Is Amazon Risking Customer Trust By Trying To Be 'The Everything Store?'

In a tech-driven world, where 'only the paranoid survive,' the question is whether Amazon's ambition will cause it to ignore risks as complacency takes hold based on its record of past successes and current domination.

The company has overcome every obstacle, tackled every threat and shown up every naysayer. Which is probably the best time to be hyper-vigilant. JL

Jason Del Rey reports in Re/code:

As Amazon’s megastore grows and becomes more popular, so does the risk that it blows itself up.Amazon accumulated its current power and market position from convenience, selection, low pricing and trust. As Amazon gives more third parties access to its store the opportunities for bad actors multiply. Trust from customers and merchants alike is at risk. The biggest threat to Amazon’s future success is Amazon itself. Meanwhile, Amazon continues to build the all-consuming everything store. Will the trade-offs be worth it?

On two recent trips to Amazon.com, I was in search of two very different products.

One was an inexpensive pair of iPhone earbuds. The other was a body wash.

Despite the products themselves having nothing in common, the two searches turned up one troubling connection: Each listing boasted tons of positive reviews — but for completely different products. The merchants selling the items I sought had apparently merged their new listings with older, outdated listings for completely unrelated merchandise such as a down-alternative pillow.

Their likely goal was to use the quantity and quality of the old, unrelated reviews — important signals that Amazon uses to rank products in search results— to boost the rankings for the earbuds and body wash, making customers more likely to discover them.

These merchants did succeed in tricking me into discovering their listings, but I recognized something was off and ended up feeling duped.

I also left the website both times without making a purchase — and feeling much less trusting of Amazon overall. And for Amazon, which has strived to build “Earth’s most customer-centric company,” that distrust is a big problem.

Opportunity breeds exploitation

For the last 17 years, Amazon has followed a brilliant playbook: recruit millions of small-businesses to sell on its Amazon Marketplace platform, enabling the creation of the everything store — without the risk of having to stock all of the inventory itself.

By many measures, that strategy has been a blockbuster hit. More than half of the items sold on Amazon across the globe now come from these small- and mid-sized businesses; during the holiday season alone, those sellers accounted for more than $13 billion — billion with a B — of Amazon’s revenue. It’s also been lucrative for many small- and medium-sized merchants; more than 50,000 of them tallied over $500,000 apiece in sales on Amazon’s platforms in 2018, the company said.

But the same opportunity that Amazon saw, and which it sold to millions of merchants, has attracted schemers and scam artists across the globe. Sometimes those scams are straightforward, such as in the case of obvious counterfeit goods. In other cases, like gaming the site’s search algorithm, they are more discreet.

Either way, both kinds of deceit lead to the same conundrum: As Amazon’s megastore grows and becomes more popular, so does the risk that it blows itself up.

If that sounds extreme, consider that Amazon has not accumulated its current power and market position from some gorgeous shopping experience; instead, it results from Amazon’s potent cocktail of convenience, selection, low pricing — and, perhaps most importantly, trust.

What happens as Amazon gives more and more third parties access to its global store? The number of opportunities for bad actors to plot nefarious things multiplies. Trust from customers and merchants alike is at risk — and Amazon knows it. The biggest threat to Amazon’s future success isn’t some imaginary antitrust case; it’s Amazon itself.

“Trust is something we work super hard at, it’s something you have to earn,” said Dharmesh Mehta, Amazon’s vice president of worldwide customer trust and partner support, in a recent interview with Recode at Amazon’s Seattle headquarters. “We think we earn that through the actions we take, but we realize we’re not perfect and so we’re constantly learning and trying to get better.”

Amazon says it invests more and more each year in trying to stay ahead of the bad guys, by combining the best of what “machines” (translation: computers) can do with monitoring and evaluation for which “humans” (translation: people) are still best suited.

The company says that, for every listing that slips through and is flagged by a brand after the fact, it is now catching 100 suspected counterfeit product listings before a brand points them out. That is thanks in part to a new automated system backed by machine learning that the company formally announced Thursday morning, February 28, 2019.

Amazon introduced two additional anti-counterfeit initiatives, but both require a brand to do more on its end: one is a tool that lets brands take down suspected counterfeit Amazon listings themselves, while another would likely require brands to alter their packaging design to add an Amazon-specific serial code.

Separately, for the last three-plus years, Amazon has made a practice of publicizing lawsuits against fake-review farms, signaling to merchants, the press, the government, and shoppers that they take customer trust seriously. Fake reviews are still a big problem, and the Federal Trade Commission has started to take action.

