Amazon's crackdown on third-party sellers is the right approach

If demanding receipts is too much bother for fraudsters, so much the better

amazon prime box
Credit: REUTERS/Mike Segar/File Photo

In trying to be the world's largest e-tailer by offering almost anything, Amazon has attracted a dedicated group of thieves and resellers trying to slip through the holes in Amazon's bureaucracy. Amazon is now making a good-faith effort to thwart those selling unauthorized goods, just as it tried to attack deceptive product reviews.

Amazon's new approach — detailed by Internet Retailer last week — is to insist on proof of purchase from select manufacturers and distributors before allowing sellers to list those products on Amazon, as well as asking for fees as high as $1,500. Amazon subsequently clarified the rule to only apply to new merchants.

"Many merchants discovered the change late last week when they tried to upload a product listing only to find they were blocked unless they could provide invoices showing the purchase of at least 30 products over the previous 90 days," said a CNBC report.

It's important to stress that these rules are designed to thwart two very different situations, one legal (albeit barely) and the other illegal. The illegal efforts are people selling cheap imitations and labeling them with the names of big brands. The barely legal approaches are folk that purchase merchandise from eBay or even from small retailers directly and then mark up the price and sell the goods on Amazon. Indeed, some resellers have gotten quite brazen about it, with the resellers using the manufacturer's own shipping operations against them.

The new Amazon fees are fairly minor, separating those who are running serious retail businesses from garage sale resellers. The paperwork is the important new rule here. And it's a good one.

Until now, Amazon's antifraud efforts were overwhelmingly reactive. It would pursue fraudsters after receiving multiple complaints. But that proved mostly ineffective, since true fraudsters would sell and then change their business name and try selling again. No, what was needed was a proactive strategy.

The goal is not to stop all fraud but to make it cumbersome enough that fraudsters will move much of their effort to non-Amazon sites. Amazon has taken its retail leadership role seriously, with supply chain and car-dealer moves that are truly innovative.

The big problem that I see with Amazon's approach is that Amazon tends to be hard to negotiate with. Take its requirement about "showing the purchase of at least 30 products over the previous 90 days." What if the legitimate reseller had received a volume shipment four months ago, with the idea that those supplies would last it six months, and can therefore show nothing for the prior 90 days? Will Amazon's team be reasonable and look into the particulars and made a judgment call? Or will its people adhere to Amazon tradition and insist on strict literal compliance or "No selling soup for you!" (Sorry, Seinfeld fans. I paraphrased your classic line.)

My sincere hope is that this Amazon approach is copied through e-commerce. Otherwise, the bad guys won't merely shift from one to another. They may decide that this particular fraud run is no longer worth their time. One can hope.

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