In today’s Finshots, we tell you about how Amazon has been trying to get insider information about its rivals such as Flipkart and Walmart.
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Now, let's dive in.
The Story
Amazon might have landed in hot soup.
Last week, the Wall Street Journal published an investigative report which claims that the e-commerce behemoth was spying on its rivals.
How, you ask?
Well, let us tell you how ‘spying’ works in the corporate world.
Say you’re running a brand selling sneakers in India. You’ve studied shoe design and manufacturing. And to get a pulse of the market, you often conduct surveys to understand what customers are looking for.
But occasionally, you’ll also assess how your prospective rivals are doing. You’ll browse through their website and see the listings and prices. You’ll pop into the stores to evaluate the customer buying experience. If they launch a new pair of sneakers that are flying off the shelves you’ll buy it too and maybe tear it apart to figure out what the secret sauce is.
If you grow to a large size, you might have set up a team dedicated to doing this. You might call it the ‘Benchmarking’ team.
It’s all part of market research. Or what the industry would call competitive intelligence.
And there’s nothing wrong with it. You could call it spying but you’re simply using public data to stay one step ahead of your competitors. It’s not illegal.
But you know when that becomes a problem?
When you see a rival put up a post saying they’re hiring senior personnel and you recruit someone to work as your spy. Yup, you’ll ask them to apply for the role and cross your fingers in the hope they’ll get selected. If all goes to plan, you then have a mole in the rival company who can get access to documents detailing secret projects and internal strategies. And then feed you this information on the sly.
That’s spying. That’s corporate espionage. And that’s illegal.
So, what did Amazon do?
Okay, in 2015, Amazon was tweaking its business model. It was focusing more on getting third-party sellers to sell their wares on the platform. It was doubling down on its own logistics and delivery fleet. And it had an internal ‘Benchmarking’ team that was tasked to get a sense of what its rivals were up to and help Amazon sort of copy tactics.
But, rather than simply talk to people or comb through earnings reports, the team had another idea. They wanted to set up a company called Big River Services International. Think of it as a seller that would sell a bunch of eclectic stuff — shoes, beach chairs, and Marvel t-shirts. And Big River would list as a seller on rival e-commerce marketplaces such as Flipkart. On Flipkart, it sold wooden home decor stuff under the brand Crimson Knot. And this would give them an insider’s view to figure out pricing algorithms, how shipping and logistics worked, and even payment methods.
The Big River team would then pass on the information to Amazon’s Benchmarking team who could then tell leadership how to better Amazon’s own services.
On the face of it, that doesn’t seem too bad. And Amazon believes its rivals do the same thing too. But the problem as per some lawyers is that if you misrepresent who you are just to get trade secrets, you can be taken to court.
Did Amazon do that?
Well, as per the WSJ, “Team members attended their rivals’ seller conferences and met with competitors identifying themselves only as employees of Big River Services, instead of disclosing that they worked for Amazon.” One of those rivals was eBay which apparently held a conference to give sellers on its platform some ‘exclusive information’.
Now what WSJ doesn’t specify is if those ‘teams’ were directly from Amazon posing at Big River. Or whether they actually worked at Big River. If it’s the former, it’s a misrepresentation. If it’s the latter, a lawyer would argue it’s not a problem.
But wait…Amazon apparently did assign two email addresses to a lot of folks working at Big River. One which was a non-Amazon one for external communication. And one linked to Amazon so that they could email folks internally without a problem.
That seems a little suspect. And it makes it sound like Amazon was using moles, no?
And guess what?
When the Blue River folks created reports that they wanted top Amazon executives to see, they didn’t email them. Rather, they printed it out and handed it over.
And you know that quite often when people try circumventing the regular digital trail, they’re up to something dubious.
Maybe what makes the whole thing worse is that Amazon even seems to have had a ready reckoner on how to react in case the news of Big River even became public. It was a crisis management tool that was ready to use.
Why would you need a preplanned response if you didn’t think you were operating in a legal grey area?
And this isn’t the first time Amazon’s corporate espionage tactics have been questioned this year.
A couple of weeks ago, WSJ published a separate story adapted from a book that will be published today (23rd April). And it talks about the time from a few years ago when Amazon wanted to launch its own food brand.
So it hired an employee from a really popular department store called Trader Joe’s. And it didn’t tell her what her project at Amazon would be. It was only when she got to Amazon that she figured that they wanted her to spill the Trader Joe’s’ trade secrets — Amazon wanted to know which food items sold well and even the margins on the products.
Now Amazon did fire the folks involved in resorting to these tactics so that’s a good thing.
But it just goes to show that this probably won’t be the last time we’re hearing the words ‘corporate espionage’ and ‘Amazon’ in the same breath.
Until then…
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