Report: Amazon Uses Marketplace Seller Data to Make Its Own Competing Products

Illustration for article titled Report: Amazon Uses Marketplace Seller Data to Make Its Own Competing Products
Photo: Ina Fassbender/AFP (Getty Images)

While Amazon faces antitrust scrutiny in the U.S. and EU, the company has consistently denied any allegations of wrongdoing. It’s been accused of things like changing algorithms to favor its own products to using seller data for its own profit. Amazon’s associate general counsel, Nate Sutton, told Congress in July 2019 that the company doesn’t “use individual seller data directly to compete” with businesses in its own marketplace. However, according to a new report from the Wall Street Journal, not only has Amazon been doing just that, but it was collecting all that data to make the same competing products to sell under its own label.

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In interviews with several former employees of Amazon’s private-label business and documents obtained by the Journal, those employees allegedly “consulted sales information on third-party vendors when developing private-label merchandise,” the paper writes. That kind of information reportedly would have guided Amazon on how to price its private-label items or whether or not it should start producing a particular item based on earning potential.

Gizmodo reached out to Amazon for comment but did not receive a response. Amazon told the Journal that using seller data to inform private-label decisions violates its policies and that it has launched an internal investigation.

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“It’s simply incorrect to say that Amazon was intentionally misleading in our testimony. As we told the Wall Street Journal and explained in our testimony, we strictly prohibit employees from using non-public, seller-specific data to determine which private label products to launch,” a spokesperson said in a statement released to media. “While we don’t believe these claims made by the Wall Street Journal are accurate, we take these allegations very seriously and have launched an internal investigation.”

One such example identified by the Journal is a car trunk organizer made and sold by a third-party vendor on Amazon, Fortem. A small, Brooklyn-based company, Fortem has been selling its car trunk organizers on Amazon since March 2016, becoming a bestseller not too long after it first appeared on the market place. Amazon launched its own competing product in October 2019 that looks similar to Fortem’s and sells for the same price. By obtaining the profit-per-unit data on third-party sellers, Amazon could “ensure that prospective manufacturers could deliver a higher margin on an Amazon-branded competitor product before committing to it,” the Journal writes, as Amazon allegedly did in the case of Fortem.

Former Amazon employees told the Journal that while the company had rules designed to prevent private-label executives from accessing seller data, those rules weren’t consistently enforced; using that data allegedly became so commonplace that it was sometimes brought up in meetings. If a private-label executive didn’t already have access seller data like Fortem’s, they would have managers ask an Amazon business analyst for reports containing that specific information, according to the report.

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While it’s common practice for retail chains to sell their own store brands to compete with brand names (Target’s Up & Up brand, which sells a plethora of common household items from face wash to printer paper, is one example), those other retail companies don’t have nearly the same kind of access to third-party seller data that Amazon does.

Amazon allegedly pulled the same kind of seller report on another company, Upper Echelon Products, last year. It makes a popular office-chair seat cushion. After looking at all the data, according to the Journal, Amazon launched its own version last September.

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When the Journal disclosed seller data to Fortem and Upper Echelon Products, both companies were perturbed, to say the least. Travis Killian, CEO of seven-person Upper Echelon, said he wasn’t conformable with internal employees looking at their company data for the purpose of competition. One of Fortem’s founders, Oleg Maslakou, said that this information was a big surprise. It appears both companies had no idea Amazon was allegedly pulling this kind of information on them.

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While nearly 40 percent of all online shopping in the U.S. happens on Amazon, the company’s private-label products only account for 1 percent of its $158 billion yearly retail sales, not counting its own branded gadgets like Echo and Kindle. However, according to former executives, Amazon wants that number bumped to 10 percent by 2022, and managers at different Amazon labels were reportedly told to create $1 billion businesses for their respective sections. Fifty-eight percent of all Amazon’s sales come from third-party sellers, according to the Journal.

Staff Reporter, Reviews at Gizmodo. Formerly PC Gamer, Maximum PC.

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