Amazon India Copied Goods and Manipulated Search Results for Profit: Reuters
The report shows how both strategies along with predatory pricing can sharply reduce sales of rival products.
An exclusive exposé filed by Reuters on Wednesday, 13 October, reveals how the private-brands team of Amazon India engaged in allegedly anti-competitive practices involving the emulation of other companies' products and the manipulation of search results on their website that would make Amazon's own products appear at the top.
Amazon's response to the Reuters report, shared by the latter, stated that because Reuters had not "shared the documents or their provenance" with them, Amazon is "unable to confirm the veracity or otherwise of the information and claims as stated", further asserting that Reuter's "claims are factually incorrect and unsubstantiated."
Before we delve into the details behind its allegedly unethical business practices, it is important to note that similar accusations have been levelled against the company in the past.
For example, according to the bag manufacturing company Peak Design, Amazon copied its "Everyday Sling" bag product to such an extent that it had become impossible to differentiate between Peak Design's original and Amazon's version of the same, Input Magazine reported.
A detailed Wall Street Journal report had also stated the various instances in which Amazon had copied products of its competitors to gain profit at the cost of rival products.
Nevertheless, in order to better understand Reuters' two main accusations against Amazon – product copying and search result manipulation – they need to be explained separately.
The controversy about product copying revolves around what is known as "private label brands", which are basically commodities that are made for a retail company (in this case Amazon) and sold under the name of that retail company, typically right next to the actual brand-name product.
The private label products, however, are sold at cheaper rates and therefore risk a reduction in sales for the original brand-name product.
A common example of a private label brand is Amazon's Echo smart speakers.
The Reuters report alleges that according to Amazon's internal documents, especially the 2016 strategy report for India titled 'India Private Brands Program', employees accessed confidential information about the sale numbers and customer reviews of products.
The objective of such an operation would be to identify and target products, and to "reference" them, that would then be replicated by Amazon and sold for a lower price.
The 2016 report, according to Reuters, also states how Amazon employees responsible for private label brands devised strategies on how to partner with companies whose products had been shortlisted for copying.
The justification for entering into such partnerships was the insight that Amazon would gain into the "unique processes" or the "tribal Knowledge" that the manufacturers of reference products possessed that made their product worth targeting.
The evidence is a passage quoted by Reuters from the document 'India Private Brands Program', which reads, "It is difficult to develop this expertise across products and hence, to ensure that we are able to fully match quality with our reference product, we decided to only partner with the manufacturers of our reference product.”
The case study in the Reuters report is regarding two brands – Xessentia, a clothing brand designed by Amazon, and John Miller, an Indian brand of men's business shirts.
The problem for Amazon India was that a significant proportion of Xessentia shirts that were being bought were being returned due to problems that customers had with the sizing of the product.
On the other hand, John Miller was outnumbering Xessentia with respect to shirt sales by a big margin, despite the former being priced similarly to the latter.
There were far fewer complaints regarding John Miller shirts' quality and the customer return rate was approximately half than that of Xessentia.
Consequently, according to its own 2016 report, Amazon India decided to "follow the measurements of [the] Business Shirt of John Miller for Xessentia because of wide acceptance with our customer base.”
The fitting of Xessentia shirts were modified to the extent that it was identically matching John Miller's, the Reuters report detailed.
Amazon has maintained that it “strictly prohibits the use or sharing of non- public, seller-specific data for the benefit of any seller, including sellers of private brands.”
Manipulation of Search Results
While buying products online, people have tendency to click on the top few options that the website presents to them.
In fact, according to Amazon's own internal findings, more than 50 percent of Amazon users clicked on the top eight results when they searched for a product.
In India, to increase sales, Amazon used a technique called "search seeding" to push the ranking of its private label brand products like AmazonBasics and Solimo, according to Reuters' reading of the 2016 'India Private Brands Program' report.
Another revelation by the 2016 report is Amazon's execution of "search sparkles", which are banners that are deliberately placed in strategic locations on the webpage in order to direct users towards products that Amazon wants to sell.
While the Reuters report mentions that such techniques can be legally used to promote products that are in high demand, a company like Amazon using "search seeding" and "search sparkles" to promote its own products makes the playing field uneven, with rival sellers likely to suffer a reduction in sales of similar products.
The case study provided by Reuters is that of Piyush Tuslian from New Delhi, who used to sell mouse pads on Amazon.
In 2019, he noticed a drop in his sales and later discovered that his customers were shown an advertisement for an AmazonBasics mousepad that cost less than half the price of the mousepads he himself sold.
Tulsian said it was "very frustrating" how Amazon was "mistreating sellers," as quoted by the Reuters report.
Amazon's predatory techniques can seriously damage small businesses in India.
India's commerce minister Piyush Goyal had recently slammed e-commerce companies for violating local laws and had also warned that the sustainable functioning of approximately 6 crore small retail business shops, which employ more than 12 crore people combined, was being threatened, The Print reported.
Nevertheless, the performance of Amazon India's private label brands is quite strong, with the website listing a huge number of Amazon-branded products ranging from soap to televisions.
(With inputs from Reuters, Input Magazine, The Wall Street Journal, and The Print.)
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