Why is Amazon footing the bill for defective products sold by marketplace sellers?

Discussion
Photo: Amazon
Aug 12, 2021

In the near future, Amazon.com shoppers that have a problem with a third-party marketplace seller will be able to bring their complaint directly to Amazon instead of having to take it up with the seller.

The change to the platform’s “A-to-Z guarantee” goes into effect September 1, allowing customers to contact Amazon with claims about defective products, according to CNBC. When Amazon receives a claim, it will vet it using a combination of insurance fraud experts and artificial intelligence technology. It will get involved with the seller if the claim has merit and will take matters into its own hands if the seller does not respond.

Amazon will also pay off claims of up to $1,000 in instances where products purchased on its marketplace cause property damage or injury, according to a report by Ars Technica. The payment will be made directly to customers at no cost to sellers with valid insurance. Amazon will also pay more on claims it finds to be valid that the third-party seller rejects.

Amazon will not admit liability in any case where it makes a payment and, while sellers will not be charged, new rules will require more of them to obtain product liability insurance. The change in policy comes as Amazon continues to be the subject of criticism and even legal action by the U.S. Consumer Product Safety Commission over facilitating the sale of dangerous and defective items through its marketplace.

Amazon’s third-party marketplace makes up the majority of the platform’s retail sales.

Other major retailers — including some of Amazon’s biggest brick-and-mortar competitors — have likewise seen their marketplaces making up more of their profits as e-commerce has grown more popular and have been investing in their expansion accordingly.

Walmart, for instance, last year partnered with Shopify to allow more small businesses access to sell on its marketplace. The retailing giant opened up its third-party marketplace for the first time to international sellers this year. Walmart’s online marketplace has been in operation since 2009.

Target has taken a more intentional approach to its marketplace expansion. The chain launched its Target+ marketplace in 2019, but rather than accepting all comers to the platform, it features a curated selection of products from third-party sellers that complement Target’s main line assortment.

DISCUSSION QUESTIONS: Do you see Amazon’s decision to take on this responsibility somehow leading to a composition of more responsible third-party sellers? How might it change the dynamics of marketplace selling?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Amazon shoppers don't distinguish between issues with Amazon and issues with third-party sellers. So this is a great way to strengthen consumers' views of the Amazon brand."
"This is Amazon protecting its reputation, and the apparent result is that this is good for the consumer."
"Over time, I see other retailers with marketplaces looking at similar consumer protections."

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4 Comments on "Why is Amazon footing the bill for defective products sold by marketplace sellers?"


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Mark Ryski
BrainTrust

Ultimately Amazon is protecting its brand and the integrity of its marketplace. Taking these steps will provide Amazon’s customers with even more confidence about buying from third-party resellers. I think this is a sign of a maturing in the marketplace space – first you build it, then you refine it. Over time, I see other retailers with marketplaces looking at similar consumer protections.

Shep Hyken
BrainTrust

This is Amazon protecting its reputation, and the apparent result is that this is good for the consumer. Amazon will have stringent guidelines for its third-party sellers. If they wish to do business on the Amazon platform, they will have to play by rules that are good for both the customer and for Amazon.

Venky Ramesh
BrainTrust

I read about how the third-party sellers are directly reaching out to the sellers when they read bad reviews and offering to refund them the money in return for removing the negative review. This is of great concern to Amazon because the genuineness of the ratings and reviews is one of the key drivers of sales for them. I guess their decision to take charge, in this case, is partly influenced by their desire to maintain the sanctity of the ratings and review mechanism.

Melissa Minkow
BrainTrust

This is yet another way for Amazon to collect data on its shoppers, sellers, and products. This move gives the retailer even more insights and opportunities to hone its AI technology and its offering. Most importantly, though, we know Amazon shoppers don’t distinguish between issues with Amazon and issues with third-party sellers on Amazon. So this is a great way to strengthen consumers’ views of the Amazon brand.

wpDiscuz
Braintrust
"Amazon shoppers don't distinguish between issues with Amazon and issues with third-party sellers. So this is a great way to strengthen consumers' views of the Amazon brand."
"This is Amazon protecting its reputation, and the apparent result is that this is good for the consumer."
"Over time, I see other retailers with marketplaces looking at similar consumer protections."

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