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- [00:00]
Brad Stone
AI is rewriting the business playbook with productivity boosts and faster decision making coming to every industry. If you're not thinking about AI, you can bet your competition is. This is not where you want to drop the ball, but AI requires a lot of compute power, and with most cloud platforms, the cost for your AI workloads can spiral. That is, unless you're running on oci. Oracle Cloud Infrastructure this was the cloud built for AI, a blazing, fast, enterprise grade platform for your infrastructure, database, apps and all your AI workloads. OCI costs 50% less than other major hyperscalers for compute, 70% less for storage, and 80% less for networking. Thousands of businesses have already scored with oci, including Vodafone, Thomson Reuters and Suno AI. Now the ball's in your court. Right now, Oracle can cut your current cloud bill in half if you move to OCI. Minimum financial commitment and other terms apply offer ends March 31 see if your company qualifies for this special offer@oracle.com strategic that's oracle.com strategic you worked hard to lay the foundation for your contracting business, and when you're with Amex Business Platinum, you can keep building it up with a flexible spending limit that adapts with your business. And since you earn 5 times Membership Rewards points on flights and prepaid hotels booked on amextravel.com, you get even more from on site overseeing. That's the powerful backing of American Express. Not all purchases will be approved. Terms apply. Learn more@americanexpress.com AmExBusiness In July 2020, in the midst of the raging COVID 19 pandemic, the CEOs of the four major technology companies were dragged before Congress. They appeared virtually the purpose of today's hearing is to examine the dominance of Amazon, Apple, Facebook, and Google. That's Rhode Island Representative David Cicillini, the chairman of the House Antitrust Subcommittee. Do you swear or affirm under penalty of perjury that the testimony you are out to give is true and correct to the best of your knowledge, information and belief, so help you God?
- [02:04]
Jeff Bezos
Yes.
- [02:06]
Brad Stone
In particular, he and the other lawmakers had hard questions for Jeff Bezos. They were skeptical, to put it mildly. Lawmakers from both sides of the aisle united against him. Why isn't Amazon more aggressive in ensuring that counterfeit goods are not sold on its platform?
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Jeff Bezos
Thank you. This is an incredibly important issue, and one that we work very hard on. Counterfeits are a scourge. I would encourage this body to pass stricter penalties for counterfeiters and to Increase.
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Brad Stone
Your company does make money off of counterfeit goods being sold on your platform, isn't that correct, Mr. Bezos? Aren't seller fees now effectively subsidizing Amazon's retail division?
- [02:50]
Jeff Bezos
Congresswoman no, I don't believe so. I think what you're seeing there when.
- [02:53]
Brad Stone
You see these fees going up, Mr. Bezos, are. Are stolen goods sold on Amazon? Congresswoman not to my knowledge. Although I think, once again, do you require real name and address from sellers?
- [03:08]
Jeff Bezos
I believe we do, but let me get back to your office with a I'd rather give you the accurate answer.
- [03:15]
Brad Stone
But I think we do. It's rare to hear Jeff Bezos caught on his back foot like this. There's some real uncertainty in his voice because government oversight could only mean bad things for his company. It could mean fines or even antitrust lawsuits that seek to break up the company. The lawmakers focused on Amazon's retail empire, which had expanded to an almost unimaginable size. This massive growth depended in large part on Amazon's third party marketplace. That's where independent merchants from around the world sell their wares. On the Amazon.com website, the lawmakers had no problem roughing up Bezos. He sounded defensive when asked whether those third party sellers weren't also victims of Amazon. Georgia Congresswoman Lucy McBath had one powerful example. I'm going to share the story of a small business owner who is also a wife and a mother. So, Mr. Bezos, after Amazon delisted this small business without any apparent reason or notice, she told us that they sent more than 500 separate communications to Amazon, including to you, Mr. Bezos, over the past year, there was not a single meaningful response. Do you think this is an acceptable way to treat someone that you described as both a partner and a customer?
