While Facebook lost $120 billion in market value in a single day this week, and Mark Zuckerberg personally lost at least $17 billion, the online retailer Amazon.com is showing record-breaking profits. In fact, in the second quarter of 2018, Amazon reported a whopping $52 billion in sales, and for the third consecutive quarter, the online behemoth earned over $1 billion in profits. However, while Amazon isn’t dealing with daily headlines about the loss of privacy, fake news, or massive data breaches, Amazon has encountered a problem of its own it’s having to deal with: third-party sellers gaming the system.
As most buyers who use Amazon understand, the retailer itself does not possess every single product stored in its warehouses (it’d be virtually impossible to), so it relies heavily on third-party sellers to provide a large number of products. However, using third-party sellers is not without its headaches for both Amazon, legitimate sellers, and ultimately the consumers, as discussed in a recent episode of the Reply All podcast. The thing about selling products on Amazon is that there are often a large number of sellers for each product, and Amazon has had to design an algorithm to determine which product listing shows up first in searches. The difference between showing up first and showing up third in an Amazon search can make a huge difference in the number of products a third-party vendor can sell (a vendor, for instance, can sell five times more products in the top spot than in the number four spot).