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The Key to Amazon’s E-Commerce Success Is Also Its Biggest Headache

Amazon decision to become a platform for sellers and buyers made it tremendous amounts of money. It’s also created a huge underground economy for scammers. Photo-Illustration: Select All; Hulton Deutsch/Corbis via Getty Images

This week, The Wall Street Journal dove into the murky waters of Amazon’s Marketplace — specifically, the practice of employees, mainly based in China, selling insider information and accepting bribes from sellers.

In exchange for payments ranging from about $80 to more than $2,000, brokers for Amazon employees in Shenzhen are offering internal sales metrics and reviewers’ email addresses, as well as a service to delete negative reviews and restore banned Amazon accounts, the people said.

It’s the latest story of shady tactics on Amazon’s website (though this is the first time Amazon employees themselves have come under investigation). Fake reviews are rampant, aided by underground “clubs” of reviewers who give five-star reviews in exchange for free merchandise or direct payments. But all of this can be traced back to one key decision made nearly 18 years ago: when Jeff Bezos decided to start the Marketplace program, which allowed third-party vendors to sell their wares directly to Amazon customers via the Amazon website.

At the time, it was seen as perhaps suicidal, allowing competitors directly onto Amazon’s own site. In retrospect, of course, it was genius, gradually swallowing any and all competitors to the point where Amazon is now responsible for half of all online commerce. Similarly important, and similarly successful, was the Fulfillment by Amazon (FBA) program, started in 2006, which allowed nearly anyone to use Amazon’s sprawling network of warehouses, shipping, and customer service to sell items, with Amazon taking a cut of anything sold.

Those two decisions turned Amazon into an online retail juggernaut, and it arguably wouldn’t have a profitable retail business without Marketplace. In 2016, Amazon directly sold about 12 million products, excluding books, media, and wine. Amazon Marketplace, however, sold 357 million different products. About half of all purchases on Amazon are through its FBA program, and sales made via FBA are actually more profitable for Amazon than when it sells its own products.

Amazon’s FBA program has all of the hallmarks of “work from home” schemes — the chance to earn tens of thousands of dollars while sitting in front of your computer. There’s a rich ecosystem of YouTube channels, subreddits, and Facebook groups dedicated to selling on Amazon via FBA, all promising thousands of dollars a month in pure profit. Unsurprisingly, it’s a cutthroat market, which leads to cutthroat tactics. Some are aboveboard, like Amazon-specific SEO tricks, or simply “FBA sniping,” (i.e, seeking out small differences in pricing between Amazon and other sites in order to quickly arbitrage). Others are shadier, like buying reviews and juicing sales through underground buyers clubs in order to get your product moving on Amazon’s internal search engine.

But set aside the problem of fake reviews for a moment. There are roughly 5 million FBA sellers on Amazon right now, far too many sellers and products for any team of human moderators to effectively monitor. If I wanted to, I could set up and start selling products on Amazon before the end of the day. Amazon could never hire and train enough humans to keep an eye on all that churn, especially as Chinese companies begin to get in on the action — even if Amazon employees themselves weren’t actively selling insider information or accepting bribes.

A software platform at global scale, suffering from a deluge of unwanted content that a relatively paltry number of human moderators are unable to process? Sounds a bit like some other companies. It’s less easily noticeable because it’s more scammy systems than hate speech and state-coordinated attacks, but Amazon is suffering from the same problems Facebook and Twitter are: an inability to adequately moderate their vast platforms in a cost-effective way.

In fact, in some ways, Amazon has a much more difficult moderation problem on its hands than Facebook or Twitter. Facebook has far more users and Twitter has a more viciously toxic abuse problem, but both are mostly secondary markets. If you want to make money by abusing the platform, it usually requires getting someone to click away from the platform. Amazon, by design, allows sellers to make money directly on the site. Put another way: People are maliciously using Facebook and Twitter for a whole variety of reasons, sometimes for financial scams and more often for something closer to ideological warfare. Amazon’s platform, on the other hand, only exists for one reason: to encourage people to spend money. What scammer wouldn’t want to be on it?

The Key to Amazon’s E-Commerce Is Also Its Biggest Headache