- [04:41]
Jeff Bezos
No, Congresswoman and I appreciate you showing me that anecdote and I would like.
- [04:46]
Brad Stone
To talk to her.
- [04:47]
Jeff Bezos
It does not at all to me seem like the right way to treat her.
- [04:53]
Brad Stone
Bezos hadn't heard of her, likely because there are thousands of sellers with similar stories. And it's also likely that this merchant wasn't delisted by any one Amazon employee, but that she got swept up in Amazon's automated system. Many politicians and regulators think Amazon is too big and wields too much power over these mom and pop sellers. As part of this investigation, we've interviewed many small businesses and they use the words like bullying, fear and panic to describe their relationship with Amazon. Bullying, fear and panic. Hardly the words Bezos had in mind when he conceived the marketplace 20 years ago, sellers can wake up one morning and find their business in crisis. They're vulnerable to negative reviews posted by competitors that tank their ratings. A merchant hawking the exact same product can accuse them of peddling unsafe or counterfeit items. And when Amazon's algorithms detect even a suggestion of questionable conduct, they can automatically close a seller's account and put them out of business altogether with no explanation, leaving a small business owner scrambling to figure out why. You're listening to Foundering. I'm your host Brad Stone. In this episode we're going to tell the story of the Amazon Marketplace, the always surprising, often chaotic and hugely successful side of Jeff Bezos retail empire. This is the business that helped make Amazon profitable in the dog days after the dot com bustle and helped the company to fund projects like Alexa and Prime Video. It's a story that starts with yet another non intuitive decision by Bezos to let indie merchants sell stuff on the website right alongside Amazon's own products. That decision would have life changing ramifications for millions of sellers around the world. We'll tell you that story after the break. You worked hard to lay the foundation for your contracting business. And when you're with amex Business Platinum, you can keep building it up with a flexible spending limit that adapts with your business. And since you earn 5 times Membership Rewards points on flights and prepaid hotels booked on amextravel.com, you get even more from on site overseeing. That's the powerful backing of American Express. Not all purchases will be approved. Terms apply. Learn more@americanexpress.com AmExBusiness this show is sponsored by BetterHelp. BetterHelp has been revolutionary in connecting people.
- [07:42]
Jeff Bezos
To mental health services.
- [07:43]
Brad Stone
Using BetterHelp can be as easy as opening your laptop or your phone and clicking a button and the session begins. Clients are able to choose in what.
- [07:52]
Jeff Bezos
Way they would like to communicate with me.
- [07:54]
Brad Stone
Whether video or on the phone or chat texting, BetterHelp is there when you need it. And that's what makes all the difference. Visit betterhelp.com podbusiness to get 10% off your first month. Therapists were compensated. So in that somewhat disastrous testimony in front of Congress, Jeff Bezos actually told the story of the birth of the marketplace.
- [08:18]
Jeff Bezos
20 years ago we made the decision to invite other sellers to sell in our store.
- [08:23]
Brad Stone
We believe that combining the strengths of.
- [08:25]
Jeff Bezos
Amazon Store with the vast selection of products offered by third parties would be a better experience for customers. Fortunately, we were right. There are now 1.7 million small and medium sized businesses selling on Amazon.
- [08:40]
Brad Stone
So if you shop on Amazon.com, you can buy some listed items directly from Amazon. This is merchandise that Amazon bought from a wholesaler and sells to the customer. It's acting like a regular retailer like Walmart or Target, but in most cases, Amazon customers are buying things on the site from other people or companies. That's the Amazon Marketplace these days. The Amazon Marketplace is a massive, unruly world unto itself. It has over a billion products, 2 million sellers, and one of the primary people responsible for the size and scope of the marketplace was a guy named Peter Farrisi. Peter ran the music and movie business during his early years at the company, until an unusual opportunity put him on Jeff Bezos radar. In 2008, Peter was asked to host Amazon's annual All Hands meeting and he found a special guest.
