Amazon to Compensate Customers for Faulty Goods From Third-Party Sellers

On Tuesday, Amazon.com updated its longstanding returns policy, referred to as the A-to-z Guarantee, to address defective product claims, reports CNBC. Beginning in September, consumers can contact Amazon with a personal injury or property damage claim, and the company will then connect the consumer with the seller. Currently, buyers are encouraged to contact the seller with any issues, leaving Amazon mostly out of the process.

The company is also launching Amazon Insurance Accelerator, a network of vetted insurance providers that will offer liability insurance to qualifying sellers. Sellers will only pay for the cost of the insurance itself and are not required to use a provider within Amazon's network. The change addresses an issue that has long plagued Amazon’s third-party marketplace, where counterfeits, unsafe products and even expired goods have become a notorious problem and attracted scrutiny from lawmakers and regulators.

Total Retail's Take: Amazon is making it easier for consumers to file a complaint when they believe they’ve been harmed by a product from a third-party seller. Previously, Amazon customers were out of luck if a seller shipped them a faulty item and didn't respond to requests for refunds or returns. This has caused some shoppers to turn away from the marketplace entirely after negative experiences. Amazon needs to regain customer trust, and is willing to spend money to make customers happy. Amazon has already pursued several other methods to enhance trust in its marketplace, launching Project Zero in 2019, its Counterfeit Crimes Unit in 2020, and partnering with a number of businesses to pursue fraudulent merchants.

Amazon also needed to find a solution that didn't throw its valuable third-party sellers under the bus. The company is taking on the claim reviews process for its merchants, combining "advanced fraud and abuse detection systems with external, independent insurance fraud experts to analyze the claim," according to an Amazon blog post. Amazon will then present credible claims to the seller and will deny those that are deemed unsubstantiated.

Although Amazon thinks it's "rare" and "unlikely" that a defective product sold through its website would cause personal injury or property damage, the company is prepared to compensate shoppers with no cost to sellers. This update to the e-commerce giant's return policy seems like it will make all parties happy but Amazon, which is now footing the bill for any counterfeit or faulty goods that slip past its multilayered fraud review process.