Can Amazon’s Marketplace Be Tamed?
Breaking up Amazon is in the news again - This time in Barron's about separating the third-party marketplace from traditional Amazon.
The article's main thrust is that the quality and production of every item on the marketplace should be verified. Further, 1P and Amazon private-label should be on one site and 3P should be on another. It's unclear what this second move has to do with trust (perhaps, antitrust!), other than the idea that Amazon lends its good name to unverified items. Amazon tried having marketplace listings in another tab on its site, rather than mixed with its 1P items, in the early 2000s - it failed miserably. (zShops and Amazon Auctions)
Why? No one cares. Amazon marketplace becomes "yet another site" rather than being within the safe confines of Amazon. Once you stop using its search engine firehose, you break Amazon's back. Clearly this isn't going to happen, anymore than Google is going to verify every website in its search index.
A few thought experiments:
Is this the best we can do?
What would have to happen for Amazon to shift their mindset from "assume 3P is default safe" to "assume 3P is default unsafe"?
What innovations in the trust and verification space must happen for this to be possible?
Jordan Brannon “was talking with a podcast about how Target and Walmart could continue to increment their marketplace growth against Amazon" and his suggestion was "Sell more sh** by selling less sh**." I love that. He goes on to share some great insights:
“Amazon's generous return policy is one of the few things that really works in favor of their marketplace. People are willing to gamble on a low price, low quality product because of the perceived option to return those goods (even if they end up tossing it instead of returning it)…I think focusing on a higher quality of marketplace seller, validated on Amazon's side and not on the consumer side (through reviews), would go a long ways towards cleaning up its trust issue. More revenue hold backs, more stringent onboarding requirements (something they've been working on), and faster suspensions of disappointing actors in the space (as opposed to just the most egregious bad actors). Instead of "assuming 3P is unsafe", "assume 3P sellers are unsafe" might be a faster way to shift the public trust and clean up the marketplace.”
This directly addressed one of my questions. Jeff Weidauer took my questions in a slightly different direction, hinting that AWS is actually what’s keeping the Amazon engine running. “Breaking Amazon apart would be the end of Amazon. The 1P/3P business depends on the AWS business and vice-versa; it's all too enmeshed for any one part to successfully operate as a standalone. So far the problem isn't enough for consumers to go elsewhere, so Amazon's default position is that things can't be that bad. Even when it stumbled with out-of-stocks and delivery issues in the early days of the pandemic, shoppers came rushing back once they got things sorted out.”
Rahul Saraswat took this idea one step further: “I would much rather force the spin-off of AWS as an independent entity and let Amazon compete on a more level playing field with other retailers. It will be a true miracle if they continue burning cash to bleed out competition without the AWS cash cow.”
“Trust” is a complicated concept, especially for a behemoth like Amazon. It’ll be interesting to see how priorities shift and what technologies emerge to address consumer concerns.
