
Speaker 1: he sent multiple requests to get at the inventory back,
Speaker 1: but these requests were ignored. Nothing happened. They destroy all
Speaker 1: your merchandise. You have nothing to do. I'm on unemployment.
Speaker 1: I was a businessman with employees. Every life perfect, walking
Speaker 1: forty fifty sixty hours a week. The epist person ever
Speaker 1: now waiting on Amazon every day like I'm like, this
Speaker 1: is the longest deal of my life and nothing. They're
Speaker 1: just ignoring us. They're just like like ghosting us. A
Speaker 1: spokesperson said. Amazon repeatedly asked Barack Jovanni to provide evidence
Speaker 1: that his items were authentic. Amazon says the invoices he
Speaker 1: showed them were either illegible or didn't match the records
Speaker 1: of the brand owners. They said they informed Barack that
Speaker 1: he needed to remove his inventory by specific dates or
Speaker 1: it would be destroyed, and that Barack failed a request
Speaker 1: to remove his inventory in time. So Barack is now
Speaker 1: waiting in hopes of getting reimbursed for his inventory. We
Speaker 1: recorded this podcast in the fall of he had a
Speaker 1: binding arbitration case pending against Amazon at the time. In
Speaker 1: binding arbitration, the outcome is kept confidential, so we may
Speaker 1: never find out what actually happens. It's hard to say
Speaker 1: how frequently these things happen. Nightmare. Amazon stories abound. Entire
Speaker 1: cottage industries have sprung up of consultants and attorneys who
Speaker 1: specialize in helping Amazon sellers navigate the suspension process, and
Speaker 1: of course, the predicaments of sellers came to the attention
Speaker 1: of the U. S. Congress. Our first witnesses Jeff Bezos,
Speaker 1: the chief executive officer of Amazon dot Com. This journey
Speaker 1: started with an order to get a million sellers into
Speaker 1: the marketplace, to build a system that was self service,
Speaker 1: and to globalize fast. The marketplace enriched the company and
Speaker 1: Jeff Bezos beyond anyone's wildest dreams. Like other tech giants,
Speaker 1: the Amazon marketplace grew into a huge platform through automation
Speaker 1: and algorithms, but not having enough human oversight hurt customers
Speaker 1: and sellers alike. It also turned the company into the
Speaker 1: policeman of e commerce, whose job was to instill order
Speaker 1: on the chaos of its own making. It also brought
Speaker 1: Amazon into the crosshairs of the U. S. Government. Meanwhile,
Speaker 1: another part of its business would prove justice controversial. Amazon
Speaker 1: decided they would deliver their own packages. They pushed to
Speaker 1: expand their vast network of fulfillment centers, launching one of
Speaker 1: the largest armies of warehouse workers and drivers that the
Speaker 1: world had ever seen. That's coming up in the next
Speaker 1: chapter of Foundering. The Amazon story. Foundering is hosted by
Speaker 1: me brad Stone. Sean When is our executive producer. Spencer
Speaker 1: Soaper contributed reporting to this episode. Raymondo is our audio engineer,
Speaker 1: Molly Nugent as our associate producer, Mark Million and Vander
Speaker 1: may Robin Agello and Molly Shoots our story editors. Francesca
Speaker 1: Levi is the head of Bloomberg Podcasts. Be sure to
Speaker 1: subscribe and if you like our show, leave of You.
Speaker 1: Most importantly, tell your friends see you next time.