Amazon tracks sellers to monitor quality

online retailer Amazon India is using technology tools to weed out poor quality sellers on its site and is conducting so-called mystery shopping tests in which it orders products from its sellers to verify whether these merchants are following the standards set by the company.

The Indian unit of the world’s largest online retailer has also set up teams in more than 17 cities to recruit sellers and help these untrained merchants sell online, said Amit Deshpande, director, Amazon Seller Services.

Because India bans foreign direct investment (FDI) in online retail, Amazon works as a marketplace, connecting customers with third-party sellers on its platform.

Since its launch in June 2013, Amazon India has more than 23,000 sellers and has established itself as the biggest threat to local rivals Flipkart andSnapdeal.

“Based on the activities sellers do, you are able to predict how they would do in the future and, of course, if there is a bad customer experience, you are able to predict that. So one thing we’ve done is, we’ve taken all of that and we’ve deployed it in India. If we see that there is a risk (that a seller may not match its standards or may be fraudulent) but we are not convinced there is a risk, we’ll mystery shop ourselves,” Deshpande said.

It’s important for Amazon and other online marketplaces to monitor seller performance, especially as even a few cases of fakes or second-hand products can damage their brand image. In November, a Flipkart customer kicked up a minor social media storm after receiving a stone instead of the smartphone she had ordered.

Amazon knows about this risk all too well. The US-based firm, as well as rival eBay Inc.and China’s Alibaba Group, have struggled to root out sales of fakes and second-hand products in international markets.

In India, Amazon is particularly watchful of seller performance because the marketplace model is nascent and a majority of new third-party sellers have no experience in selling online.

Apart from coaching sellers, Amazon has launched a programme through which it reaches out to independent entrepreneurs near clusters of sellers and trains them in e-commerce.

These freelancers then help sellers with managing orders, listing products and other activities. Amazon has some 500 such freelancers and is adding more. And to get products faster to customers, Amazon has built a large logistics operation, which delivers some 90% of products sold on its site.

“It’s not that for the most part sellers who are not doing well in terms of performance are sellers who have the wrong intention. In most cases, we have found it is a question of enablement. The small percentage of cases where sellers, even after giving them multiple opportunities, if they have the wrong intentions, we have to tell them, ‘I’m sorry, you can’t sell right now, come back when ready’,” Deshpande said.

Analysts say that while online marketplaces claim to have tens of thousands of sellers, only a minority are active and do any meaningful business.

Apart from third-party sellers, Amazon set up a seller entity called Cloudtail in a joint venture with N.R. Narayana Murthy’s Catamaran Ventures last year. Cloudtail sells all kinds of items including phones, clothes, shoes, pet supplies and exclusive Amazon merchandise.

Deshpande said a large number of Amazon sellers contributed to sales, with as many as 80% of the company’s sellers receiving at least one order in a given month.

“It’s not just about just registering sellers or launching them, it’s about making them successful, making it sustainable because sellers are doing this because they want sales and profits. We have seen upwards of 8,000 sellers coming through self service registration (SSR— where sellers register on Amazon). Our largest sellers who have come through SSR have done more than Rs.1 crore of business,” Deshpande said.

“Amazon can use data analytics and other technology to help improve seller performance, but there’s only a limited amount of effect that it can have,” said Harminder Sahni, managing director at Wazir Advisors. “India is at a very early stage in e-commerce, and sellers are simply not professional or knowledgeable enough to understand how to maximize performance. This is a problem all online marketplaces face and, in India, more so, because the market is in an early stage.”