ALL Fingers Point to the Middle Man

Last spring, decided to end its venture with one of its largest third party sellers, DAB Unlimited. Amazon logs more than two million sellers, where nearly half of all of its merchandise is sold by volume through Like DAB Unlimited, third party companies use Amazon’s website, warehouses and payment systems to sell their goods over the Web, allowing the retailer to offer a much broader range of products. This type of strategy has caught on to other retailers such a Staples Inc., Wal-Mart Stores Inc., and Sears Holdings Corp.

DAB Unlimited mainly offered vitamins, supplements, weight-loss pills, pet-care products and children’s toys. In 2010, DAB racked in more than $200 million in sales alone. The fast growth of companies like DAB explain how Amazon can generate mass amounts revenue or even increase their revenue by 25% like they did in 2008.

The biggest risk of this venture is that Amazon cannot control the overall customer experience. Between 2009 and 2012, Amazon received dozens of complaints from people claiming that DAB had sold them counterfeit or mislabeled items, according to internal Amazon documents filed from their bankruptcy case. But although Amazon cannot control the full customer experience, Amazon did take matters into their hand in 2011 forcing DAB to stop selling products on their sight after DAB sought bankruptcy protection.

But third party sellers like DAB shows the true risk that Amazon faces when it comes to customer service. One specific customer reported that DAB was selling fake Gillette Mach3 razor cartridges, according to the Amazon documents. However, there are less than 1% of DAB shipments that get flagged for problems.  During one instance where a customer took some diet pills and felt adverse side affects, Amazon took it upon them to investigate and sent a warning to DAB with the concerns. At this point, Amazon, based on recommendations, decided to suspend DAB’s selling privileges. Johnson & Johnson last year suspended sales of scores of consumer products and over-the-counter medications to Amazon because it said the Web retailer wasn’t doing enough to prevent third parties from selling expired or damaged J&J products.

Although the Amazon account manager pleads a blind eye to the situation, he is now willing to help improve third-party sellers in sales and in ratings.  Amazon is still currently not doing business with DAB Unlimited. However, DAB Unlimited still has its storefronts open and has been continuing to get great ratings from customers since 2006. It is still not clear if Amazon will look to do business with DAB in the future.

  1. How do you think service is when it comes to returns?
  2. Do you believe that third party sellers provide a convenience or a hassle to customers?
  3. Should look to develop a new strategy to better manage these third party sellers?

13 thoughts on “ALL Fingers Point to the Middle Man

  1. I do not shop a lot with Amazon, but the times I have, I have been very pleased. I have only once had to return a textbook I bought through Amazon, and my experience was very pleasant. They were very clear with their process and attentive to the tracking of items in the mail. In this case with DAB Unlimited, maybe Amazon could take it into their hands and revise any orders shipped by third party sellers, but this may be too expensive and even not realistic.

  2. Very interesting post. Really makes me think about who the seller is that I am purchasing from and what items I am purchasing.
    I think Amazon is pretty good at handling returns. I usually do a lot of research before I buy anything online to prevent the headache of returning something but I had to return a faulty USB cable a few months ago and it was very easy to return it. I barely had to do any work.
    I think that third party sellers are a hassle. If Amazon doesn’t sell it directly or it is not “fulfilled by Amazon” I do not buy it. I do not trust other sellers because they usually price their items higher than Amazon and have worse ratings or few/no reviews on their items (at least from what I have seen). I would prefer for a better system to be put in place where everything is fulfilled by Amazon and sellers have more responsibility because if there is a return the seller will have to deal with Amazon not some customer. This will force Amazon to screen their sellers better but will provide customers with more satisfaction because there will be more items available and all backed with Amazons great customer service/return policies.

  3. This is an interesting problem. Third party sellers are great for Amazon because they bring in more revenue and are even good for consumers because they widen the variety of products to choose from but like you stated they can also be unreliable in the quality of their products. This is like a small scale version of the problems that I imagine a site like eBay could face. But with eBay the risk is usually assumed, the customer knows that they are buying directly from another person and eBay is just a facilitating site. With Amazon that’s not as expected. I think that the regulation of DAB or another company like it could be very difficult from a money perspective and from figuring out just what kind of restrictions to place and how to enforce them. I’m wondering how it would be received if, like eBay, Amazon were to put the majority of responsibility on the customer and clearly state that they hold no responsibility for the quality of products from their third party carriers. It’s kind of a cop out but I also kind of works.

