According to an investigation by Reuters, Amazon India has incorporated into its business strategy the systematic production of counterfeits and manipulation of search results on its own trading platform. The company stubbornly denies such practices, but at least two Amazon executives were aware of the strategy.
In 2020, Amazon founder and CEO Jeff Bezos testified under oath in the US Congress. He then stated that the company prohibits its employees from using statistics on individual sellers to develop business under its own brands. In 2019, another top executive at the company testified that Amazon does not use such data to create its own branded products or manipulate search results to promote them.
Reuters reporters were able to get acquainted with internal Amazon documents, from which it follows that, at least in India, copying goods from third-party sellers and manipulating the results of the issuance was part of the company’s official secret strategy. And this was reported to high-level leaders. India’s strategy was reviewed by senior vice president Diego Piacentini, who has since left the company, and Russell Grandinetti, who now runs Amazon’s global consumer business.
Like many other retailers, Amazon views its own brands as a major driver of profit margins. Products produced under these brands often have higher margins, since they have significantly reduced production and marketing costs. An email that Grandinetti sent to several of the company’s top executives in December 2018 stated that Amazon views the Private Brands program as one of the most important drivers of consumer business growth and profitability. Over the next 5 years, the company planned to increase their consumer market penetration on its platform to 10%.
It was especially important to introduce the own brands program in India. The company began full-scale operations in this country in 2013 and soon, as shown by an internal document, recorded millions in losses. To make the business “sustainable in the long term,” according to a 2016 document titled “Private Brands”, Amazon has embarked on a strategy to roll out existing proprietary brands like AmazonBasics, as well as new brands to operate in the country. The goal was to offer products under our own brands, covering 20% to 40% of Amazon.in product categories from 2016 to 2018. The document from 2017 says that by 2020 this program in India alone should reach sales of $ 600 million, while the company should be in the top three best-selling brands in all categories of presence. It is unclear whether the company achieved this goal, as no private label statistics are released.
With a population of 1.3 billion and a growing middle class, India represents a huge and potentially profitable market for Amazon. However, in this country, foreign sellers face complex, protectionist regulatory mechanisms. Foreign e-commerce players cannot sell most products to consumers directly. As a result, Amazon is forced to sell most of its products under its own brands through third-party vendors.
A striking example of the implementation of the strategy was the launch of the Solimo brand. The brand name comes from the Solimões River at the headwaters of the Amazon. According to the original plan, Amazon aimed to produce products that would be equal or superior in quality to competing brands, but would be 10-15% cheaper. To determine the assortment of goods under the new brand, the company, of course, conducted an analysis of sales on the Amazon.in site. In 2020, the company told the American Congress about the mechanisms of statistics in the online store and stated that detailed information is available not only to the seller himself, but also to an unlimited number of people. However, seven former and current sellers on Amazon.in told Reuters they had no access to competitor statistics. Four more claim that they have extensive statistics only for their own sales.
Having defined the product range, employees of the company’s own brands conducted an analysis of sales and customer reviews on Amazon.in to determine the “reference” brands whose products need to be “replicated”. Peter England and Louis Philippe are some of these benchmark clothing brands in India, which are produced by the local conglomerate Aditya Birla Group. Amazon also targeted the John Players menswear brand, which was then owned by the Indian company ITC. In the segment of pots and pans, a large Indian brand Prestige has become such.
In the menswear category, Amazon has launched its own brand, Xessentia. Louis Philippe was the reference brand for the first line of men’s shirts. In the first quarter of 2016, Xessentia became the second most popular brand on the Indian Amazon, behind only the American brand Arrow. However, about 1 in 12 shirts were returned due to sizing issues – in total, more than 350 were returned because they were too small. As a result, it was decided to change the standard and adjust the dimensions for John Miller products.
In the US, Amazon has been repeatedly accused of copying goods. In 2018, Williams-Sonoma sued Amazon, accusing the online store of producing replicas of chairs, lamps and other products under its own Rivet brand. In court documents, Amazon denied all charges, and two years later the companies were able to negotiate out of court, but the terms of the agreement were not disclosed.
In 2016-2017 Amazon offered Allbirds to sell eco-friendly shoes on its site, but was refused. In 2019, Amazon released its own similar product, which closely resembled Allbirds products, but at a significantly reduced price, since the copy used cheaper material. Allbirds did not file a lawsuit – instead, the two co-founders of the company issued an open letter to Jeff Bezos, noting the similarities between the products and offering their help in finding more sustainable materials for the product from Amazon.
Reuters gives another example. In 2020, Amazon India employee Aditi Singh advised Mohit Anand, who was selling his wares on the site at the time, a new way to achieve sales success. According to the recording of the telephone conversation, Anand was asked to “reproduce” the products of the furniture company DeckUp. By copying the assortment and setting lower prices, it was possible to achieve good sales. But Anand still did not follow this advice.
According to a 2017 internal document from the company, more than half of user clicks in search results come from the first eight results. And a year earlier, according to a report from its own brand, the company began manipulating the search results to bring products under the AmazonBasics and Solimo brands to the top search positions.
In addition to organic search, Amazon ranked its own brands in the platform’s best-selling product rankings, as well as placed banners on competitor product pages, and clicks on those banners led to Amazon’s own brands. As one former employee of the company said, such practices cannot be called unambiguously illegal, but they clearly hurt competitors’ sales.
Piyush Tulsian, a computer accessories retailer based in New Delhi, made about $ 1,500 a month on Amazon.in selling Logitech mouse pads. Then its sales began to decline for no apparent reason. Subsequently, he discovered that a rug from the AmazonBasics brand appeared on the page with his product, which was 60% cheaper. And the Logitech product dropped significantly in search results. Tulsian was forced to stop selling Logitech rugs on Amazon.in, failing to sell the remaining 150 units.
In recent months, a heated debate has erupted in India over the business practices of foreign companies. The government has proposed a number of regulations that will impose a number of restrictions on Amazon and other global players on the sale of goods under their own brands in the country.
In June, Amazon announced that it would launch a program in India that is already being offered to companies in other countries. This is a program called Intellectual Property Accelerator, which will provide selected Amazon.in sellers with access to the services of specialized experts and lawyers. One of the goals of the program, according to Amazon, is to help merchants “protect their brands.”