- [09:40]
Jeff Bezos
Getting asked to host the All Hands meeting was like a treasured gift. And coming into it, I was looking for, well, gosh, what's the unique thing that we could do to really make this All Hands meeting special? We had this idea of, let's just try to get a big celebrity and a big name. So to skip ahead, we got really lucky and we got Tom Cruise.
- [10:02]
Brad Stone
Yes, the Tom Cruise maverick. Ethan Hunt, the couch jumping, Scientology proselytizing action star. Peter remembers that All Hands meeting as kind of magical. And perhaps his greatest accomplishment was not booking Tom Cruise, but impressing his boss, Jeff Bezos, who is clearly enthralled by Cruise.
- [10:24]
Jeff Bezos
So it was an incredible All Hands meeting. The energy in the audience was incredible. Tom and Jeff talked backstage about space rockets and planes, and it turned out they actually had quite a few things in common when it comes to space and space travel. So that was fun to see. And after the All Hands meeting ended, it ends with Jeff doing a Q and A. So it's he and I on stage together and he came over and if I remember correctly, he either shook my hand or gave me a hug. I may have hugged him, I don't remember what it was, but it was like, that was great. And he invited me back to lunch afterwards with he and the S team, that's the senior team that was leading the entire company. So I thought to myself, wow, this is great.
- [11:07]
Brad Stone
So Peter is invited to a lunch with the most important people at Amazon. And that lunch would turn out to be pivotal because Bezos clearly took notice of Peter.
- [11:17]
Jeff Bezos
And I was shocked to get a call from him a couple weeks later saying, we have a new role we want you to take and we have Three businesses that are really struggling. One of them is called the Marketplace and that's what we want you to go lead. So I was on the other end of the phone not knowing what to say exactly. It was such a different twist than I sort of imagined.
- [11:43]
Brad Stone
He was really surprised. He was asked to change jobs to lead the small, sad team of about 35 engineers. Their goal, to bring third party sellers onto the site to compete against their own colleagues.
- [11:58]
Jeff Bezos
As I came to find out, it was a very small, underfunded team going through a really tough time. And this was one of the teams within Amazon that people would say, wow, I don't think you want to go over there because those guys are struggling to get stuff done. The morale looks pretty poor. People were jumping ship. So I sort of said to myself, wow, I wonder if the cruise thing went very poorly actually, because why would Jeff ask me to run this struggling business?
- [12:27]
Brad Stone
At the time, the Amazon Marketplace was an unsuccessful backwater at the company. It was mostly a place where people sold used books, CDs and DVDs. It represented maybe a quarter of all sales on the site. But Bezos thought it could be bigger. If sellers could offer a lower price or get a product to customers faster, they should win the sale over Amazon. The idea struck a lot of employees as nutty.
- [12:54]
Jeff Bezos
It's one of those things you sort of raise your eyebrows on when you join the company. Like, tell me this again. So I'm running our retail business, but you would also like me to enable thousands of people across the world to compete against us on our same platform on an even basis to serve our customers. So, you know, honestly, it was sort of, no one had ever done this before. You know, you don't go into a retail store and see your competitors products on the shelf next to yours. That didn't happen.
- [13:24]
Brad Stone
Peter thought it was counterintuitive. In fact, most Amazon employees thought it was counterintuitive. Why invite in the competitors? Well, Bezos realized that more sellers on the marketplace meant a greater selection of products. That more products meant more customers, and those buyers would in turn attract more sellers. All of this would make Amazon a richer, more prosperous company. Bezos posed a fundamental challenge for Peter. He asked this new Marketplace team, how would you get a million sellers?
- [13:58]
Jeff Bezos
It is a classic way of thinking at Amazon. You know, if you frame the question, how would we grow our seller base by 10% next year, you'll probably get back an answer that delivers 10%, which would be small. When you start the question by saying, how would I get a million more sellers into the marketplace. You know that can't be answered quickly and obviously it's going to take an enormous amount of innovation here.
