You're Only as Good as Your Worst Supplier

A wave of Amazon sellers have been suspended from the platform for unintentionally selling stolen goods. The sellers in question were unaware of their suppliers' illicit activities. In this episode Chris and Leah discuss how Amazon handles such cases and the importance of knowing your supplier, conducting due diligence, and taking responsibility for business decisions.

Leah: [00:00:00] Welcome to this episode of Seller Performance Solutions. I'm Leah McHugh from ecommerceChris, and I am here with Mr. ecommerceChris, Chris McCabe. 

So this week we're talking about where you get your merchandise from, and it's something that we've talked about a lot. But this week we're specifically talking about sellers who have accidentally sold stolen merchandise. There was an article in CNBC a couple weeks ago about multiple sellers being flagged for selling stolen goods.

Turned out most, if not all of them were sourcing from either the same supplier or suppliers that were all related to each other. And it brings up an interesting point because most of the sellers weren't aware that they were selling stolen goods, of course. And second of all, Amazon never actually told them which of the goods that they were selling were considered to be stolen or which ASINs had been flagged as stolen.

And Chris actually spoke to CNBC. He was quoted in the article about how Amazon handles these sorts [00:01:00] of cases. 

Chris: Yeah. They use the line that I say sometimes where you're guilty until proven innocent. We know from our suspension and reinstatement appeal experience that that's quite common. In this case, it looks like some of these sellers bought from suppliers who were on some sort of blacklist that is private, not public, and there's no real way to know if you're buying from a vendor or supplier who's on that blacklist.

And the fact that you bought from them was enough for them to assume that the items were stolen. There was a warehouse raid, a California highway patrol found the warehouse in California. It seems I'm talking to a lot of these sellers that a lot of the sellers bought from that warehouse, but within that warehouse, it's still unclear whether everything there was legitimately sourced or some of them.

Or some listings that those sellers had in question, but others were considered legit. None of that was specified in the suspension messaging. That's what created a lot of confusion and [00:02:00] misunderstanding. And potentially they cast a wide net as they often do, reeled in all the fish. And then later, maybe, maybe not figured out which fish were good and threw them back in the water and which ones were bad that they kept in the net.

That's one big problem with their process and with the way they executed these suspensions. But the good news, I guess, is I'm trying to create this KYS know your supplier movement because Amazon is so hip to know your customer in terms of they want to know their sellers and their buyers, of course, in the marketplace.

Backwards and forwards before anyone does any transacting through the marketplace sellers have to create a unique little version of this for themselves before you do business with any supplier of any kind. You need to research them and vet them and know as much about them as possible. 

Leah: Well, and I think that was the most interesting part of that article were all of the quotes from the people that had purchased from these suppliers essentially saying that they had done absolutely no vetting, there was a telegram group.[00:03:00]

And they would get these hot deals and you had to act fast and they would just act fast without doing any research. We see similar things with people coming to us saying, I don't know, I just hired somebody off Instagram. I don't even know who they are. And I found that interesting because these are, one, I'm assuming fairly large purchases that they're making from somebody that they don't really know who they are.

And two, it's a very, very risky business model. You're essentially, potentially buying things off the back of a truck, to use an old phrase. Not really thinking about where they're coming from. 

Chris: This is the new version of the New York based sellers telling us, Oh, we got it from a guy in the back of a truck and we don't know where he got it. This is the new version of it, but it's on Instagram, Telegram, Signal, god knows where else, you have to vet these people. You should already know that you need to vet them because Amazon's demanding all sorts of supply chain documentation from you as a reseller.

But even beyond Amazon, just for your own lawful business practices, you need to know who you're doing business with and what their [00:04:00] tactics and methods are the same way, not just for vendors and suppliers, the same way for third party services and consultants in the Amazon space, you're supposed to know more about them too, before you hand them your money, right?

Leah: Yeah, and not saying that this is all of the vetting that people should be doing, but when these cases first started coming in to us, I did a cursory Google search and within a pretty short period of time, I found that all of the suppliers seemed to have at least one person in common across all of the different companies that they were registered as they were all registered as different companies.

What did I find? Like nine different companies that were all registered and related to the same person. And so that's within less than five minutes. You can see that something isn't quite right there. And again, not saying that that should be the extent of knowing your customer, knowing your supplier, but even just doing a cursory search is a lot better than just trusting them because they're on Instagram or in a telegram group.

Chris: Some of the sellers I talked to [00:05:00] did fly up to California, go to the warehouse. And their main focus, I mean, to be fair, their main focus was, are these items counterfeit or not? So they did whatever they did on site inspection to determine that the items weren't counterfeit, the problem is, stolen items are legitimate and aren't counterfeit.

But they're stolen. So the real issue is, they didn't have the ability to or didn't take the time to research it enough to know the provenance of those items. Well, going to Amazon and saying, how can you expect us to do all that? How are we supposed to know that, we were duped by these people?

