Seller scams abound in any marketplace that is open to third-party merchants. Even a marketplace like Amazon is not immune. The constant marketplace evolution means that one mistake can mean the end of a business. As a result, some sellers will resort to underhanded, and sometimes illegal, tactics to gain an advantage or eliminate their competition. While most sellers are honest and provide fantastic customer service, just a handful of bad sellers can harm the marketplace as a whole.
The scams discussed below have damaged the trust amongst customer, marketplace, and sellers.
Drop shipping is one strategy that sellers use. In this tactic, sellers will target a merchant on a marketplace like Amazon. These sellers often have a suite of analytical and scraping tools that compare Amazon prices with other marketplaces like eBay. They choose products that they can profit from by charging a more on a different platform like eBay. Often, listings on marketplaces like eBay can be automated using product descriptions and pictures from Amazon, so there is little work involved.
When a customer purchases from the seller, the seller places an order on Amazon for delivery to the customer. With marketplace fees, these sellers may not be earning much at all, but for relatively little work and potentially hundreds of orders a day, even a $1 profit per item may be worthwhile since these sellers don’t run a business. In order to reduce costs, some of these drop shippers abuse their Prime membership to get free shipping.
The real scam occurs when these sellers initiate an Amazon A-to-Z claims process in the hopes that merchants will refund the sale without appeal. If the Amazon claim is successful, scammers get to keep the proceeds from the sale, and the merchant loses the product. He also gets a negative mark on his metrics. Meanwhile, the customer who received the product is unaware that a scam has been committed on his behalf.
Many will wonder why merchants should care in cases where sellers don’t initiate chargebacks or refund claims. While drop shippers may increase sales, the increase isn’t worth the potential frustrations and customer defection due to poor customer service. One possible scenario is this: a seller targets an Amazon merchant and makes a sale on eBay. The seller orders the item from the Amazon merchant. The merchant includes an invoice that shows the company details and lower Amazon price.
Customers become angry because of the higher price, so they contact the Amazon merchant. The Amazon merchant cannot refund a non-existent sale to that customer, nor would he reimburse the drop shipper. Thus, business has to deal with the upset customer. Of course, the simple solution for the merchant is to list on eBay, removing the seller’s ability to sell the same item at a higher price.
Other seller scams abound in the marketplace. Another common one includes the creation of new seller accounts on Amazon. Often, these sellers are identifiable because they set prices that are too good to be true. They may price an item at $10 when it retails for $40 everywhere else. Then they will claim that the item ships from outside the US or they will claim delivery issues to delay the customer from filing claims or requesting refunds due to Amazon’s settlement period.
If the customer files a complaint later, the seller has already left. Then Amazon has to handle the flood of complaints. While this scam may appear to hurt only buyers, merchants who also sell the same items may lose sales when those customers shop elsewhere.
“Just Launched” scammers are often identified by the products they carry. Their catalog may include hundreds or thousands of items, and their inventory remains relatively consistent across numerous accounts. Another indicator is the sheer number of negative reviews they receive. Most Amazon merchants will do their best to maintain good ratings for their performance metrics since low metrics can lead to consequences like suspension.
However, scammers will not care about their ratings. While they may deliver an item or two to appease some customers, they only care about the short term. This scam has harmed new and honest sellers the most, as shoppers eventually learned to avoid sellers with the “Just Launched” tag.
To avoid the stigma of the “Just Launched” tag, scammers then moved to purchase, hack, or hijack old and inactive Amazon accounts. Attempts include phishing for accounts or buying personal information leaked online. Even now, many Amazon sellers report receiving email spam requesting account details. Scammers hope that the history of the hacked account will give customers a false sense of security. Hacked accounts will often have previously excellent ratings, but current ones will be low. Scammers then repeat their behavior, setting too-good-to-be-true prices to capture customers and employing delaying tactics to stall more patient customers.
See this picture for an example of a Pokemon 3DS game that goes for around $30. Notice that all the sellers are “Just Launched.”
Similarly, scammers may begin by providing excellent customer support to build trust and confidence. They may accomplish this by selling small, low-cost items even at a slight loss. Once they feel confident they’ve established some trust, they then move onto the larger scam involving more expensive items.
Some unscrupulous sellers have resorted to other means to undermine their competitors. Some sellers file frivolous claims against their competitors to get the listings or accounts removed. Because of the way Amazon works, filing such complaints can lead to an automatic suspension regardless of legitimacy. The review process can take days or weeks, and in the meantime, the merchant under review loses revenue from sales while competitors benefit. While Amazon has banned against abusers of this reporting system, such action hasn’t deterred sellers from creating new buyers accounts and making false claims.
Several other underhanded seller practices exist as well. One popular one is purchasing a competitor’s stock, waiting almost thirty days, and then returning everything. Or they will buy an item and then leave negative feedback to undermine their competitors.
Even sellers who are not targeted by these scammers are subject to the consequences. Basically, these kinds of scammers, if left unchecked, will drive other sellers away from the marketplace. With sellers abandoning one platform, products and traffic will also decrease, creating a downward spiral. The fraud perpetrated by both merchants and customers have resulted in more restrictions on marketplaces like Amazon. While these new policies curbed scams, they have also resulted in limiting competition. Less competition is good for the sellers, but it’s terrible for the customer.
The rise of online scams has not really made shoppers more wary of making their purchases online. In fact, the opposite has happened: more and more people are moving to online purchases for price and convenience. This partly due to customer protections and marketplaces like Amazon, which is fervently on the side of the customer. But this dedication to the customer creates a lot of opportunities for both sellers and buyers to cheat the system.
As Amazon finds solutions to certain types of fraud, scammers rush to exploit other methods. New technologies will always provide scammers with tools to continue their scams. Everyone has to work together to keep fraud to a minimum for the overall health and success of the marketplace.