Coronavirus Exposes Additional Flaws in Amazon Marketplace

Sellers say the platform should assume a more active role in policing it

bottles of hand sanitizer with the amazon logo behind them
Price gouging has been a problem in the midst of the coronavirus pandemic, with Amazon saying it's removed hundreds of thousands of listings. Getty Images, Amazon
Headshot of Lisa Lacy

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The coronavirus outbreak has created a run on certain supplies, and with demand comes opportunists. Over the weekend, The New York Times published an account of one Amazon seller’s 18,000-bottle stockpile of hand sanitizer, which he was selling for as much as $70 apiece until the platform yanked his listings, the latest example of morally murky behavior in third-party marketplaces.

“We are disappointed that bad actors are attempting to artificially raise prices on basic need products during a global health crisis and, in line with our long-standing policy, have recently blocked or removed hundreds of thousands of offers,” an Amazon spokesperson said in a statement. “We continue to actively monitor our store and remove offers that violate our policies.”

Amazon said it is working around the clock to ensure compliance with its Marketplace Fair Pricing Policy. It also pointed to praise from California Gov. Gavin Newsom and Massachusetts Sen. Ed Markey for its response after their complaints.

But it’s this reactive approach that some sellers say is precisely the problem in the ever-growing Amazon Marketplace, which adds 2,200 new sellers daily, according to Marketplace Pulse. These new ranks have helped Amazon’s product catalog balloon to over 500 million items, by some estimates—and Amazon previously told Adweek it has no plans to throttle the spigot as it seeks to offer the best prices, selection and convenience. (It probably doesn’t hurt that third-party sellers accounted for $160 billion in sales in 2018, according to CEO Jeff Bezos’ last shareholder letter.)

But as the marketplace grows, it becomes harder to control.

“Amazon has some stringent rules around products, pricing and overall customer experience. However, since the marketplace is incredibly big, there are always a few bad apples that are hard to get rid of,” said Deneiro Bartolini, an Amazon seller with products in categories like kitchenware, baby items and mobile accessories.

The seller in the Times story acquired his stock of hand sanitizer through what is known as retail arbitrage: A seller buys products from stores on the cheap and sells them online at a markup.

According to sellers, there’s a certain line between good and bad behavior here.

Jonathan Weber, a seller focused on products like outdoor equipment and office supplies, said the practice is widespread because it’s an accessible business model to new sellers thanks to all the YouTube channels and Facebook groups dedicated to it.

Bartolini agreed that arbitrage has long been a part of the Amazon Marketplace as sellers use apps like Profit Bandit to scan barcodes at stores to quickly determine Amazon price and sales rank.

“That makes it very easy for anyone to go into a shop, buy products in bulk and resell them at a profit,” Bartolini said. “That is not a problem when you buy toys at Walmart and you resell them on Amazon for a small profit. However, creating a shortage of a primary product during a national emergency to capitalize on fear should be considered not only immoral, but illegal.”

John Frigo, who sells home goods and gadgets on Amazon, agreed.

“I’m not against buying Fingerlings Monkeys or some new board game prior to Christmas and marking them up, but when it comes to buying up staples like water, hand sanitizer, face masks, medication, etc., I think that’s wrong [and] preying on people,” he said.

While noting that Amazon sellers are notoriously secretive about what they sell out of fear of competition, Weber said he’s seen some sellers talk about profiting from the pandemic while others have been actively discouraging any kind of profiteering. In the end, he said it’s a personal decision about what you’re comfortable selling and how much risk you’re willing to take with your Amazon account.

“Amazon seems to generally pay little attention to many of these gray area models, such as jacked-up prices on toys around Christmas, selling thinly veiled cannabis accessories, etc. until something happens that initiates a widespread crackdown,” he added.

What’s more, according to Frigo, Amazon is being somewhat hypocritical now as it, too, raised prices on the hand sanitizer it offers as a first-party seller.

“I … find it funny Amazon allows this to go on until there’s public and regulator backlash, and now they want to help regulators prosecute or pursue people who did this when Amazon was essentially a part of it,” Frigo said. “Basically, Amazon wants to play the good guy after making their 15% final value fee on all the price gouging.”

We’ve seen this before, he noted, such as when Amazon allowed sellers to exchange free products for reviews.

“They were happy to have the added money, [but] once the FTC and the public turned against them, then all of a sudden they took it seriously and wanted to be part of the solution,” Frigo added. “Heck, even with this recent incident when many organizations are paying employees for time off, Bezos asked low-level warehouse workers to donate vacation time or sick time to their colleagues instead of doing something himself or … as a company. Then, when he caught flack from the public, he says anyone who tests positive or is quarantined will be paid.”

While there isn’t necessarily an easy solution to some of the problems plaguing the marketplace, sellers say Amazon ought to do more.

“I think that Amazon should be more upfront with their policies and rules, so sellers are clear about what is and isn’t allowed on the platform,” Weber said.

Clear-cut policies, along with regular enforcement, would “vastly improve the marketplace for both buyers and sellers,” Weber said.

Bartolini agreed Amazon should get more involved when it comes to smaller violations like price manipulation. And, when a seller is breaking the law, the government should step in.

“I would expect law enforcement to intervene if someone broke the law at a mall, so I don’t see why it wouldn’t apply to an online marketplace, especially if the seller is in the U.S.,” he added.

While the Amazon seller from the Times story has since donated his hand sanitizer, he is still reportedly being investigated by the Tennessee Attorney General’s office.

A better immediate solution would be to limit sales of products like sanitizer and masks to sellers who have consistently sold them for three months prior to a major incident, Frigo suggested.

“There’s no reason to hurt someone’s business when this is their specific products and industry,” Frigo said. “Amazon already does this for toys during the holidays, i.e., if you hadn’t been selling toys since October or November, you can’t pop on and sell them in December. They could have done the same thing here.”

@lisalacy Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.