- [14:25]
Brad Stone
So Peter realized that you couldn't recruit a million sellers one by one with salespeople making phone calls. He needed sellers to sign up on their own and go into business with Amazon.com they called it a self service system.
- [14:39]
Jeff Bezos
One of the big lessons I learned from Jeff actually was the importance of using technology to build self service in order to scale. Over the 10 years I ran the business, more than 80% of all the businesses who sold their products on Amazon came in through self service. They never talked to a human being.
- [15:00]
Brad Stone
I know to some people this might sound kind of techno dystopian. But Peter's big win, the reason why the Amazon marketplace became so dominant was because it depended on technology rather than people to grow. But this self service grow at all cost mentality is also why the marketplace would later generate so many problems for Amazon, unfairly punishing many sellers and drawing the attention of Congress. We'll tell that story next. So the early 2000 and tens were a great time for the Amazon marketplace, their primary rival. At the time, ebay was in decline. Now ebay sellers were jumping on Amazon through Bezos self service system. They could sign up, list their wares and start selling. But this is the Internet where things change fast. Pretty soon, Peter Farrisi and his colleagues noticed they had real competition. Sellers in China were signing up for a site called wish.com, operated by a San Francisco company. It allowed sellers anywhere in the world to sell products online to buyers anywhere else in the world. Aliexpress, an arm of the Chinese Internet giant Alibaba, was doing the same thing for Peter Farese. It struck close to home.
- [16:32]
Jeff Bezos
When our oldest was a freshman in college. All of a sudden I see a charge for AliExpress on my credit card and I say to myself, well, I know that wasn't me, so I wonder what happened here. And it turned out that my son bought a basketball jersey on there and so did all of his college roommates. And he didn't even understand that AliExpress might be a competitor to Amazon. All he knew is all of his roommates were constantly buying new sports clothing on Aliexpress. That's a wake up call.
- [17:05]
Brad Stone
It was a signal to Peter that the Amazon marketplace could be in trouble. Sellers in China, where the cost to make goods is much lower, we're suddenly competing head to head with sellers in the west where costs were higher. It was classic Internet style disruption.
- [17:22]
Jeff Bezos
When we saw wish in AliExpress, it really broke one of the principles we had in mind, which is, well, wait, people won't want things that are delivered that slowly. And it turned out, actually, some people will. Some people are willing to make the trade off between much higher value, you know, much lower cost and slower shipping time. And so that was a signal for us.
- [17:46]
Brad Stone
So what did Amazon do? Of course, they also went to China. They decided to follow wish.com and AliExpress and allow Chinese sellers to reach buyers around the world. Peter wanted to see things for himself.
- [18:02]
Jeff Bezos
I took my leadership team over to China, and at the very beginning of this in Beijing, we hosted in kind of a big conference center, like a product fair.
- [18:13]
Brad Stone
So Peter and his team held this big fair where they invited all sorts of merchants based in China to show off their products.
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Jeff Bezos
And it was incredible. You know, these robot vacuums that we see all over our homes? I mean, we saw two or three people who built that. I think there was a Chinese company that acquired Segway. So we saw multiple versions of the Segway motorized vehicles. And the innovation was just absolutely incredible. And you say to yourself, wow. I mean, if we were selling these products right now across the world, people would love it because not only were they high quality, but they were also great value.
- [18:54]
Brad Stone
On the trip, Peter noticed something else. Brand names were under attack.
- [19:00]
Jeff Bezos
But the most incredible thing to see live was the same factories that are making the most expensive apparel in the world, also on the same factory line, are capable of making something equally as beautiful, equally as high quality, and selling it for a tenth of the price, a twentieth of the price.
- [19:22]
Brad Stone
This could have enormous implications for the fashion industry. Peter and his team visited a factory that made sport codes for Abercrombie and Fitch. Abercrombie sold the jackets for $500, but it only cost the factory $9 to make the jacket. And then they took the same coat, added a slightly different button pattern to it, and sold it directly online for $90 and still made a fat profit.
