Amazon India has been systematically copying top-selling products using data that is not available to other sellers and manipulating search results to promote these products over those of competitors, an investigation by Reuters based on internal documents of the e-commerce giant revealed.
Sellers on the platform have long accused the company of doing this, but Amazon has repeatedly denied it. However, the new Reuters investigation exposes how such practices “were part of a formal, clandestine strategy at Amazon” and that at least two top executives were fully aware of it – senior vice presidents Diego Piacentini and Russell Grandinetti. While Piacentini has since left the company, Grandinetti currently runs Amazon’s international consumer business, the report stated.
“Use information from Amazon.in to develop products and then leverage the Amazon.in platform to market these products to our customers.” — Amazon’s strategy according to internal company documents
Amazon refused to confirm the findings of this investigation saying: “Reuters hasn’t shared the documents or their provenance with us, we are unable to confirm the veracity or otherwise of the information and claims as stated. We believe these claims are factually incorrect and unsubstantiated.”
How does Amazon copy products?
Amazon has maintained that it does use non-public seller data for the benefit of its private labels, but the following evidence unearthed by Reuters reveals otherwise.
Finding target products:
- By using a metric called “glance views”: The company used a metric called “glance views” which showed which products were being viewed by customers on the platform. In an internal document, the company said that it chose this metric because it provides “an opportunity to influence interested customers who are actively considering” a purchase in a product category. Amazon told Reuters that the data it uses to start private brands, such as bestseller rankings and customer ratings, is public, but sellers told Reuters that unlike the company they cannot access internal sales data of rival brands such as the number of product units shipped and details about customer returns. They also said that glance views are only available for their own products, not that of other sellers.
- By studying overall market size compared to Amazon’s performance: To find segments to focus on, Amazon compared the overall market size of different categories with how they were doing on the platform. For example, “Amazon found that furnishings was a $2 billion business in India – but its own website’s three-month sales in mid-2014 totaled about $1 million,” Reuters reported. This finding was one of the reasons behind the introduction of the Solimo brand. Solimo went on to become an international brand and is now popular on Amazon’s US site, Reuters noted.
Replicating target products:
- By identifying reference products: Once Amazon decided which product category to enter, the company identified “reference” or “benchmark” products that it can replicate. Some of the brands that were targeted for use as reference were Old Navy/GAP for men’s t-shirts, Prestige for pots and pans, Peter England and Louis Philipe for men’s shirts, and John Player for menswear, Reuters revealed.
- By using the exact specification and other non-public data of reference products: Amazon’s Xessentia brand for men’s business shirts initially used Louis Philippe as the benchmark for sizing, but when Amazon found out that Xessentia shirts were often returned for sizing issues, the employees studied sales data of other brands and found that John Miller had outsold Xessentia and had half the rate of customer returns for quality-related issues.”Our learning is that our customer is different from the Louis Philippe customer and doesn’t prefer this fit […] We concluded to follow the measurements of Business Shirt of John Miller for Xessentia because of wide acceptance with our customer base,” internal documents stated. Amazon then copied John Miller’s sizing, “matching it down to the neck, shoulder, armhole, sleeve, and waist dimensions,” Reuters revealed, providing images of sizing charts used by the company.
- By partnering with manufacturers of the original products: “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,” Amazon internal documents stated. The company chose this strategy because it believed that the manufacturers of the original products use “unique processes which impact the end quality of the product.”
Asking other sellers to replicate top-selling products: In one instance last year, an Amazon employee advised a furniture seller on the platform to replicate the products of a furniture brand called DeckUp and charge lower prices. The seller reportedly did not follow the advice and DeckUp said they were fine with it as long confidential data was not shared, Reuters said.
How does Amazon promote the copied products?
Manipulating search results: Amazon has always said that its search algorithm does not give unfair preference to its own brands and it is optimized to display results based on relevance to the customer’s search query, irrespective of brands. But documents seen by Reuters reveal that Amazon used two strategies that directly contradicts this claim:
- Search seeding: Noting that the top eight results receive more than half of users’ clicks, Amazon reportedly used a technique called “search seeding” that boosted the ranking of AmazonBasic and Solimo products such that these products feature “in the first 2 or three … search results,” documents showed. According to current and former Amazon employees who spoke with Reuters, seeding was used to boost the ranking of new products that do not have sufficient sales data for the company’s algorithms to rank them. An internal document noted that four products of AmazonBasics were “#1 Bestsellers in their category week after week,” within months of the launch of AmazonBasics in India in 2015.
- Search sparkles: Another technique called “search sparkles” was used to “aggressively” promote Solimo products on “relevant customer searches from ‘All Product Search’ and Category search,” an internal report said. Sources told Reuters that “Sparkles are banners that Amazon has planted above search results to direct customers to certain products the company wants to promote.”
- Placing promos in competitors’ product pages: One document showed that Amazon placed “promos” on “detail pages of competitor products to direct traffic to AmazonBasics brands products.”
Same quality but cheaper pricing: Amazon aimed to offer products that are of the same or better quality than competing products but that were 10 to 15 percent cheaper, one of the documents related to Amazon’s Solimo brand revealed.
Why are private labels important to Amazon?
- Most important growth and profitability drive: “We believe that over the next several years, Private Brands will be one of the most important growth and profitability drivers in the Consumer business,” an email sent by Amazon executive Grandinetti in 2018 stated. The company’s goal according to another internal document from 2016 was to offer private brands in 20 to 40 percent of all product categories on Amazon.in within two years.
- Makes the business sustainable in the long run: In India, Amazon was making significant losses when it began its e-commerce operations in 2013, and private brands were needed to make the business “sustainable in the long run,” an internal document noted.
- High sales figures: A 2017 document revealed that Amazon predicted that private brand sales to reach $600 million by 2020 in India and also for Amazon to be “the Top 3 brands in each sub-category that we play in.” It is not known if Amazon achieved these goals because these numbers are not publically revealed by the company. However, in 2018, Amazon said that it saw record sales during its annual shopping festival, and “Amazon Brands saw its best performance ever with 11X jump over last Great Indian Festival.”
Why do these revelations matter?
Amazon India has thousands of Amazon-branded products ranging from household supplies to phone cases and electronics and these products generally show up on top of search results in their respective categories. Sellers on these platforms, through retailer bodies like CAIT, AIOVA, and Swadeshi Jagran Manch, have long alleged that Amazon unfairly copies best-selling products and gives preference to these in search results.
The Competition Commission of India (CCI) is currently probing these allegations and the Indian government in June proposed changes to the e-commerce rules to explicitly prevent platforms like Amazon and Flipkart from selling their own private label products. The latest revelations by Reuters provide invaluable evidence on Amazon’s anti-competitive practices to both these efforts, as well as to the investigation of competition authorities in other jurisdictions such as the US and Europe.
This is Reuters’ second such report on the anticompetitive practice of Amazon. In February this year, the news agency revealed that a small number of big sellers, which were partly owned by Amazon, accounted for two-thirds of Amazon’s sales in India, circumventing regulations that were designed to protect small retailers. These allegations are under probe by CCI too.
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