Sometimes this happens in business. Give us a pass and let us off. We all know what Amazon's answers is going to be. Answer will be, which is you're the seller of record. This is your responsibility. We're not here to tell you the best way to do it. That's not our role. We're a marketplace in a platform.

You have to find out a way to do that. And yes, if stolen inventory shows up on our site. Because of mistakes or [00:06:00] gaps or problems you had, you are the one who's going to take the blame.

Leah: Well, and that's another thing that I find interesting in these sorts of conversations, is so many people in our industry do want to put it on Amazon.

Oh, well, Amazon should teach sellers this stuff. Amazon needs to have an onboarding process so sellers know how to do this. And, I mean, I am the first person to say when Amazon should be doing something, but there has to be a line. When you're in business and you are a business owner, It is your responsibility to make sure that you are complying with laws.

And yes, it is Amazon's responsibility to make sure that you know their policies, but at a certain point, it has to be your responsibility to know that what you're doing in business is legal and I don't think it's fair to put that on Amazon. I think it's fair to put it on Amazon to police it when it happens on their platform, but I don't think it should be put on Amazon to train their sellers how to source inventory.

Chris: Not even the burden being Amazon's to teach you [00:07:00] the laws and how to make sure you comply with laws. I don't think it's Amazon's responsibility to teach basic business skills

I mean, this is common sense. Would it be Amazon's obligation to teach basic street smarts? Because some people are just more gullible than the average person. And if you're going to fall for a sales pitch, we hear about this all the time with people who hire some wacky service we've never heard of to do all these things for them.

Leah: Right. Or the give us $40,000 and we'll create a turnkey Amazon account for you. That's all managed without you having to do anything. 

Chris: Yeah. Fully automated. You don't even have to know what we're doing. 

Leah: Just give us money and we'll make tons of money. 

Chris: Right. And we're not trying to pile on for people who fell for some of this stuff. We just think it's not really our responsibility and it's not Amazon's responsibility to teach basic business skills that already should have happened or been taken care of before the Amazon [00:08:00] seller account was opened.

Because an Amazon expects you to have certain key skills if you're going to be a business on their platform or anywhere, right? I mean, Amazon is the right to determine, you know, you can't just wing it from the get go and learn as you go on the fly. And you can't just assume you're going to learn everything from zero just by opening a seller account and reading seller policy pages or seller university courses and that sort of thing. 

Leah: I do think that there is a responsibility as members of the seller community, though, if you do have any sort of experience with somebody sketchy, for lack of a better word ,to tell people, it's amazing to me often how reticent sellers are to talk about these sorts of scam experiences that they've had. And what happens is it just becomes this closed loop. And so other people fall for it because they had no idea that it was going on. And so I do think that there is a responsibility within the community [00:09:00] and again, not putting it on Amazon, but I mean, Amazon would be the best person to broadcast this because they have the greatest reach, but I do think there is just this reticence in the community to talk about things like this happening, and I think that that creates an environment for this to just keep happening over and over again.

Chris: Yeah, I think there's some of this shows up in the forums. And there are some various mentions of things, but it's the shame of being duped. And it's just like, you can go listen to some podcast where there's a con artist or a fraudster who takes a bunch of people for a ride and takes their money. Those people don't typically share info publicly either because they're afraid that it'll keep happening and they'll be attacked and abused again and again. But also they don't want to wear the scarlet letter of shame that they fell for something like this. Maybe it would deter future investors in their business. Maybe it would be harmful if they have partnerships that are depending on their business.

So I can understand that, but we have seen it [00:10:00] propagate to ridiculous degrees. And of course, The attackers and the fraudsters know that no one's going to call them out for this publicly. In this case, there was a CNBC article. We'll include it in the notes. You can, you can read all about it. But tell somebody if you don't want to post it in the forums, at least tell people like us.

So we are aware of what's going on and we can bring it to groups we belong to, or we can post it on our own, or we can somehow share the information to prevent other people from getting scammed because the more you prevent, it's not just that you're helping a neighbor or helping a buddy. You might be helping yourself too because you might be closing the door on other scams that never get off the ground because they aren't as hopeful that they'll get away with it.

Leah: Exactly. I think creating an environment where it isn't easy for stuff like this to grow and become a bigger problem is, is the best thing that you could do kind of across the board, really because it's getting a little bit better now, but a few years ago, there was this whole thing of like, well, everybody has to break the rules. That's the only way to succeed [00:11:00] on Amazon. And so I think if you do just keep not saying anything and let it happen that fosters that sort of culture within the space, which isn't good for anybody because it just kind of pushes us all into a race to the bottom, which none of us should want. 

Chris: it's not good for Amazon. It's not good for service providers, sellers or buyers. It's a toxic environment when all of this stays behind the scenes because fraudsters and black hats depend, I mean criminals, let's face it, anyone who steals is a thief and a criminal. They're depending on gullibility of people to shatter their business world and profit from it. 

If you're apprehensive about sharing the info, not sure what to do with it, let us know. We might have some ideas that we might be able to share it for you. And thanks again, Leah. Talk to you soon.