- [19:48]
Jeff Bezos
So pick whoever your favorite designer is. The same factory that's making those clothes, they're also capable of making those same clothes much less expensively. And so what we began to see was these entrepreneurs who own these factories, and some of them were US Based, some of them were China based. They all were coming to the same conclusion we were, which is, this is going to significantly disrupt the world of brands and brand premium. And from a customer perspective, it's like, this is gonna change the world.
- [20:19]
Brad Stone
It certainly changed the Fate of Amazon. In 2016, Peter Ferrissy and his team threw open the doors of the marketplace to international sellers. Overnight, the marketplace tripled in size. The next year, the marketplace was responsible for more than half of all goods sold on Amazon. Sales in North America took off. The annual growth rate jumped from 25% to 33%. Amazon was defying the laws of corporate gravity. It's basically unheard of for a 20 year old business to start growing even faster. As a result, its stock price zoomed and Bezos was vaulted into the ranks of the wealthiest people in the world. Peter Farrisi remembers presenting a written report on his team's progress. He got the best feedback an Amazon executive can dream of.
- [21:11]
Jeff Bezos
And so Jeff picked up the document and he held it close to his chest. And what I remember him saying is, I'm going to take this document home and sleep with it tonight.
- [21:24]
Brad Stone
But there was a serious downside. Remember, on the Amazon marketplace, anyone could register and start selling. There was hardly any quality control, no seller verification, no product safety tests. This had significant repercussions.
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Jeff Bezos
A family in Tennessee is suing Amazon.
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Brad Stone
Half a million hoverboards are being recalled after reports that dozens of them have burst into flames. Hoverboard fires like this one at a Houston mall in December sparked a major recall.
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Jeff Bezos
If you own a hoverboard, stop using it immediately.
- [22:01]
Brad Stone
It looked like chaos. Counterfeits, fake products, fake reviews, even house fires. Media outlets around the world started investigating the problems of the marketplace and Amazon belatedly tried to tame it.
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Jeff Bezos
We invested hundreds of millions of dollars in innovations to try to fix this at the root, you know, and if you've seen what's happening on these social media platforms, you can't hire thousands of people and play whack a mole looking at every single posting and try to take them down. That's a process that you'll lose because there are people out there who have great technology and can keep whatever bad actor things you're trying to do coming at you faster than you can stop them.
- [22:47]
Brad Stone
Amazon urgently needed to police the marketplace. But the way they would do it would prove to be controversial. Just like they relied on technology to create the global marketplace, they would also develop technology to keep it in check. Algorithms and automation would monitor reviews and promptly boot sellers whose products drew complaints about quality or safety. For sellers caught in these shifting sands, this was the stuff of nightmares. That's next. You worked hard to lay the foundation for your contracting business. And when you're with Amex Business Platinum, you can keep building it up with a flexible spending limit that adapts with your business. And since you earn 5 times Membership Rewards points on flights and prepaid hotels booked on amextravel.com, you get even more from on site overseas. That's the powerful backing of American Express. Not all purchases will be approved. Terms apply. Learn more@americanexpress.com AmExBusiness this is a message from sponsor Intuit TurboTax Taxes was dealing with piles of paperwork in frustrating forms and then waiting and wondering and worrying if you were going to get any money back. Now taxes is easily uploading your forms to a TurboTax expert who's matched to your unique tax situation. An expert who's backed by the latest technology which cross checks millions of Data points for 100% accuracy. While they work on your taxes, you get real time updates on their progress and you get the most money back guaranteed. All while you go about your day. No stressing, no worrying, no waiting. Now this is taxes intuit turbotax get an expert now on turbotax.com only available with TurboTax live full service real time updates only on iOS mobile app. See guarantee details@turbotax.com guarantees so the Amazon marketplace was now international and all over the world it was making people rich. The biggest Amazon sellers even became public companies. For instance, the electronics maker Anker is now worth more than $6 billion. But not everyone was so lucky. Here's James Thompson. He used to work at Amazon and now advises Amazon sellers.
