Will Warranty Enforcement Be Amazon Marketplace’s Achilles’ Heel?Written by Evan Schuman
When it comes to competing against Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY) or even Japan’s Rakuten, one of the more challenging aspects is their third-party marketplaces, which give each a seemingly endless inventory at minimal risk. But the odds may be getting more even, as shoppers are starting to notice that some manufacturers are strictly enforcing their authorized reseller rules.
The immediate impact on shoppers is they may find that the expensive flat-screen TV, surround-sound speakers or refrigerator that looked like such a bargain on Amazon voids the warranty. The arguably unrealistic expectation from consumer goods manufacturers—which sharply strengthens the hands of traditional e-tailers trying to fight against these third-party marketplaces—is that shoppers would not only notice the actual name of the merchant shipping the item, but would take the time to run that name on the manufacturer’s site to see if they are truly an authorized reseller. Or they could just make the purchase from Target.com or Bestbuy.com and know for certain.
In a recent example cited by Consumer Reports’ Consumerist site, a shopper bought some Klipsch headphones from Amazon (unknown to the shopper at the time, it was really a third-party merchant) and the headphones shortly broke, due to no consumer negligence. The e-mail he sent to the manufacturer—republished in part at Consumerist—nicely summed up the problem: “I bought it from Amazon.com so I didn’t think twice. Frankly, consumers shouldn’t have to check a manufacturer’s website to verify they are purchasing from an authorized reseller. I am at a loss as to how a product that I purchase sealed in a new box would fail to qualify for a warranty.”
Amazon, always wise when it comes to detecting a potential Achilles’ Heel for its lucrative third-party community (both in terms of profit as well as research opportunities), agreed to accept a return of that product for that particular consumer. It’s unclear if that is Amazon’s policy for all shoppers.
If so, though, that would make for an excellent policy. It could simply say “Amazon stands behinds any products that you buy through Amazon. If the manufacturer’s warranty doesn’t apply, ours will. Buy from Amazon confidently.”
There are lots of products that consumers will purchase without any serious long-term warranty expectations—used books, exotic spices, cables, etc. By long term, I mean that if the product works when it arrives, all is good. (To be clear, if a used book arrives all torn up, Amazon would likely issue an immediate refund. The idea of warranty here is to cover problems that happen weeks or months later.) That expectation is crucial to a TV or a lawn-mower, though.
Getting back to the competitive issue, perception—as always—trumps reality. If enough stories crop up about various manufacturers refusing to cover warranties on unopened product boxes—something that is absolutely within those manufacturers’ rights—this could pose a very serious threat to various third-party marketplaces.
This isn’t entirely great news for the Walmarts, Targets and Best Buys of the world, as many venerable brick-and-mortar chains are looking hard at whether incorporating such third-party environments would make sense for them, helping in their infinite inventory efforts. In other words, be careful spreading the dangers about third-party merchant environments until you are really certain that you won’t be in that business six months from now.