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Amazon sellers are organizing against the retailer through probes



Third-party sellers quietly power Amazon's retail dominance.

According to a recent Morgan Stanley analytical note, Amazon's third-party business is worth $ 307 billion of the company's $ 1.1 trillion enterprise value, which makes up 58% of total merchandise sales. Meanwhile, the first-party platform is worth $ 93 billion.

Amazon founder Jeff Bezos raved about third-party sellers, whom he mostly described small and medium-sized businesses, in his letter to shareholders in 2018. From 1999 to 2018, these sellers had a compound annual growth rate of 52%. On eBay, these same small sellers had a CAGR of 20%.

"To put it bluntly: third-party sellers kick off our first party-butt," Bezos wrote. "Bad".

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But third-party sellers who spoke to Business Insider aren & # 39; Don't feel exactly the same love for Bezos as he professed to them.

Complaints abound

"I've been selling on Amazon for seven years," Scott Needham, CTO of Amazon Marketplace seller BuyBoxer, told Business Insider. "From the beginning, if you look at the mechanics of things that work, in some situations, it just wasn't a fair marketplace."

Some sellers say that Amazon has an unfair advantage when it comes to accessing sales data on its third-party platform. For example, one company told Bloomberg in 2016 that its best-selling portable stand was replaced when Amazon Basics launched a very similar product – at half the price.

Another leading complaint from Amazon sellers is that they can have their accounts suspended without much notice or explanation. The process of reinstating an account is brutal, sellers told Business Insider.

"I think many sellers sense who they are against and that Amazon is not their friend," said Paul Rafelson, a tax attorney at Francissen Rafelson Schick, LLP whose practice is focused on helping Amazon sellers, told Business Insider. "Amazon will use them when needed and dispose of them when appropriate. There is no love there."

An Amazon Flex driver that delivered packages.
Pat Greenhouse / The Boston Globe via Getty Images

Chris McCabe worked at Amazon for more than five years on account filing. McCabe, who is now an independent consultant who helps Amazon sellers whose accounts are suspended, explained to Business Insider why it is so stressful for sellers if their accounts are abruptly canceled.

When customers complain to Amazon about a seller, Amazon takes those complaints seriously and will likely jump to suspend the account, even if the reasons are "scary," McCabe said.

"The Amazon Marketplace for 'Buyer Experience Is King,'" said McCabe, founder of the ecommerceChris consulting firm. "So any complaint from the buyer, unless determined to come from a competitor from your account, is considered a valid complaint which must be taken up by a seller. So, as you can imagine, it is easy to bring in a handful of complaints that may warrant further investigation. "

But, McCabe added," buyer complaints are not really seen to much of a degree. They are more or less considered to be valid almost every time they are out. "That means seller accounts can sometimes be suspended when they really shouldn't be.

Third-party sellers aren't always small and fun [19659008] Although they may be small businesses, some of these market sellers are huge. About 50,000 Amazon third-party sellers generated more than $ 500,000 in sales last year.

Take BuyBoxer, where Needham works, the Logan, Utah-based the company, in part, manages Amazon sales for BIC, Hasbro, 3M and about 200 other massive household brand names, according to the store's page. In total, BuyBoxer has about 100,000 products on Amazon at a given time.

BuyBoxer was actually suspended for seven days for it Needham eventually said it was a badly formatted label. The company was not told about the suspension until two days after the lawsuit.

"We had to send a hundred employees home in a week," Needham said.

say that like all salespeople out there have feared policy enforcement out there, "Needham said. "Amazon says they're going after the bad actors. I fully support and I want them to, but I can name dozens of sellers who have tried to do things in good faith and they still come across this."

NOAH SEELAM / AFP / Getty Images

But if BuyBoxer were to be suspended for longer than just a few days, it would be disastrous for their employees and their business.

"There are all these stories about ways Amazon has basically ruined the seller's life," Rafelson said. "One strong suspension or misunderstanding can ruin a seller's business."

Amazon did not respond to Business Insider's request for comment on this story. Amazon told The Wall Street Journal in a 2012 report that sellers who join Amazon and use its fulfillment service report a 50% increase in sales.

"All of our focus is to help sellers succeed," Peter Faricy, then vice president of Amazon Marketplace, told the reporter at the time.

Amazon sellers large and small see the need to organize

To get their business started, Amazon sellers have organized to communicate their needs to the Department of Justice and the Federal Trade Commission. Both agencies have launched antitrust probes in Amazon this summer.

These probes have largely centered on how Amazon has crushed its rivals by undermining logistics costs and packing countless services, such as Amazon Prime Video and Amazon Prime two-day delivery, under a fee. Both are considered predatory and restrictive of competition.

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But sellers are trying to push for a different perspective – how Amazon unfairly competes with its own third-party sellers. To that extent, Needham is gathering a group of sellers to address the FTC and DOJ through a public comment.

"We're a group of salespeople or some kind of movement," Needham said. "We try to unite the voice and just make sure that we who contribute to the Amazon market are listened to."

Stephen Brashear / AP Images for Amazon

This is not the first time Amazon sellers have joined forces to express concern for political authorities. Rafelson formed a nonprofit organization for merchants called the Online Merchants Guild, which is currently campaigning the state of California for a tax law that would recover sales tax from online merchants.

Rafelson said it can be challenging to get sellers to understand the importance of banning together.

"It's a bet," he said. "It's hard to get small businesses to understand the importance of this."

Nevertheless, these concerns have already been heard by major political figures.

Senator Elizabeth Warren, who is also a front runner for the 2020 presidential election, says Amazon is "crushing" its own third-party sellers.

Some claim that Amazon can see from their own online data which products sell best. Then, the retail giant is able to launch its own product to capture sales in that specific area. This means that Amazon can only launch private label products in the most popular verticals, rather than making products that nobody wants to buy.

"It's their website. It's Amazon's website," Needham said. "But you never know exactly when it is those who exploit something they have built or where there is an open marketplace that should be all things the same."

Are you an Amazon seller? Email the reporter to rpremack@businessinsider.com.


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