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Jeff Bezos
Consumers just sit back and say, wow, look at all this great selection that's happening. Not realizing that there is a whole type of Darwinism happening every day on the site. And some of it is brutal. It's absolutely brutal.
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Brad Stone
It's brutal because the competition among sellers from around the world is fierce. That's why sometimes you can't even find the same item twice on Amazon. Oh, I think I bought that set.
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Jeff Bezos
Of headsets last week on Amazon. I think I'm going to buy another.
- [25:56]
Brad Stone
One for my nephew.
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Jeff Bezos
Oh, it's not on Amazon anymore? Well, it's not on Amazon because either that brand was taken down or that brand no longer exists and it's been replaced with 10 other brands. Or somebody went after that brand and filed a bunch of fake reviews and the brand is temporarily suspended while they work out with Amazon how to get reinstated. All this stuff is happening and as an Amazon customer, you just say, wow, there's 10,000 brands of headsets I can buy. Aren't I lucky as a customer?
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Brad Stone
It is choice.
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Jeff Bezos
Choice Choice. It's wonderful. As a seller, it's a lot scarier.
- [26:32]
Brad Stone
It's scary for sellers because. Because the same technology that makes it easy for them to sign up on the marketplace can also take them down. All it takes is a couple of reviewers saying they think a merchant's products are fake and the algorithms pick this up and the next thing you know, the seller is banned. Amazon's automated system has little ability to sort out false allegations from real ones. And the sellers are at its mercy. To better understand this new landscape, we sent our colleague Spencer Soper to one of the largest gatherings of Amazon merchants in the world. We are at the Las Vegas Prosper Show. And what brought you here? I'm a new Amazon seller and this is our first conference so we're just trying to get some basic information. Okay, what do you sell? We sell after market UTV and ATV products. So when you say atv, like off roading vehicles, Razors and muds, windshields, winches, mirrors, bumpers. The Prosper show is all about Amazon, but it's not sponsored by Amazon in any way. But selling on Amazon can be so confusing and overwhelming and the rules constantly change. The sellers find it helpful to meet in a big group and network and swap tips. And what kind of problems do Amazon sellers face? I would say poor communication from the Amazon customer support can be an issue. You're not really sure if they shut your listing down what the exact issue is with your listing. An abrupt suspension? Yes. What do you sell on Amazon? Engagement rings and wedding bands.
- [28:09]
Jeff Bezos
Wow.
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Brad Stone
So people buy those on Amazon? Yes. I had no idea. And so what do you sell on Amazon?
- [28:16]
Jeff Bezos
PBFit, a peanut butter powder.
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Brad Stone
Is that like a protein powder? Yes, kind of. Tell me your name. Okay. My name is Manish Pusher and I'm high seven figure Amazon seller. One of the most interesting people I met at the Prosper show was Manish. He's from Phoenix, Arizona. And what stood out to me was that he was ready to talk about numbers that a lot of the other merchants didn't want to talk about. High seven figure Amazon seller. That sounds very important. And what, what were you doing before this? I was entirely in a different trade. I was doing scrap metal trading. You know, there was no need of a middleman like me, so I quit that business. Manish buys most of the products from China where they're made. Then he ships them to the US and he sends them to Amazon warehouses all around the country. What's your best selling product? It's a five gallon gas can that Turned out to be lucrative. It's doing $3,000 a day. What does the gas can cost on Amazon? Or does this the 5 gallon one I sell for 15 bucks, something I get for $2.50. What percentage of each sale would you say goes to Amazon on Amazon? So I'll say I'm making 15. 10 to 15 is what I take home is your profit margin, that's 10 to 15%. So for every $15 gas can Manish sells, he pockets about $1.50, maybe $2. What's the biggest challenge to selling on Amazon? Every now and then a lot of hackers attack our listing to bring the listing down.
- [29:53]
Barack Giovanni
And once the listing is down, it.