  4. Sleek article. I think that effectiveness of third party sellers really depends. In some ways, DAB Unlimited can be seen as using the name of Amazon to protect itself. But then DAB Unlimited also provided a lot of revenue for Amazon and less than 1% of goods flagged for problems is not that bad.

    Of course high standards is expected, but sometimes it just doesn’t work out that way. People make mistakes, and so do machines when they malfunction. I still think that it is mostly about owning up to the problem and making sure that the problem won’t happen again.

  5. As a third party seller on amazon, and a frequent buyer from third party sellers, there is often an option to not allow returns for items purchased from the third party sellers. The buyer accepts the risk of lack of return when they buy with this option. Amazon, like said by another commenter, needs to state that they are not responsible for the quality of products sold by third party sellers and should encourage buyers to rate their experience with third party sellers to provide an insight of what the service is like.

  6. Over the summer I accidentally purchased amazon prime and once I realized this I started using it for all of my online shopping. I bought many things from books to phone batteries. Every single order has been in on time and correct. In fact the only problem I have ever had with amazon was in my favor. The third party sellers, I think, are a great addition to the website that add a unmatched variety.

  7. It is a great article. I used to sell on amazon and as a former seller their seller support is terrible but their customer support in amazing. They tend to hold on to your profits for weeks because they are trying to make sure that you are have a legit business. They require a tax id for certain level of profit and they are very unresponsive with their seller support. Though when you are a customer they are very prompt and tend to be overprotective. Their A-to-z Guarantee Protection is supporting customers who are having issues with 3rd party vendors and they are very unforgiving. So DAB will probably never work with Amazon again but their customers who were hurt by DAB will get refunds and restitution.

  8. Interesting story. I am not really sure about Amazon’s return policies, but I cannot imagine returning goods to an online company such as that. In regard to third party sellers, I think that it is important to gauge their credibility before making the purchase by researching them a little. You can never be too sure when it comes to ordering from the internet. I think that Amazon should at least research their third party sellers BEFORE allowing them to use their platform. I mean, Amazon is engaging in risky behavior when they accept business from companies such as DAB.

  9. I honestly think that 3rd party sellers offer benefits and problems to customers of Amazon. It allows for more variety and more competitive pricing, but as you stated in your blog, it definitely causes problems in terms of consistency and customer service. I think Amazon is doing the only thing they can really do in the situation by trying to regulate the third party sellers themselves while not overdoing by removing 3rd party sellers completely.

  10. I would say Amazon should invest everything they can in order to ensure that the third party responsibility is upheld to the extent of what is expected of Amazon. Personally, this third party service provides a lot of convenience as I find so many text books this way; and for their to be an accountability involved by way of amazon and their legitimization helps the purchasing process become that much easier. When it comes to returns I believe it goes over pretty smoothly but in terms of third party returns there could be more resources invested to create more confidence in customers.

  11. I think that you have a great viewpoint on this issue. Amazon has a responsibility to filter and respond to businesses that provide consistently poor service/products to the customers. In addition, more global marketplaces are emerging everyday and regulations overseeing products may be more lax than what has become the ‘standard’ in long-time, established markets. Amazon, being the global leader that it is, has to continue to regulate its own marketplace and punish/remove businesses that do not provide fair, reliable products. Great post!

  12. As someone who actively purchases from Amazon, my personal experience has been really good. I have a prime membership and it makes buying things very easy at times. What I find with third party vendors is that for the most part they take longer to ship things. Returning with Amazon itself is easy, but it can take sometime. I have never returned with a third party vendor. It will be interesting to see how Amazon plays the middle man when they start their same day shipping process.

  13. I have never returned anything from Amazon as I do not shop on Amazon frequently. I believe that third party sellers are a convenience for shoppers looking for products on Amazon because they do not have to look on other platforms and compare prices from two different websites, and they’re able to look at the customer ratings for this product in a familiar platform ( that they’re used to and can rely on due to it’s large customer base and frequent ratings.

    A new strategy would be difficult to implement but perhaps they could develop stricter penalties against third party companies who have a high percentage of flagged products. I think it will be difficult because these third party organizations account for a quarter of Amazon’s revenue as your chart states.

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