Acknowledging its far-reaching fraud problem, Amazon has announced through a spokesperson that it is “testing a process that allows us to validate prospective sellers’ identification via video conferencing.”
By meeting with the third-party sellers face-to-virtual-face, the multifaceted giant of commerce hopes to make it “difficult for fraudsters to hide.”
Between its well-known outlets (shopping, television) and its lesser-known outlets (IMDb, Amazon Web Services), the Seattle-based company has a vast and wide-ranging empire. One of its most powerful tools has been its third-party marketplace, which allows companies or individuals to put their products up on its own site against all competitors. This can mean tremendous profits for electronics companies like Anker or used booksellers like World of Books. Their sales are so strong, that in 2019’s annual shareholder letter, founder and CEO Jeff Bezos wrote that “third-party sellers are kicking our first-party butt. Badly.”
As these legitimate sellers have been making profits, both they and potential customers have been pulling their hair trying to keep away scam artists who will glom on to popular products. The scams have become elaborate, as one technique described by Marketwatch called “brushing” shows:
How "Brushing" works on Amazon
A third-party seller on Amazon will get the name and address of a consumer. They will purchase an item that they will then send to that person, claiming it’s a gift. Amazon’s policy allows the individual who purchases a gift to leave a review for that item, so the third-party seller will leave a fake review after the item ships. The review is listed as a “verified buyer” review, meaning that it’s supposed to have more authority because it’s from someone who actually bought and theoretically used the product.
And that’s not where the problems end. A complex black market ecosystem to raise higher in Amazon’s rankings has emerged, with some legitimate businesses feeling the pressure to break the rules or fall behind. In 2019, one security blog deemed the situation so bad that it declared “Amazon Is Losing the War on Fraudulent Sellers.”
The company plans an enhanced system of vetting using both machine learning and face-to-face meeting in order to pinpoint bad actors before they ever make their first sale. The process includes trained investigators and at one point, even reached to face-to-face meetings.
But with the global pandemic caused by the novel coronavirus, face-to-face meetings proved impossible. So now the company is turning to video chats, which it has confirmed with GeekWire will not incorporate facial recognition technology, although Buzzfeed reported last year that Amazon did in fact incorporate it during interviews.
It’s too soon to see what sustained success against fraudulent sellers looks like. A Department of Justice report out earlier this year points out that:
The relative ease of setting up and maintaining e-commerce websites makes online marketplaces a prime locale for the retailing of counterfeit and pirated goods. E-commerce retailers enjoy low fixed costs of setting up and maintaining web businesses and lower costs for carrying out normal business operations such as managing merchant accounts. These ventures can be set up quickly without much sophistication or specialized skills.
Some online platforms allow retailers to use pre-made templates to create their stores while other platforms only require that a seller create an account. These businesses face much lower overhead costs than traditional brick-and-mortar sellers because there is no need to rent retail space or to hire in-person customer-facing staff. Not only can counterfeiters set up their virtual storefronts quickly and easily, but they can also set up new virtual storefronts when their existing storefronts are shut down by either law enforcement or through voluntary initiatives set up by other stakeholders such as market platforms, advertisers, or payment processors.
Amazon has certainly had some success—in 2019, it was able to halt over 2 million accounts of bad actors. Over a thousand sellers have signed up for the pilot program so far, eager to show that it works.
The Inverse Analysis -- As anyone working from home can attest, video conferencing successfully requires at least some time commitment, from preparing the facts to present your case to look professional.
While the metrics Amazon is analyzing over its video conferencing aren’t clear, it’s clear that it is a time commitment. But given how easy it is to recreate an online store after one is rejected, this might turn into a slightly more elaborate game of whack-a-mole.