- [29:56]
Brad Stone
Takes a couple of days to bring it up. So that itself is damaged. At least your sales is not happening for that period of time. Right. So Amazon sellers get attacked by rivals. So in a lot of cases, someone who sells a competing product, say another gas can, will find a way to take down his competitors listings. This happens frequently. It's part of why these unofficial support systems for sellers exist like the Prosper Show. James Thompson, the guy who advises Sellers, has seen many of the worst case scenarios. I've seen many people disappear because they.
- [30:36]
Jeff Bezos
Were so disgruntled or they made bad initial decisions around how to think about which products to sell and they ended up with tens of thousands of dollars of unsold inventory that they'll never be able to sell. They didn't monitor the competitive landscape properly and they basically said all my savings that I thought I was going to turn into the next e commerce business, it's gone.
- [30:58]
Brad Stone
And that's exactly what happened to a guy named Barack Giovanni. Basically everything that could go wrong for an Amazon seller went wrong for him.
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Barack Giovanni
Like my life was so perfect, simple. Like I have a job, I have family, I have a very simple life. Living the same place for so many years and now I'm like waking up in the morning and I don't know what next because I need first of all to finish with Amazon. But till I will get money from Amazon, I have so much debt I cannot apply even to a credit card right now.
- [31:32]
Brad Stone
For 17 years Barack had a clothing store called New York Speed. He mostly sold trendy streetwear like Hugo Boss, Calvin Klein and Lucky. He had a physical storefront in LA on Melrose Place and, and he also sold online on ebay and Amazon. Then when the pandemic hit in the spring of 2020, clothing sales were down. He decided to close his store and go all in on Amazon back then he was telling himself Amazon is the future. This decision would end up costing him dearly.
- [32:07]
Barack Giovanni
In March 2020, we packed all the warehouse and we moved it to Amazon. And this was the biggest move that I did in my life because imagine, like to take a huge warehouse and just to pack every item individually. Underwear, jeans, leather jacket, expensive item. You're talking about like a lot of merchandise.
- [32:26]
Brad Stone
Barack says that all of this merchandise had a retail value of $800,000. Amazon says it was worth a quarter of that. Either way, it basically amounted to his life savings. And it was all inside Amazon warehouses. Then one day, he got just about the worst news that an Amazon seller can get.
- [32:48]
Barack Giovanni
You wake up in the morning and then the employee is calling you and telling you that they close your account. And then of course, your body gets in. Sweat, all your body. And like, you freaked out, you're going to the office, you're calling Amazon and you check what they need and you start and you send them everything.
- [33:03]
Brad Stone
Barack says Amazon suspended his account with little explanation. They seized his inventory and froze the money. It was the equivalent of going to open your store one day and finding chains on the doors. After combing through his own customer reviews, Barack believed that Amazon suspected his products were counterfeit. This is essentially a death sentence for an Amazon seller.
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Barack Giovanni
Yes. And this is like you're ruining somebody life based on somebody else giving a review. Now they don't give you enough information. You need to dig to see what is the last time that somebody bought this item. And then you see you have a jacket that like four people bought or two people. And like you check in, if somebody complains, it's hours that you need to do your research. They are not telling you all the information, like why somebody will complain.
- [33:53]
Brad Stone
This is something a lot of people don't realize about Amazon. The company can suspend you based on mere suspicions. Then it's up to the merchant to prove to Amazon that their products are indeed authentic. And Amazon has no obligation to spell out why they're suspending an account. This is when Amazon sellers learn a difficult lesson. Amazon can afford to suspend them indefinitely because there are millions more merchants with millions more products. The disruption for Amazon is negligible. But for the individual seller, the consequences are catastrophic.
- [34:27]
Barack Giovanni
And then they stop communicating with you. And then they start telling you that they will destroy your merchandise. Like this point, like, you already live in a nightmare for a couple months, now they want to destroy your merchandise. It's like, why to destroy my life saving like, this is not happening to me.