Killer ambition

At the same time, Amazon’s own insatiable ambition means this is a long-term battle in which the company will never be able to claim 100 percent victory. If Amazon merely wanted to act like a normal retailer and secure all goods directly from the brand that creates them, the e-commerce giant could nip a lot of this in the bud. Target, for example, this week announced its own marketplace platform on which outside merchants can hawk their wares, but through an invitation-only process that it claims will maintain high product standards.

But Amazon doesn’t want to be home to just a massive selection of goods. Nor will Amazon executives be satisfied if Amazon’s product catalogue is just larger than any competitor in the world.

Instead, Amazon wants to sell “every genuine product in the world,” according to Mehta.

On first read, that might sound like a tech exec bloviating. But Mehta referenced the same idea several times in a 30-minute discussion.

“We want all of the product in the world at the lowest prices, as long as it’s genuine,” he told me.

And again: “[O]ur general mental model ... is actually quite simple: We want the vast selection of every genuine product in the world [and] we want it at the lowest prices.”

You get the idea. (Wait a minute. Are we really at the point where we accept such a goal as a healthy one?)

If you trust that this is indeed a central pursuit of Amazon’s, trade-offs are always going to be necessary. You can’t carry every product in the world if you are purchasing each item directly from the brand that makes it.

Amazon is open about this. The company want to get its hands on a product pretty much however it can — even if it sometimes means restricting and upsetting popular brands in the process.

“If [a brand’s] got three intermediaries going to some reseller who gets a genuine product — and they’ve got great prices — we want it,” Mehta said.

That kind of allowance creates all sorts of openings for what Amazon’s trust team calls “bad actors”; if you legitimately want to get your hands on every product in the world, you have to welcome a certain amount of risk. Mehta’s teams sits at that perilous point where Amazon’s appetite for growth butts up against the thing it says it can’t do without: customer trust.

And the list of schemes they’re facing is long. Beyond counterfeit goods, fake positive reviews (intended to trick customers), and fake negative reviews (intended to harm a competitor), there is the problem of merchants “hijacking” another seller’s listing, which can entail all sorts of tactics to essentially steal customer traffic from a reputable Amazon seller.

There are subtler sneaky tricks, too, highlighted by my experience resulting from sellers merging new listings with old ones. Another popular scheme involves a seller creating some sort a variant of a product sold by a big brand — a different pack size or color, for example — and getting that listing added to the main product detail page on Amazon.

That last one is currently driving brands mad, executives at the startup Boomerang Commerce told me recently, because these “variant” items are essentially trading on the trust between a customer and a brand — or between a customer and Amazon — but can come with higher prices per unit. Shoppers might fail to do the math and end up paying more for their bundled goods.

Amazon’s Panda?

Despite all of Amazon’s current and past investments in preventing and tracking various tricks and schemes, several plugged-in sources who do business with Amazon believe a greater cleansing could be on the horizon — perhaps something as seismic as the Google Panda algorithm update of 2011.

Panda was a change to how Google’s in-house search algorithm evaluated websites across the web, boosting the rankings of high-quality sites and single-handedly crushing scores of websites that specialized in gaming the search engine with low-quality content. Something similar for Amazon would, partners hope, eviscerate legions of shady merchants who use hacks and tricks to game search results.

This may be wishful thinking. If Amazon has such an initiative in the works, it’s not saying, though Thursday’s anti-counterfeit announcements could be related.

Nor will Amazon acknowledge any major shift in how aggressively it has begun policing its marketplace over the past 12 to 18 months, despite several of my sources saying that something appears to have changed up in Seattle during that timeframe.

“For all the years that I’ve been here, we do continue to invest more every year,” Mehta said flatly.

That makes sense, because the long-term risks are real. Take my own recent shopping experiences as cautionary tales. Prior to the incidents I outlined at the beginning of this story, I generally trusted the average review rating for top-ranked Amazon products that had hundreds or thousands of reviews.

Now, I’m increasingly suspicious of all reviews on the site — especially if they accompany a brand or product with which I have no previous experience. This is coming from a family — mine — that has placed, on average, around two orders with Amazon every single week over the past year.

Customer trust does not erode overnight. It happens slowly, disappointing order by disappointing order — and then all at once.

Meanwhile, Amazon continues to build the all-consuming everything store. Will the trade-offs be worth it?