- [34:44]
Brad Stone
The threat to Destroy his inventory. Sounds over the top, right? But it's safe to say that Amazon has been extremely sensitive about accusations of selling counterfeits because in April 2020, the US government pointed a finger at the company as a haven for fake products. The next year, Amazon claims that it seized and destroyed 2 million counterfeit products from its warehouses. It's possible that Barack got swept up in this crackdown. He says that he sent multiple requests to get his inventory back, but these requests were ignored.
- [35:18]
Barack Giovanni
Nothing happened. They destroyed all your merchandise. You have nothing to do. I'm on unemployment. I was a businessman with employees, life perfect. Working 40, 50, 60 hours a week, happy. The happiest person ever. Now waiting on Amazon every day. Like, I'm like, this is the longest year of my life. And nothing. They're just ignoring us. They're just like ghosting us.
- [35:42]
Brad Stone
A spokesperson said Amazon repeatedly asked Barack Giovanni to provide evidence that his items were authentic. Amazon says the invoices he showed them were either illegible or didn't match the records of the brand owners. They said they informed Burak that he'd need to remove his inventory by specific dates or it would be destroyed and that Barack failed a request to remove his inventory in time. So Barack is now waiting in hopes of getting reimbursed for his inventory. We recorded this podcast in the fall of 2021. He had a binding arbitration case pending against Amazon at the time. In binding arbitration, the outcome is kept confidential, so we may never find out what actually happens. It's hard to say how frequently these things happen. Nightmare. Amazon stories abound. Entire cottage industries have sprung up of consultants and attorneys who specialize in helping Amazon sellers navigate the suspension process. And of course, the predicaments of sellers came to the attention of the US Congress. Our first witness is Jeff Bezos, the chief executive officer of Amazon.com this journey started with an order to get a million sellers into the marketplace to build a system that was self service and to globalize fast. The marketplace enriched the company and Jeff Bezos beyond anyone's wildest dreams. Like other tech giants, the Amazon marketplace grew into a huge platform through automation and algorithms. But not having enough human oversight hurt customers and sellers alike. It also turned the company into the policeman of E commerce whose job was to instill order on the chaos of its own making. It also brought Amazon into the crosshairs of the US Government. Meanwhile, another part of its business would prove just as controversial. Amazon decided they would deliver their own packages. They pushed to expand their vast network of fulfillment centers, launching one of the largest armies of warehouse workers and drivers that the world had ever seen. That's coming up in the next chapter of the Amazon story. Foundering is hosted by me, Brad Stone, Sean Wen is our executive producer. Spencer Soper contributed reporting to this episode. Ray Mondo is our audio engineer. Molly Nugent is our associate producer. Mark Million, Ann Van der Me, Robin Agello and Molly Schutz are our story editors. Francesca Levy is the head of Bloomberg Podcasts. Be sure to subscribe and if you like our show, leave a review. Most importantly, tell your friends. See you next time. Feeling buried in the never ending to do list that comes with running a business, managing orders, tracking expenses. It's a lot. That's where Amazon Business steps in. They've got smart buying solutions like Spend Visibility, a cloud based system to track your buying patterns so you can optimize your savings and bulk buying so you can continue to save costs on select products with quantity discounts. Smart, right? Let Amazon Business take care of the admin so you can focus on what really matters growing your business. Check out Smart business buying@amazonbusiness.com a business prime membership is required to access Spend Visibility. This podcast is supported by BetterHelp, offering licensed therapists you can connect with via video phone or chat. Here's BetterHelp head of clinical Operations Hes Yu Jo discussing who can benefit from therapy I think a lot of people think that you're supposed to be going to therapy once you're like having panic attacks every day. But before you get to that point, I think once you start even noticing that you feel a little bit off and you can't maintain this harmony that you once had in relationships. That could be a sign that maybe you want to go talk to somebody. There's always a benefit in talking to someone because we can all benefit from improved insight about ourselves and who we are and how we behave with other people. So if you're human, that's like a good indicator that you could benefit from talking to somebody. Find out if therapy is right for you. Visit betterhelp. Com today. That's betterhelp. Com.